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author: www-data <www-data@mail.pglaf.org> 2026-02-28 23:03:23 -0800
committer: www-data <www-data@mail.pglaf.org> 2026-02-28 23:03:23 -0800
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+      Cartels: Challenge to a Free World | Project Gutenberg
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+<body>
+<div style='text-align:center'>*** START OF THE PROJECT GUTENBERG EBOOK 78077 ***</div>
+
+
+<p><span class="pagenum" id="Page_i">[Pg i]</span></p>
+
+<h1 title="CARTELS: Challenge to a Free World">CARTELS</h1>
+
+<p class="center subtitle">Challenge to a Free World</p>
+
+<p class="center author p2"><i>By</i> WENDELL BERGE</p>
+
+<p class="center"><i>Assistant Attorney General of the United States</i></p>
+
+<p class="center publisher p2"><i>Public Affairs Press</i></p>
+
+<p class="center small">WASHINGTON, D. C.</p>
+
+
+<p><span class="pagenum" id="Page_ii">[Pg ii]</span></p>
+
+
+<p class="center p4"><i>To My Father</i></p>
+
+<p class="center dadname">GEORGE W. BERGE</p>
+
+<div class="dadtext">
+<p class="center"><i>who throughout his life and in his public career was
+guided by the conviction that the people’s rights
+are not won without struggle and will not
+be maintained without vigilance</i>.</p>
+</div>
+
+<p class="center p4"><i>Public Affairs Press, 2153 Florida <abbr title="Avenue">Ave.</abbr>, Washington, D. C.</i></p>
+
+<p class="center"><i>Copyright, 1946, by American Council on Public Affairs</i></p>
+
+<p class="center"><i>M. B. Schnapper, Executive Secretary and Editor</i></p>
+
+
+<hr class="chap x-ebookmaker-drop">
+<div class="chapter">
+
+<p><span class="pagenum" id="Page_iii">[Pg iii]</span></p>
+
+
+  <h2 class="nobreak" id="Preface">
+    <i>Preface</i>
+  </h2>
+</div>
+
+
+<p>Plastics, television, new chemical and electrical techniques
+are but a few of the instruments which will furnish the stuff for
+the pioneers of a new age. The challenge of housing will excite
+bold minds to action, on a scale never before attempted, to wipe
+out slums and give dwellers in country and city alike a new and
+higher standard of living. Not only at home, but also abroad,
+the opportunities for daring enterprise which will be offered by
+the needs of world reconstruction will surpass anything ever
+before known.</p>
+
+<p>How are we going to meet this challenge? At the outset, we
+must face frankly the greatest obstacle to making the most of
+our opportunity. It is the threat of cartel control of major
+world industries. Unless this threat is understood and dealt
+with decisively, our opportunity to realize the great potential
+benefits of a free economy will be lost. And worse still, the
+hope of maintaining democratic political institutions will be
+seriously impaired.</p>
+
+<p>The pattern of cartel operations has been clearly revealed in
+recent years by antitrust investigations. From public records in
+antitrust proceedings and congressional hearings, information
+about cartel operations is now available. The public should be
+familiar with the facts. As head of the Antitrust Division of
+<span class="pagenum" id="Page_iv">[Pg iv]</span>the Department of Justice, I have frequently been called upon
+to discuss cartel problems before congressional committees,
+trade associations and civic groups. Since my testimony and
+speeches received varying degrees of public notice at the time
+they were given, the casual reader of newspaper reports necessarily
+obtained only an impressionistic picture of the far-flung
+ramifications of the subject. Something more is needed for
+thorough understanding.</p>
+
+<p>With this thought in mind, a number of friends and associates
+have suggested from time to time that my material should
+be woven together in book form. This I have undertaken to
+do in the present volume.</p>
+
+<p>Merely to make assertions about the evil effect of cartels is a
+simple matter. But I believe that the real usefulness of this
+book will depend upon its fairly detailed explanation of the
+operation of particular cartels, with direct quotations from letters,
+memoranda and other documents.</p>
+
+<p>While I have not tried to compile a complete source-book, I
+have striven to make this discussion as non-technical as possible.
+The factual material is drawn largely from the documents
+of the Kilgore, Truman and Bone Senate Committees, and from
+the public records of antitrust cases.</p>
+
+<p>The investigations which unearthed the facts cited in this
+book were, of course, the work of a great many men and women
+in the Antitrust Division extending over a period of years.
+Acknowledgment of credit to all of them would be impossible.
+Many of the men who have developed these facts are now
+serving their country in the armed forces.</p>
+
+<p>I cannot praise too highly the ability, energy and devotion to
+public service of the men and women of the Antitrust Division.
+It is a privilege to head such a splendid staff, as it is to serve
+under such an able and distinguished Attorney General as
+<span class="pagenum" id="Page_v">[Pg v]</span>Francis Biddle, who has maintained at all times an extremely
+deep interest in our cartel work and has given it his fullest support.
+Attorney General Biddle has repeatedly impressed upon
+me his own conviction that the vigorous enforcement of the
+antitrust laws against cartels is an indispensable condition to the
+maintenance of a free competitive economy in this country.</p>
+
+<p>In the preparation of this book I am particularly indebted to
+Joseph Borkin of my staff, who is in my opinion one of the best
+informed men in America on the activities of international cartels.
+For more than five years <abbr>Mr.</abbr> Borkin has devoted his
+great resourcefulness and energy to investigation and study of
+cartel problems. His contribution in this field has been invaluable.</p>
+
+<p>I also want to acknowledge my deep obligation to my First
+Assistant, Edward H. Levi, with whom I have spent many
+hours discussing the legal and economic problems of cartels, and
+on whom I have relied so heavily in the practical administration
+of the Antitrust Division. And I am greatly indebted to Myron
+W. Watkins, Charles A. Welsh, Ernest S. Meyers, George P.
+Comer, Herbert A. Berman, Bartholomew Diggins, Robert
+Hunter, and Heinrich Kronstein of the Antitrust Division staff,
+all of whom have been of great assistance in the preparation
+of this book and in the cartel work of the Division. Professor
+Walton Hamilton of Yale, who has been a part-time member
+of the staff, has also worked closely with me on these
+matters and has made a signal contribution to our work.</p>
+
+<p><abbr>Mr.</abbr> M. B. Schnapper, Executive Secretary of the American
+Council of Public Affairs, has been of greatest assistance in the
+planning of this book and in the editorial work which it has
+involved.</p>
+
+<p class="right">
+  <span class="smcap">Wendell Berge</span>
+</p>
+
+
+<hr class="chap x-ebookmaker-drop">
+<div class="chapter">
+
+<p><span class="pagenum" id="Page_vi">[Pg vi]</span></p>
+
+
+  <h2 class="nobreak" id="CONTENTS">
+    CONTENTS
+  </h2>
+</div>
+
+
+<table class="autotable">
+
+<tr>
+<td class="tdl">
+  <i>1</i>:
+  <a href="#Page_1">Trusts to Cartels</a>
+</td>
+<td class="tdr">1</td>
+</tr>
+
+<tr>
+<td class="tdl">
+  <i>2</i>:
+  <a href="#Page_10">Enterprise Eclipsed</a>
+</td>
+<td class="tdr">10</td>
+</tr>
+
+<tr>
+<td>
+  <i>3</i>:
+  <a href="#Page_19">Technology</a>
+</td>
+<td class="tdr">19</td>
+</tr>
+
+<tr>
+<td class="tdl">
+  <i>4</i>:
+  <a href="#Page_36">Patents</a>
+</td>
+<td class="tdr">36</td>
+</tr>
+
+<tr>
+<td>
+  <i>5</i>:
+  <a href="#Page_52">Medicines</a>
+</td>
+<td class="tdr">52</td>
+</tr>
+
+<tr>
+<td class="tdl">
+  <i>6</i>:
+  <a href="#Page_58">Synthetic Hormones</a>
+</td>
+<td class="tdr">58</td>
+</tr>
+
+<tr>
+<td class="tdl">
+  <i>7</i>:
+  <a href="#Page_82">Vitamins</a>
+</td>
+<td class="tdr">82</td>
+</tr>
+
+<tr>
+<td class="tdl">
+  <i>8</i>:
+  <a href="#Page_112">Quebracho Extract</a>
+</td>
+<td class="tdr">112</td>
+</tr>
+
+<tr>
+<td class="tdl">
+  <i>9</i>:
+  <a href="#Page_124">Titanium</a>
+</td>
+<td class="tdr">124</td>
+</tr>
+
+<tr>
+<td class="tdl">
+  <i>10</i>:
+  <a href="#Page_142">Optical Instruments</a>
+</td>
+<td class="tdr">142</td>
+</tr>
+
+<tr>
+<td class="tdl">
+  <i>11</i>:
+  <a href="#Page_176">Miscellaneous Products</a>
+</td>
+<td class="tdr">176</td>
+</tr>
+
+<tr>
+<td class="tdl">
+  <i>12</i>:
+  <a href="#Page_192">The Webb Act</a>
+</td>
+<td class="tdr">192</td>
+</tr>
+
+<tr>
+<td class="tdl">
+  <i>13</i>:
+  <a href="#Page_208">Private Governments</a>
+</td>
+<td class="tdr">208</td>
+</tr>
+
+<tr>
+<td class="tdl">
+  <i>14</i>:
+  <a href="#Page_233">Freedom or Control?</a>
+</td>
+<td class="tdr">233</td>
+</tr>
+
+<tr>
+<td class="tdl">
+  <i>Appendix <abbr title="1">I</abbr></i>:
+  <a href="#Page_250">Recent Cases</a>
+</td>
+<td class="tdr">250</td>
+</tr>
+
+<tr>
+<td class="tdl">
+  <i>Appendix <abbr title="2">II</abbr></i>:
+  <a href="#Page_257">Bibliography</a>
+</td>
+<td class="tdr">257</td>
+</tr>
+
+<tr>
+<td class="tdl">
+<a href="#Page_261">Index</a>
+</td>
+<td class="tdr">261</td>
+</tr>
+
+</table>
+
+
+<hr class="chap x-ebookmaker-drop">
+<div class="chapter">
+
+<p><span class="pagenum" id="Page_1">[Pg 1]</span></p>
+
+
+  <h2 class="nobreak" id="1">
+    1
+    <br>
+    <i>Trusts to Cartels</i>
+  </h2>
+</div>
+
+
+<p>The problem of monopoly is no longer a distinctively domestic
+and national phenomenon. It has come to encompass the
+wide world. Like a parasite upon its host, monopoly has grown
+with the marketplace. Today hardly a corner of the world
+remains free from the malignant influence of its latest and most
+sinister form, the cartel. Diamonds discovered in Arkansas may
+prompt agitated conferences within 48 hours in London and
+the Belgian Congo; a lawsuit in New York challenging the
+aluminum monopoly brings simultaneous outbursts of oratory
+in the House of Lords and of vituperation on the Axis radio.</p>
+
+<p>For over half a century, the Sherman Act has stood as a
+positive expression of the inflexible will of the American people
+to preserve freedom of economic opportunity. When this
+measure was enacted the oil, whiskey, and sugar trusts had
+placed barriers directly athwart the arteries of commerce and
+were exacting tolls for every gallon or pound of product permitted
+to pass. Since nation-wide industrial monopoly of a
+comparatively stable character first took the form of a simple
+trust agreement the Sherman Act came to be designated an antitrust
+statute. But its thrust was positive: the maintenance of
+<span class="pagenum" id="Page_2">[Pg 2]</span>free, competitive markets and a democratic system of industrial
+control.</p>
+
+<p>If such an Act were passed today, I am quite sure it would
+be called an “Anti-Cartel Act.” For our attention is at the
+present time focused on industrial monopoly in a different form,
+operating in a wider orbit. But our basic concern is the same.
+We are as determined today as were our grandfathers, two
+generations ago—indeed, as were the founders of the republic—to
+countenance no infringement of the right to engage in any
+legitimate enterprise and to conduct business without let or
+hindrance from any self-constituted group presuming to monopolize
+trade or industry.</p>
+
+<p>The Sherman Act has proved an effective instrument no less
+for dealing with the cartel problem than for curbing the trusts.
+It must be conceded, however, that, in default of proper implementation
+and appropriate supplementation, it has not fully
+realized the salutary object for which it was designed. In particular,
+our policies with regard to patents, trademarks, the
+tariff, monetary and credit matters, interstate commerce, and
+foreign trade, all have a direct bearing upon competition and
+the pattern of industrial organization. They are important factors
+conditioning the efficacy of a free market for performing its
+basic economic functions. To our comparative neglect of the
+incidence of these policies on the problem of maintaining healthful
+competitive conditions in industry must be attributed a large
+share of the responsibility for the difference between antitrust
+goal and business practice.</p>
+
+<p>In these circumstances, cartels—which, in effect, are trusts
+magnified to an international scale—have been able by clandestine
+means to impress their sinister mark upon our economy.
+In mobilizing for war, we discovered, almost too late, that they
+were responsible for shortage after shortage of vital materials.
+<span class="pagenum" id="Page_3">[Pg 3]</span>The fact is that they have retarded technological advance and
+the introduction of improved devices and products, whenever
+such developments seemed to threaten their vested interests
+despite the fact that thereby national security might be jeopardized.
+They have, indeed, obstructed and in no small measure
+thwarted the declared foreign policies of the American government,
+placing their own business interests above the public
+interests.</p>
+
+<p>In peace time, their high-price, restricted-output strategy has
+impeded the advance of our living standards and general economic
+well-being. Through the abuse of our patent system,
+cartel controls have been established over large segments of
+technology. With this leverage, industrial monopolies of international
+compass have at times deliberately brought about the
+deterioration of quality standards. When it might be to their
+advantage in maintaining or exploiting their monopoly position,
+they have adulterated their products to an extent and in a
+manner endangering the health, and even the lives, of consumers.
+Almost incredible as these assertions may be, they are
+not subject to contradiction—the incontrovertible facts are clearly
+set forth in Congressional investigations and in the evidence
+in antitrust cases of the Department of Justice.</p>
+
+<p>Cartels are in essence private governments which threaten
+to subvert and even engulf duly constituted authority. In Germany,
+Kaiserism and later Nazism received enormous impetus,
+indeed decisive support, from the regimented, cartelized structure
+of the national economy.</p>
+
+<p>Totalitarianism represents simply the ultimate consummation
+of cartelism—the final, full expression of the reactionary
+forces stemming from special privilege. In totalitarian states all
+industrial enterprise is subservient to the predatory interests and
+fear-dominated will of a government which openly flouts the
+<span class="pagenum" id="Page_4">[Pg 4]</span>democratic principle of consent of the governed. In the economic
+sphere, the investment of fresh capital, the volume of
+production, the prices to be charged, the markets to be served,
+are determined by arbitrary decrees. Risk-taking, managerial
+discretion, bargaining freedom, the essential elements of the
+capitalistic system as we have known it, are absent. One can
+neither start a new industry, launch a new enterprise, or change
+one’s occupation without first obtaining official consent. It is in
+the nature of cartels that they should operate in a similar fashion,
+even if in their application the devices used for consolidating
+the vested interests of established concerns and throttling
+the dynamic forces which economic freedom would release may
+lack something of the rigor they exhibit under totalitarian
+“leadership.” In order to maintain their control over production
+and prices cartels must determine who may enter the industry,
+how they shall operate and where they may sell.</p>
+
+<p>The basic American concept of free enterprise is the antithesis
+of a cartelized market. Yet, all too frequently, some of our industrialists
+have had the effrontery to attempt to promote a
+pro-cartel policy by a specious appeal for free enterprise. The
+pretension is that freedom to compete in trade must encompass
+freedom to suppress competition! As though the right to start
+a fire in order to heat a house must include the right to burn
+down the house in complete disregard of the peril to the whole
+community! The common sense of ordinary men has no difficulty
+in distinguishing between the right to start a fire and the
+“right” to commit arson.</p>
+
+<p>Unless I am greatly mistaken, the American public will no
+more tolerate a cartel-sanctioning abrogation of the antitrust
+laws in the name of “free enterprise” than they would countenance
+a repeal of the laws against arson in the name of “freedom
+of self-preservation”—the right to keep warm!</p>
+
+<p><span class="pagenum" id="Page_5">[Pg 5]</span></p>
+
+<p>It is significant, and deserves thoughtful reflection that Germany,
+the “classic land of the cartel,” where regimented economic
+restrictionism is the accepted “way of life,” has in the
+course of two generations farrowed Kaiserism and Hitlerism—the
+natural offspring of militarism and cartelism. Even in times
+of peace, the militarists and industrial monopolists of Germany
+found cartel restrictions an excellent means for conducting covert
+warfare. In this way industrial “colonies” were acquired
+and prospective victims “softened up.” Back in 1883, Joseph
+Chamberlain, as a member of the British Cabinet, declared, in
+sponsoring a bill designed to forefend the sub-rosa “invasion”
+tactics of imperialistic Germany:</p>
+
+<p>“It has been pointed out especially in an interesting memorial
+presented on behalf of the chemical industry that under the
+present law it would have been possible, for instance, for the
+German inventor of the hot blast furnace, if he had chosen to
+refuse a license in England, to have destroyed almost the whole
+iron industry of this country and to carry the business bodily
+over to Germany. Although that did not happen in the case of
+the hot blast industry, it had actually happened in the manufacture
+of artificial colors connected with the coal products, and
+the whole of that had gone to Germany because the patentees
+would not grant a license in this country.”</p>
+
+<p>A quarter century later, Lloyd George, introducing a more
+drastic bill for curbing these insidious depredations on strategically
+vital British industries, pointed out:</p>
+
+<p>“Big foreign syndicates have one very effective way of destroying
+British industry. They first of all apply for patents on
+a very considerable scale. They suggest every possible combination,
+for instance, in chemicals, which human ingenuity can
+possibly think of. These combinations the syndicates have not
+tried themselves. They are not in operation, say, in Germany or
+<span class="pagenum" id="Page_6">[Pg 6]</span>elsewhere.... A good many of these patents have been taken
+out not for the purpose of working the patents in this country,
+<em>but for the purpose of preventing their being worked</em>.”</p>
+
+<p>The “big foreign syndicates” to which George referred were,
+of course, the German cartels.</p>
+
+<p>The adroit strategy of stealthily sapping the industrial foundations
+of the national security of countries capable of resisting
+the German <i lang="de">drang nach</i> all-points-of-the-compass has been relentlessly
+pursued and resourcefully developed, through thick
+and thin, decade after decade. If the cartels are thwarted in the
+use of the patent system as a weapon for disarming potential
+competitors abroad, they may inveigle the intended victims of
+German aggression to a ‘simulated’ love-feast at which the
+latter are gorged with the poisoned food of production quotas,
+technology restrictions, market-territory limitations, and pricing
+inhibitions. What these tactics accomplished in the way of
+immobilizing French industry is now a familiar story. To cite
+the record of only three of the most strategic industries, through
+cartel manipulations the Germans succeeded in (a) reducing the
+relative output of French steel from substantial equality with
+German output in 1926 to 40 percent thereof in 1938, (b) retarding
+the growth of French aluminum production to a rate
+which fell short of doubling the output in the same period,
+while German production was increasing five-fold, and (c) restricting
+the French dyestuffs industry in such fashion that its
+output in 1937 was barely two-thirds of what it had been in
+1924, whereas German production, even according to official
+estimates (none too reliable though they are) had increased five
+percent in the same period.</p>
+
+<p>Nor were the European countries alone the “potential enemies”
+whose vital economic defenses were thus impaired by
+subtly imposed cartel restrictions. In this hemisphere, likewise
+<span class="pagenum" id="Page_7">[Pg 7]</span>and not least of all in our own country, the cartel device was
+sedulously—and effectively—used for the same ulterior purpose.
+As President Woodrow Wilson declared shortly after the
+first World War,</p>
+
+<p>“Our complete dependence upon German [dyestuffs] supplies
+before the war made the interruption of trade a cause of
+exceptional economic disturbance. The close relation between
+the manufacture of dyestuffs on the one hand and of explosives
+and poisonous gases on the other, moreover, has given the industry
+an exceptional significance.... It will ... be a policy of
+obvious prudence to make certain of the successful maintenance
+of many strong and well-equipped chemical plants. German
+chemical industry, with which we will be brought into competition,
+was and may well be again <em>a thoroughly knit monopoly,
+capable of exercising a competition of a peculiarly insidious and
+dangerous kind</em>.”</p>
+
+<p>Despite this warning in 1919, we were only slightly better
+off, relatively, in respect of the arts of organic chemicals manufacture
+twenty years later, when Germany decided the time was
+ripe for another attempt at world conquest, than we had been
+in 1917. In the matter of synthetic rubber technique, today the
+most strategically critical of all these processes, I. G. Farbenindustrie
+had succeeded, through its cartel arrangements with
+the leading American firms in the petroleum and chemical
+fields, in keeping this country in an extremely vulnerable position—as
+all the world now knows. Partly through persistent
+stalling tactics, partly through playing one American firm off
+against another, partly through cajolery, and partly through
+deliberate deceit, the German cartelists had not only stifled
+the development of American technology in this field, even by
+their “partners” on this side of the Atlantic, but had done even
+better, from their standpoint. They had obtained the German
+<span class="pagenum" id="Page_8">[Pg 8]</span>patent rights and the essential know-how for the most signal
+contributions of American technicians to the art of synthetic
+rubber manufacture. And, incredible though it may seem, they
+had obtained these advantages without divulging a single significant
+detail of their own carefully guarded know-how!</p>
+
+<p>As the President’s Office of Facts and Figures ruefully
+summed up the situation in 1942:</p>
+
+<p>“[The enemy] has worked for many years to weaken our
+military potential. Through patent controls and cartel agreements
+he succeeded in limiting American production and export
+of many vital materials. He kept the prices of these materials up
+and the output down. He was waging war, and he did his work
+well, decoying important American companies into agreements,
+the purpose of which they did not sense.”</p>
+
+<p>Thus, sixty years after a member of the British Cabinet first
+testified to its awareness of the menace in the insidious penetration
+of German cartels in the international sphere, a branch of
+the American Executive confirms the continuing pertinence of
+his observations.</p>
+
+<p>How, in the face of this record, in the light of this evidence
+of the persistence of the cartel movement and of its chronic
+tendency to pervert the processes of industrial production to
+ulterior ends leading indefeasibly to the devastation and slaughter
+of war can it be contended that cartels represent a promising
+way to order the post-war world economy? Is it not plain,
+rather, that “if we would guide by the light of reason,” we must
+reaffirm our pledge of democratic equality of opportunity for
+all in trade and industry, and resolutely set about the task of
+putting our house in order in accordance with that basic principle
+of American life? Is it not plain, too, that monopolistic industrial
+control in the domestic sphere cannot be completely
+achieved without the uprooting of the foci of cartel infection in
+<span class="pagenum" id="Page_9">[Pg 9]</span>German industry? Once German industry is purged of its cartel
+hook-ups and monopolistic animus and all non-German industry
+is released from the haunting fears and seductive temptations
+which go so far to explain these international industrial alliances,
+I am confident that the prospects for the restoration of
+genuine freedom of enterprise and healthy competitive markets
+will be good. While I am not sanguine of the goal being
+reached forthwith and easily, “at one bound” as it were, I have
+an abiding faith that the dynamism of economic freedom will
+enable us, in the end, to surmount every obstacle erected by
+special privilege or vested interest on the highroad to full utilization
+of resources. A truly great adventure is ahead.</p>
+
+
+<hr class="chap x-ebookmaker-drop">
+<div class="chapter">
+
+<p><span class="pagenum" id="Page_10">[Pg 10]</span></p>
+
+
+  <h2 class="nobreak" id="2">
+    2
+    <br>
+    <i>Enterprise Eclipsed</i>
+  </h2>
+</div>
+
+
+<p>It is the determination of our people not only to gain victory
+over the military power of aggressors, but to establish securely
+the lasting conditions of peace. We know that beyond victory
+we shall have to face a multitude of perplexing economic problems.
+We must also realize that we shall meet new dangers to
+those free institutions on which our national economy is based.
+If the problems of peace are to be solved, we shall have to come
+to grips with these difficulties in the same spirit of resolution
+with which the war has been waged.</p>
+
+<p>It seems abundantly clear that America can never have a
+foreign policy based on the principles of democracy and international
+good will as long as international trade is dominated
+by cartels. It does not seem possible that the Atlantic Charter,
+the Good Neighbor policy, and the reciprocal trade pacts can
+effectively prevail if the special privileges of cartels dominate
+trade and politics in the postwar world.</p>
+
+<p>In many respects cartels form one of the central issues of the
+present period. The greatest threat to our success in achieving
+full production and full employment at home, and friendly cooperation
+with other nations abroad, is the philosophy and practice
+of privilege embodied in cartels. If there is to be a free and
+productive economy in the United States, or a free exchange of
+<span class="pagenum" id="Page_11">[Pg 11]</span>goods in world markets, the power of cartels must be broken.</p>
+
+<p>It is essential to understand that cartels seek to divide and
+rule world industry on the basis of economic privilege. If cartels
+are successful in gaining a foothold in the postwar period,
+it will almost be impossible for this nation to maintain a high
+level of peacetime production or to cooperate in the reconstruction
+of world trade.</p>
+
+<p>In general, cartels restrict rather than promote trade. Cartels
+typically engage in such practices as dividing fields of operation
+and market areas between members so as to eliminate competition,
+restricting production by agreement, and fixing prices so as
+to avoid price competition. They also promote various kinds of
+patent licensing contracts which enable them to control and limit
+the use of new inventions and thus restrict the benefits of technological
+advance. The effects of these practices include reduced
+production and employment, higher prices and profits, retarded
+spread of technological improvements and a lower standard
+of living.</p>
+
+<p>The conduct of cartels before and during this war has been
+one of the tragic pages of our history. The shortages of aluminum
+and magnesium resulting from cartel restrictions forced us
+to strip the kitchens of America and scar our public squares with
+scrap piles. The scarcity of rubber is a never-ceasing threat to
+our productive effort. Our armed forces plead with us to
+contribute our binoculars. The lack of vital drugs and medicines
+has jeopardized our men fighting in fever stricken areas.
+In fact, almost wherever there was a cartel there was a shortage.</p>
+
+<p>But cartels have an even more serious aspect. These private
+governments threaten the sovereignty of democratic nations.
+The political implications of cartel activity threaten to subvert
+future national public policy of the United States.</p>
+
+<p>There is a close relation between a country’s economic policies
+<span class="pagenum" id="Page_12">[Pg 12]</span>and its foreign relations. It is generally recognized now that
+economic freedom cannot be attained at home if private groups
+are permitted to acquire monopoly power over industry. Likewise,
+it must be equally recognized that friendship and cooperation
+between this country and other nations cannot be established
+without the free exchange of goods and services. Reciprocal
+trade treaties and good neighbor policies can have little effect
+if private cartels can shut off American markets to foreign producers
+or prevent American producers from selling abroad.</p>
+
+<p>The Good Neighbor policy is one of the fundamental principles
+of our relations with Latin America. While our Government
+was bending every effort to bring about the conditions of
+sound and mutually advantageous cooperation, cartels were
+systematically undermining these efforts. Latin America was
+turned over by private cartels as a colony to hostile foreign interests.
+By giving German industry virtually a free hand in
+Latin America, and by agreeing not to compete, American cartelists
+made possible the creation of a German sphere of influence.
+Nazi propaganda, espionage, and subversive activity all
+stem directly from this unhampered German penetration.
+When South Americans sought to purchase drugs, metals, precision
+equipment, and munitions from the United States, private
+cartel treaties had already provided that American concerns
+could not engage in this trade. Not only was the healthy development
+of South American trade and industry checked, but
+even today we struggle desperately to overcome the political
+consequences of cartel activity.</p>
+
+<p>We have long cherished the principle of open covenants
+openly arrived at. In fact, this policy is an essential part of
+America’s conduct of foreign affairs. Every treaty commitment
+made by this country is debated publicly by the people’s representatives.
+Without the agreement of two-thirds of the Senate
+<span class="pagenum" id="Page_13">[Pg 13]</span>and the President, no treaty may be made. Yet agreements
+have been made in international industry affecting both the
+American economy and our foreign policy which were secretly
+contrived and clandestinely arrived at. The American people
+had no voice, but they bore the burden of these private treaties.</p>
+
+<p>Make no mistake—the war has not interfered with cartel
+plans. Cartel agreements invariably provide for the contingency
+of war. Long before the war, cartels worked out a <span lang="la">modus
+vivendi</span>—a method of continued existence—for they felt that
+their relations must be preserved, war or no war. Thus we find
+American and British cartelists agreeing to preserve the German
+position in Latin American markets after the war. Agreements
+between the cartel members of countries now at war provide for
+a resumption at the war’s close. In case legislation or government
+action interfere, then they will cooperate to adapt their
+relations, as one agreement states, “in the spirit of the present
+agreements.”</p>
+
+<p>Therefore, the necessity for vigorous action in keeping open
+the channels of trade becomes apparent when we consider that
+those who create cartels hold themselves above the law or seek
+to control legislation and Government policy in the many countries
+where they operate.</p>
+
+<p>These same groups are making their own postwar plans. Because
+they have found the enforcement of the Sherman Act a
+hindrance in the past they have expressed a desire to have the
+antitrust laws repealed.</p>
+
+<p>It should be recalled that the political deal which Munich
+represented had its economic counterpart in one made at Dusseldorf,
+in which the Federation of British Industries and the
+German industrial overlords expressed their intention of stabilizing
+and rationalizing world trade. As indicated at Dusseldorf,
+cartel groups regard governments as handy instruments
+<span class="pagenum" id="Page_14">[Pg 14]</span>to be used in working out their schemes of restriction.</p>
+
+<p>Although the peace of Munich has received considerable public
+consideration, little attention has been given to the peace of
+Dusseldorf, a peace which, while obscured in the welter of political
+and military crises, epitomized the spirit and the power of
+international industrial monopoly.</p>
+
+<p>On March 15 and 16, 1939, immediately after Hitler’s invasion
+of Czechoslovakia, representatives of the Reichsgruppe
+Industrie of Germany and of the Federation of British Industries
+held an intensive conference at Dusseldorf. At the conclusion
+of the conference representatives of German and British
+industry issued the following joint declaration:</p>
+
+<p>“The Reichsgruppe Industrie and the Federation of British
+Industries, having concluded a general discussion on Anglo-German
+trade relations, issue the following agreed statement:</p>
+
+<p>“1. The two organizations welcome the opportunity which
+these discussions have given of developing still further the
+friendly relations which have existed between the two bodies
+for so many years.</p>
+
+<hr class="tb">
+
+<p>“4. The two bodies are agreed that the objective to be attained
+is that the export of all countries should be conducted
+in such a way as to ensure a fair return for the producers of those
+countries. Hence it is agreed that it is essential to replace destructive
+competition wherever it may be found by constructive
+cooperation, designed to foster the expansion of world trade,
+to the mutual benefit of Great Britain, Germany and all other
+countries.</p>
+
+<p>“5. The two organizations are agreed that it is desirable that
+individual industries in both countries should endeavor to arrive
+at industrial agreements which will eliminate destructive
+competition, wherever occurring, but prices must be fixed at such
+<span class="pagenum" id="Page_15">[Pg 15]</span>a level as not to diminish the buying power of the consumers.</p>
+
+<p>“6. The two organizations realize that agreements upon
+prices or other factors between Germany and Great Britain are
+only a step, although a most important step, towards a more
+ordered system of world trade. They would welcome the participation
+of other nations in such agreements.</p>
+
+<hr class="tb">
+
+<p>“8. The two organizations realize that in certain cases the
+advantages of agreements between the industries of two countries
+or of a group of countries may be nullified by competition
+from the industry in some other country that refuses to become
+a party to the agreement. In such circumstances it may be necessary
+for the organizations to obtain the help of their governments
+and the two organizations agree to collaborate in seeking
+that help.</p>
+
+<p>“9. The two organizations agree that it is their objective to
+ensure that as a result of an agreement between their industries
+unhealthy competition shall be removed. Their aim is to secure
+as complete cooperation as possible throughout the industrial
+structure of their respective countries.</p>
+
+<p>“10. The two organizations have agreed to use their best
+endeavors to promote and foster negotiations between the individual
+industries in their respective countries. They are encouraged
+in this task owing to the fact that a considerable number
+of agreements between individual German and British industrial
+groups are already in existence. There is thus available
+a large body of experience which inspires confidence that an immediate
+extension of this policy is both practicable and advantageous.</p>
+
+<p>“They are glad to state that approximately a further fifty
+industrial groups have already signified their willingness in
+principle to negotiate at an early date.</p>
+
+<p><span class="pagenum" id="Page_16">[Pg 16]</span></p>
+
+<p>“They also report with satisfaction that negotiations have already
+been started and are now taking place between ten industrial
+groups.”</p>
+
+<p>The spirit exemplified in the above declaration is not dead.
+It is awaiting the moment of peace to step in and resume control
+of those very industries which are most essential to the rehabilitation
+of a war-torn world, to the fullest use of our labor
+and resources.</p>
+
+<p>Surely we must realize now that if the program of Dusseldorf
+prevails in the postwar world it will produce World War
+<abbr title="3">III</abbr>. Surely we must recognize that we cannot build a free
+world without a free economy.</p>
+
+<p>The close and constant cooperation of the United Nations
+after the war is all-important. This cooperation should rest,
+among other things, on active and healthy international trade.
+We want to see that trade grow unhampered by private restrictions.
+In attacking these illegal activities the Government
+of the United States is aiming at a condition which obstructs
+healthy international trade and threatens the effectiveness of
+governmental foreign policies.</p>
+
+<p>To combat the influence of monopoly groups, the United
+States has two effective weapons: (1) the vigorous enforcement
+of the Sherman Act, and (2) the power which Congress possesses
+to investigate and make public the hidden dealings of
+cartel interests.</p>
+
+<p>It is significant that in Great Britain increasing interest in
+the purposes and activities of cartels is being manifested—principally
+as the result of American antitrust investigations which
+have revealed that British industry, no less than our own industry,
+has suffered the burden of restrictive practices imposed by
+cartel arrangements.</p>
+
+<p>Moreover, there has been developing in Canada a substantial
+<span class="pagenum" id="Page_17">[Pg 17]</span>interest in the cartel problem. Thus, the <cite>Ottawa Journal</cite> recently
+stated editorially that “it is fairly clear to all that cartels,
+large combinations of industries parcelling out territories among
+themselves, controlling patents and fixing prices, may be a
+menace to the general well-being, and what is more vital, a
+menace to world peace.”</p>
+
+<p>And the <cite>Winnipeg Free Press</cite> declared not long ago that
+“it is gradually dawning upon Britain that rationalization of
+industry has its dangers. They are discovering that monopolies
+can and do develop evil practices.... Thus there is arising there
+[in Great Britain] a demand for control of monopolies, the
+breaking down of cartels and the restoration of competition between
+the great industrial giants.” After pointing out some of
+the evils that flow from monopoly control, <cite>Winnipeg Free
+Press</cite> went on to say: “National monopolies which restrain trade
+are bad enough of themselves. But when combined with international
+cartels they are intolerable. The Canadian government
+should pay particular attention to the antitrust proceedings
+in the United States. They reveal a most unhealthy state
+of industrial health and if the economy of this country is to be
+saved from disaster steps will have to be taken to break up the
+evil monopolies and their cartels.”</p>
+
+<p>It would certainly be in the mutual interest of Great Britain
+and ourselves if we could take a joint stand against private restrictive
+arrangements in the postwar world and together seek
+to stamp them out.</p>
+
+<p>There is ample reason to believe that American exposure of
+secret cartel practices may have its effect on the public policy
+of other countries and promote common understanding that
+certain types of activity should be outlawed in other countries
+as well as here. But irrespective of the extent to which other
+governments adopt policies similar to ours, there can be no
+<span class="pagenum" id="Page_18">[Pg 18]</span>doubt that American business can thrive in competition with
+foreign cartels if it does not enter into cartel restrictions. If
+freed of cartel shackles, American enterprise should well be
+able to expand in world markets and render foreign cartel control
+ineffective. It is doubtful, indeed, whether any major international
+cartel can effectively control world markets without
+the participation and cooperation of the American segments of
+the industry. There is a real question whether foreign cartels
+can long survive in many industries if American cooperation is
+not extended to them.</p>
+
+<p>If and when some measure of control and regulation becomes
+economically necessary on an international scale in a particular
+industry, a question is presented for governmental action—not
+for private cartel action. If, for example, in a particular industry
+it seems necessary to control production in order to avoid
+waste of a scarce natural resource, the solution of such a problem
+is properly a responsibility of national or international governmental
+action. Where control is needed, it must be by public
+authority. If international restrictive agreements are ever needed,
+they must be determined upon by governments—not by
+private cartels.</p>
+
+<p>But the situation where control would be required on an international
+scale is decidedly the exception. Most foreign trade
+in the postwar world can be conducted on a competitive basis
+if we give competition a chance. The period following the war
+will present an unprecedented challenge to the ingenuity of
+mankind. Men of brains and imagination should have a chance
+to rebuild the world, to take risks, to engage in foreign trade
+and to win in competitive struggle, unhampered by private decrees.
+The world is not a private hunting preserve which can be
+divided at will among monopolists who think they have gained
+squatters’ rights.</p>
+
+
+<hr class="chap x-ebookmaker-drop">
+<div class="chapter">
+
+<p><span class="pagenum" id="Page_19">[Pg 19]</span></p>
+
+
+  <h2 class="nobreak" id="3">
+    3
+    <br>
+    <i>Technology</i>
+  </h2>
+</div>
+
+
+<p>In the days of Adam Smith it was possible to measure the
+wealth of nations in terms of mineral resources, possession of
+fertile lands and control of strategic geographical areas. Today
+we have a new index to the wealth and security of nations.
+Technology and applied science have become principal instruments
+in the maintenance of a high standard of living and for
+the protection of national interests. In fact, when we speak of
+the balance of power in the modern world, we must take into
+account the extent and quality of industrial and technological
+resources as a dominant factor in national welfare. The horizons
+which have been opened by applied science and research offer
+to the world, and to our own nation in particular, new industries,
+greater opportunities for our youth, higher levels of health and
+comfort, and the attainment of that genuine social security which
+comes with all great advancements in human knowledge.</p>
+
+<p>Technology—its direction, its applications, and its enjoyment—is
+today a primary concern of government. In a system
+based upon freedom of enterprise, access to technology is the
+fundamental condition of rapid advancement toward the goals
+for which our nation is striving. The power that goes with the
+<span class="pagenum" id="Page_20">[Pg 20]</span>development of modern technology has been perverted in totalitarian
+countries to provide instruments of aggression. Because
+totalitarian states have regimented science and have made
+it subservient to imperial ambitions, it has been used to destroy
+rather than to create. One of the principal problems which
+the United Nations will encounter in the peace to come will be
+the prevention of any abuse of new discoveries for the purpose
+of establishing war machines which can threaten the peace of
+the world.</p>
+
+<p>The control of vital areas of research by monopolistic interests
+is a condition which cannot be tolerated. Monopoly control
+seeks to protect vested interests and to perpetuate its grip on
+the advancement of science and technology. It retards the introduction
+of new goods and services and the maintenance of
+full employment in time of peace. Our experiences in this war
+have demonstrated conclusively that monopolistic control of
+critical sectors of industrial research has a paralyzing effect on
+mobilization of our national strength. One of the most difficult
+problems we have encountered in arming this country has been
+the domination and restriction of technology by small privileged
+groups. It has required strenuous efforts on the part of government
+and industry alike to overcome the stifling effects of complacent
+monopoly.</p>
+
+<p>With rare exceptions industrial research at the present time
+can only be carried on by large numbers of scientists and technicians
+combining their ingenuity to resolve the complex problems
+of both pure and applied science. In the last fifty years
+technology has moved at such a rapid pace that no longer is
+the small businessman in a position to maintain laboratories of
+sufficient size. Today we witness the gigantic research organizations
+of all major corporations, and no one desires to impair
+their efficiency.</p>
+
+<p><span class="pagenum" id="Page_21">[Pg 21]</span></p>
+
+<p>There is, nevertheless, a gap between the promise of organized
+research conducted on a huge scale by great corporations
+and the fulfillment as measured by accomplishments for the
+public interest. So that there shall be no misunderstanding, I
+should like to pay tribute to the vast army of scientists and
+research workers who have done such remarkable work in the
+years of peace as well as in the years of war in bringing forth a
+multitude of amazing discoveries. It is not their fault that their
+contributions have not been fully realized. The trouble is that
+in many instances the misuse of research by monopolistic and
+cartelized groups has resulted in the restricting of production,
+withholding new products, and fencing in and blocking off new
+developments.</p>
+
+<p>One of the ablest and clearest statements of the effect of restrictive
+arrangements upon research was made by <abbr>Dr.</abbr> F. B.
+Jewett, vice-president of the American Telephone &amp; Telegraph,
+and chief of Bell Laboratories. In discussing an agreement between
+his company and other parties, he stated:</p>
+
+<p>“Broadly speaking, the practical effect of the agreement is
+to limit the field of possible development of each party to its
+present major activities....</p>
+
+<p>“Thus, while a casual reading of the agreement by one not
+thoroughly conversant with all the factors may appear to establish
+the basis for an enlarged free development in most of
+the fields, this is not actually the case.</p>
+
+<hr class="tb">
+
+<p>“The far-reaching effect of the proposed agreement on the
+character and scope of our research and development work is
+apparent. Viewed both from the standpoint of the research
+worker in our laboratories and from the standpoint of those
+responsible for the expenditures incurred by the Laboratories,
+the inevitable result would be a narrowing of the field of activity
+<span class="pagenum" id="Page_22">[Pg 22]</span>and failure to undertake anything which at the outset is not
+clearly directed to the field of our current business. From the
+standpoint of the man who has a brilliant idea which in its first
+nebulous form seems to be applicable outside our business, there
+will be little or no urge to go ahead in the face of a situation
+where he knows that the results of his work have been sold in
+advance outside of the Bell System. From the standpoint of
+management there will likewise be no incentive, but quite the
+reverse, to urging him on and appropriating money for his investigations.”</p>
+
+<p>A member of a monopoly or cartel group all too often finds
+itself in a position where it must choose between the national
+interest on the one hand and its cartel obligations on the other.
+This difficulty is accurately stated in a document taken from
+the Standard Oil <abbr title="Company">Co.</abbr> (<abbr title="New Jersey">N. J.</abbr>) files with reference to the development
+of 100 octane gasoline, one of the most vital materials
+of modern warfare:</p>
+
+<p>“This possibility is, of course, extremely attractive to the
+Army Air Corps, but there is one difficulty involved which <abbr>Mr.</abbr>
+Russell quite frankly discussed. The hydrogenation development
+originated in Germany, and through cooperation all
+around has now passed into the hands of the oil industry of the
+entire world, and, to a certain extent, into the hands of the foreign
+chemical industry as well. There is a full and free exchange
+of technical information between all of the companies
+and units involved in the hydrogenation development and this
+exchange is not only by means of reports but by constant visits
+of technical men. To cut off these reports and shut our hydrogenation
+plants against these visitors would be not only a violation
+of these agreements, which would involve us in many difficulties,
+but would also be tantamount to a confession that we
+were engaged in some work of special military value which
+<span class="pagenum" id="Page_23">[Pg 23]</span>would mean that the plants would become a focal point for espionage.
+The costs and difficulties of protecting against leakage
+of information about large commercial operations under such
+conditions is hard to estimate. <em>It seems that the only practical
+way to handle this problem is to avoid carrying out the operation
+of producing 100 octane number aviation gasoline commercially
+as long as possible.</em> We would, of course, also have
+to breach our agreements to render full and complete technical
+reports to all of the companies associated with us (even to the
+American companies, for fear of leakage). We should also forfeit
+the advantage in producing at the least cost the best available
+gasoline for commercial purposes.</p>
+
+<p>“<em>Any program by which the Army Air Corps can obtain their
+objective of a one or two year start over the rest of the world
+on this vital matter bristles with difficulties and sacrifices from
+our standpoint.</em> We will not have to cross the bridge finally until
+our present experiments are completed. When and if we are
+able to demonstrate that the hydrogenation plants are capable
+of turning out an aviation product which with the usual quantity
+of lead can be brought up to 100 octane number, we shall be
+faced with the situation mentioned above. <em>To meet the very
+proper desires of the Air Corps as expressed to us we shall have
+to violate our agreements and perhaps forfeit the confidence of
+our associates, both American and foreign, and beyond this we
+shall either have to avoid any commercial use of the new method
+or run the very grave risk of finding that our efforts at
+secrecy have been abortive.</em>”</p>
+
+<p>In pointing out the inevitable conflicts between national loyalties
+and business interests which arise when industry is carried
+on through private international cartel agreements, I do not attack,
+nor do I intend to cast inferences against, the patriotic motives
+of any men or companies. I assume that the persons who
+<span class="pagenum" id="Page_24">[Pg 24]</span>have taken part in these transactions have not consciously acted
+against the best interests of their country. But it is the cartel
+system that is at fault. The individuals caught up in the system
+are faced with a dilemma because it imposes on them choices
+which it is almost impossible to make without violation of an
+obligation to one of two conflicting interests.</p>
+
+<p>One of the most serious limitations upon research has been
+the division of fields of technology by cartel groups. If a company
+is barred by agreement from an aspect of technology, there
+is little if any incentive to do research in that field. One possible
+consequence of such division of technology is that it permits
+foreign interests to exercise influence amounting to domination
+over research in this country.</p>
+
+<p>No one doubts that synthetic rubber is a matter of national
+interest. The cartel arrangement between Standard Oil <abbr title="Company">Co.</abbr>
+(<abbr title="New Jersey">N. J.</abbr>) and I. G. Farbenindustrie was such that the latter dominated
+the development of synthetic rubber in this country as
+well as in Germany.</p>
+
+<p>In the case of the Bausch &amp; Lomb (Rochester)-Carl Zeiss
+(Jena, Germany) cartel on military optical glass, the heads of
+the Bausch &amp; Lomb department responsible for military research
+were to be appointed only with the agreement of the
+Zeiss firm.</p>
+
+<p>In regard to the cartel involving Plexiglass, probably one of
+the most important plastics, and one which has innumerable
+military uses, the Rohm &amp; Haas Company (Philadelphia)
+stated: “We could think of a price agreement on the finished
+product, or a division of our interests ... we have not only our
+own interests at stake, but also the ones of our German house
+[Rohm &amp; Haas of Darmstadt, Germany] and the I. G.”</p>
+
+<p>In December 1934 a high official of the duPont Company
+wrote to E. W. Webb, president of the Ethyl Gasoline Corporation
+<span class="pagenum" id="Page_25">[Pg 25]</span>(copies were sent to every member of its Board of Directors)
+as follows:</p>
+
+<p>“I learned through our Organic Chemicals Division today
+that the Ethyl Gasoline Corporation has in mind forming a
+German company with the I. G. to manufacture Ethyl lead in
+that country.</p>
+
+<p>“I have just had two weeks in Washington, no inconsiderable
+part of which was devoted to criticising the interchanging with
+foreign companies of chemical knowledge which might have a
+military value. Such giving of information by an industrial
+company might have the gravest repercussions on it. The Ethyl
+Gasoline Corporation would be no exception, in fact, would
+probably be singled out for special attack because of the ownership
+of its stock.</p>
+
+<p>“It would seem, on the face of it, that the quantity of Ethyl
+lead used for commercial purposes in Germany would be too
+small to go after. It has been claimed that Germany is secretly
+arming. Ethyl lead would doubtless be a valuable aid to military
+aeroplanes.</p>
+
+<p>“I am writing you this to say that in my opinion under no
+conditions should you or the Board of Directors of the Ethyl
+Gasoline Corporation disclose any secrets or ‘know how’ in
+connection with the manufacture of tetra-ethyl lead to Germany.”</p>
+
+<p>Yet, in the face of this warning from duPont, on January 12,
+1935, Webb wrote the Chief of the Army Air Corps that “There
+is no technical data of military importance known to us which
+would be involved in the building of such a plant that has not
+already received wide publicity, or is of common knowledge in
+the aviation field.”</p>
+
+<p>This statement strikingly ignores the warning received from
+duPont only one month earlier that such a disclosure would
+<span class="pagenum" id="Page_26">[Pg 26]</span>“doubtless” be prejudicial to our national security. In this connection
+it should not be overlooked that duPont and Dow were
+the sole producers of the chemical components of tetraethyl lead
+and, as such, were the concerns which alone possessed the essential
+know-how.</p>
+
+<p>Why did Ethyl Gasoline disregard duPont’s warning? Webb
+himself has supplied the answer in the final paragraph of his
+letter of January 12, 1935:</p>
+
+<p>“There is, furthermore, an equally, if not more, important
+business aspect to the German situation. We are owned by
+Standard Oil and General Motors in equal shares. General
+Motors has important investments in Germany, producing there
+in excess of 50 percent of the motor cars. Standard Oil has large
+investments in all phases of the petroleum business in Germany....
+We feel ... for the reasons specifically mentioned
+here, that it would be extremely unfortunate for all concerned
+if we do not proceed to carry out the agreement with I. G....
+A refusal or undue delay on our part ... might bring on
+some serious reprisal measures.”</p>
+
+<p>This leaves nothing for surmise. It is not unfair to conclude,
+in view of these facts, that for the directors of Ethyl Gasoline
+the preservation of I. G. good-will conflicted with the maintenance
+of good faith in dealings with their own government.
+Though duPont, from the beginning, was opposed to the entire
+deal on grounds of patriotic scruples, nevertheless it eventually
+deferred. In an inter-office memo of the duPont Company
+appears the following:</p>
+
+<p>“I think we should tell <abbr class="spell">I.C.I.</abbr> that the technical and engineering
+information which we are giving I. G. in connection
+with Tetraethyl Lead is being given them entirely at the request
+of the Ethyl Gasoline Corporation. As they no doubt know,
+Ethyl Gas and I. G. set up some arrangements whereby they
+<span class="pagenum" id="Page_27">[Pg 27]</span>are going to participate jointly in the manufacture and sale of
+Ethyl Lead in Germany and we are turning over our information
+to Ethyl Gas which they in turn can submit to I. G. as part
+of the bargain in connection with this joint enterprise.”</p>
+
+<p>The full extent of the dilemma in which cartel members are
+placed by the conflict of their cartel commitments with national
+interest is indicated in two statements made by a representative
+of one of the world’s great industrial combines. In a letter written
+in 1939, after the outbreak of war, a Standard Oil official
+stated:</p>
+
+<p>“Pursuant to these arrangements I was able to keep my appointments
+in Holland, where I had three days of discussion
+with the representatives of the I. G. They delivered to me
+assignments of some 2,000 foreign patents and <em>we did our best
+to work out complete plans for a <span lang="la">modus vivendi</span> which would
+operate through the term of the war, whether or not the <abbr title="United States">U. S.</abbr>
+came in</em>. All of the arrangements could not be completed, but
+it is hoped that enough has been done to permit closing the most
+important uncompleted points by cable. It is difficult to visualize
+as yet just how successful we shall be in maintaining our
+relations through this period without personal contacts.”</p>
+
+<p>It is of significance also that this same representative of a
+cartel group brilliantly expressed the cartel point of view when
+he said:</p>
+
+<p>“Upon completion of that agreement, the war intervened
+because our grouping of interested parties included Americans,
+British, Dutch, Germans, and the war introduced quite a number
+of complications. <em>How we are going to make these belligerent
+parties lie down in the same bed isn’t quite clear as yet.</em> We
+are now addressing ourselves to that phase of the problem and
+I hope we will find some solution. <em>Technology has to carry on—war<span class="pagenum" id="Page_28">[Pg 28]</span>
+or no war</em>—so we must find some solution to these last
+problems.”</p>
+
+<p>It is in their very nature that cartels restrict the fullest developments
+of new products and that they attempt to place rigid
+handicaps on output. Very often they even adulterate the
+quality of products in order to exact the greatest possible toll
+from the public. Several examples may be used to indicate the
+practices and mental attitude of monopoly groups in relation to
+the quality of material. The following quotation concerning
+flashlight bulbs speaks for itself:</p>
+
+<p>“Two or three years ago we proposed a reduction in the life
+of flashlight lamps from the old basis on which one lamp was
+supposed to outlast three batteries, to a point where the life of
+the lamp and the life of the battery under service conditions
+would be approximately equal. Sometime ago, the battery
+manufacturers went part way with us on this and accepted lamps
+of two battery lives instead of three. This has worked out very
+satisfactorily.</p>
+
+<p>“We have been continuing our studies and efforts to bring
+about the use of one battery life lamps. I think you will be
+interested in the attached analysis which <abbr title="Misters">Messrs.</abbr> Prideaux and
+Egeler have worked up covering the various points involved
+in going to the one battery life basis. If this were done, we
+estimate that it would result in increasing our flashlight business
+approximately 60 per cent. We can see no logical reason either
+from our standpoint or that of the battery manufacturer why
+such a change should not be made at this time.</p>
+
+<p>“<abbr title="Misters">Messrs.</abbr> Parker and Johnson now have this matter up with
+the battery manufacturers and I would urge that every assistance
+be given them to put it over.”</p>
+
+<p>Methyl methacrylate, the name of one of the best known
+plastics, is used not only in the industrial field to make airplane
+<span class="pagenum" id="Page_29">[Pg 29]</span>windshielding and many other structural materials, but it also
+has excellent qualities for the making of dental plates or dentures.
+As a result of the monopoly control of this material by
+the duPont Company and Rohm &amp; Haas, its uses were divided
+into two fields: industrial and dental. At the time these firms
+were indicted a sharp difference in price was maintained. When
+methyl methacrylate was sold for industrial purposes, it cost 85
+cents a pound, while the price to dental users was $45 a pound.
+The dental profession soon learned that there was no difference
+in the material, whether it was designed for industrial or dental
+use. As a result they began to purchase their requirements
+from industrial users, in order to gain the advantage of the
+cheaper industrial price which, we could assume, might possibly
+be passed on to the dental patient.</p>
+
+<p>The monopoly clique considered this a form of bootlegging.
+On March 15, 1940, the Vernon-Benshoff Company (Pittsburgh),
+a member of the clique, made various suggestions to
+the Rohm and Haas Company which, although they were not
+placed in actual effect, offer valuable insight into the shocking
+extremes to which monopolists will consider going:</p>
+
+<p>“Our discussion of the Pure Food and Drug Law and pulling
+the acrylic denture under it leads me to wonder if the manufacturers
+of the commercial molding powders might not add an
+ingredient which would not effect the molding properties, but
+which would disqualify it under the act. Apparently a slight
+trace would suffice. Naturally it would be omitted from the
+strictly denture powder.</p>
+
+<p>“Recently I asked <abbr>Dr.</abbr> Johnson to suggest an addition which
+might interfere with distillation of monomer or retard polymerization.
+He could not think of anything that wouldn’t spoil
+the molding properties or clarity of the powders. But there the
+quantity needed to accomplish the result was the handicap.</p>
+
+<p><span class="pagenum" id="Page_30">[Pg 30]</span></p>
+
+<p>“Under the very finicky regulations of the above act however,
+it may be the slightest trace of the right agent, too little
+to constitute harm to molding (or health either as a matter of
+fact) would suffice to have bootleg products in bad.</p>
+
+<p>“A millionth of one per cent of arsenic or lead might cause
+them to confiscate every bootleg unit in the country. There
+ought to be a trace of something that would make them rear
+up.”</p>
+
+<p>In its reply the Rohm &amp; Haas Company said that it was in
+agreement with the general principles presented in the letter
+quoted above and that it would ask its research department to
+work on the matter. This was expressed in a letter of March
+21, 1940 to the Vernon-Benshoff firm:</p>
+
+<p>“With reference to your letter of March <abbr>15th</abbr>, we shall be
+glad to investigate whether denture materials come under the
+Pure Food and Drug Act. We agree with you that if we could
+put some ingredient in our commercial molding material which
+would disqualify it under the Pure Food and Drug Act, this
+would be a very fine method of controlling the bootleg situation.
+We shall take this matter up with our development department
+and advise you whether any such material could be
+used.”</p>
+
+<p>A striking way in which research can be perverted is illustrated
+by another example. The dyestuffs industry is one which
+is basically monopolistic and cartelized. A tight grip is maintained
+over its price structure. This is especially true of dyestuffs
+for textiles. Recently the duPont Company’s research
+laboratories developed a pigment which can be utilized either
+in paints or as a dye for textiles. The duPont research laboratories
+considered various ways to be sure that the pigment could
+be limited in use to the paint and finishing field so as not to
+disturb the price structure of the textile dyestuffs field. The
+<span class="pagenum" id="Page_31">[Pg 31]</span>trend of duPont’s research thought on this subject was stated
+by the director of one of its laboratories:</p>
+
+<p>“Further work may be necessary on adding contaminants to
+‘Monastral’ colors to make them unsatisfactory on textiles but
+satisfactory for paints.”</p>
+
+<p>After working on this problem for some time, duPont’s Jackson
+Laboratory reported on its progress somewhat dolefully.
+(DuPont says of Jackson Laboratory that it is “one of the
+largest organic chemical research laboratories in the world.”)
+The particular task involved was difficult, according to a report
+by the Jackson Laboratory dated June 26, 1940:</p>
+
+<p>“<abbr>Mr.</abbr> Chantler was of the opinion that pigment mixtures,
+unsuitable for textile printing would be very difficult to obtain.</p>
+
+<p>“(B) <i>Agents Injurious to Textile Printing.</i>—The suggestion
+was made that certain compounds that were white under ordinary
+conditions but that would be oxidized to give colored bodies
+when the prints are subjected to chlorine bleach, could be
+used. A few experiments had been made along this line using
+such compounds as Chlorostain N, dianisidine and DuPont Oxy
+Black Base. Complete data on this work are not available. <abbr>Mr.</abbr>
+Dahlen expressed the opinion that the addition of such compounds
+probably would cause as much or more damage to the
+paint trade as to textile printing.</p>
+
+<p>“Such substances as ground glass and carborundum were suggested
+for incorporation with the pigment. While these materials
+would undoubtedly scratch printing rolls, there is considerable
+doubt as to their effect in paints and lacquers.”</p>
+
+<p>Two days later the problem was again attacked at a meeting
+between the representatives of General Aniline Works and the
+duPont Company. Eight possible methods of adulteration
+were considered. I quote a few from the confidential memorandum
+of their discussion:</p>
+
+<p><span class="pagenum" id="Page_32">[Pg 32]</span></p>
+
+<p>“1. A new type of copper phthalocyanine (<abbr class="spell">CPC</abbr>) for the
+paint and lacquer trade which would be unsuitable for application
+textiles.</p>
+
+<hr class="tb">
+
+<p>“The importance of solving these problems was recognized,
+and it was agreed that both parties would work on promising
+ideas which resulted from this discussion. The three problems
+are closely related, and it is possible that the solution of one or
+two will automatically solve the third. It was agreed that a
+powder would be the preferable standard. After detailed discussion
+of various modes of attack, the following appeared to
+be outstanding:</p>
+
+<p>“1. (a) Mixtures of <abbr class="spell">CPC</abbr> with Lakes.—The most promising
+mode of attack appears to lie in the formulation of a mixture
+of <abbr class="spell">CPC</abbr> with a lake, especially a lake of <abbr class="spell">CPC</abbr>. Such a mixture
+should have fairly good fastness to light and <em>yet be poor in wash
+fastness on textiles</em> or incompatible with the usual textile printing
+lacquers....</p>
+
+<hr class="tb">
+
+<p>“(d) Deteriorate Cotton.—Compounds might be incorporated
+into <abbr class="spell">CPC</abbr> which when applied to textiles and followed by
+bleaching or heating treatment <em>might increase the deterioration
+of the cloth</em>. Compounds such as chlorates or aliphatic halides
+which would produce hydrochloric acid were specific examples.</p>
+
+<hr class="tb">
+
+<p>“(g) Irritating Substances.—<em>It is known that certain resins
+and solvents are irritating to the skin, often causing dermatitis.
+It might be possible to formulate a <abbr class="spell">CPC</abbr> composition which will
+make textile materials irritating to the skin.</em></p>
+
+<p>“(h) Incorporation of Grit.—It seemed too dangerous to
+attempt to add gritty material to <abbr class="spell">CPC</abbr> since, although it would
+<span class="pagenum" id="Page_33">[Pg 33]</span>interfere with the use of the material for textiles, it would also
+offer serious disadvantages in grinding on application of surface
+coatings.</p>
+
+<p>“It was agreed that the mere dulling of the material would
+not be a satisfactory solution since dull shades are often used in
+the textile trade. Most of the above comments are often based
+on work on blue, and many of the solutions would apply equally
+well to the green. In fact it is believed that there is a larger
+market for the sale of green than the blue.”</p>
+
+<p>It seems to me that we cannot afford to place our sole reliance
+upon monopolistic corporations whose interests have only
+too often been divided, who have sought restricted production
+rather than full employment of our resources and labor, and
+who have sought for monopoly control rather than public welfare.
+We must learn by the bitter lessons of the early years of
+this war which found us lacking both materials and the know-how
+to make them, resulting from the restrictive practices of
+monopolies which instinctively seek to produce as little as possible
+for the greatest profit.</p>
+
+<p>In war and peace alike technology is a vital factor in our
+national life. The present war is being waged with weapons
+and equipment which represent the last word in scientific development.
+Careful planning and rigorous adherence to the plans
+enabled Germany to have, in 1939, the most efficient war machine
+the world had ever seen. Now, after several years of
+feverish activity, the United Nations have at last caught up with
+and passed Germany in the race for armament superiority.</p>
+
+<p>Now that our war effort has finally been put in high gear an
+entirely different kind of problem seems to be emerging. Under
+the forced draft of war urgency and unlimited government expenditure,
+materials and products are being made the like of
+which we have not heretofore known. The light metals, aluminum
+<span class="pagenum" id="Page_34">[Pg 34]</span>and magnesium, the wonder metal beryllium, the miraculously
+efficient diamond tools and the tungsten carbide tools, the
+plastics and dozens of other new developments will unquestionably
+make the postwar world something entirely different from
+that to which we have been accustomed. Many of the processes
+which can revolutionize our mode of living are owned by the
+government. Some are in the custody of the Alien Property
+Custodian. Others have been developed with federal funds,
+either by government agencies or by private concerns. No one
+will seriously dispute the wisdom of retaining control of these
+government-owned processes and of fostering the fullest possible
+use of them for the benefit of all.</p>
+
+<p>There can be no denying that the war has resulted in a concentration
+of productive facilities in the hands of a relatively
+small number of gigantic corporations. Even before Pearl Harbor
+some of them were enormous concerns capable of wielding
+irresistible power in the competitive struggle with other, smaller
+companies. Today and after the war the smaller competitors
+which have survived will find the odds against them a great deal
+more disheartening than before. It is not in the public interest
+to allow the small competitors to be killed off in the uneven
+fight. Neither is it in the public interest to place hampering
+restrictions upon the effects of the large companies to fully utilize
+their research laboratories and technical experience for the
+purpose of strengthening their competitive position.</p>
+
+<p>Without doubt the sensible thing for us to do is to make research
+and technology available to the little fellow as well as to
+his big competitor. In agriculture this policy has amply demonstrated
+its soundness. Experiment stations financed by state and
+federal funds extend the benefits of their research to the
+small farmer as well as to the large. It is doubtful that one
+could find a single intelligent farm operator, large or small, who
+<span class="pagenum" id="Page_35">[Pg 35]</span>would voice the opinion that governmentally financed agricultural
+research has not been worth many times the money spent
+for it. The small industrialist has the same right to expect that
+a government wishing him to continue to make his contribution
+to the national welfare shall offer him those benefits of research
+and expert advice which he cannot afford to provide for himself
+but which can easily be provided by the government.</p>
+
+<p>There are those who scoff at all mention of cartels and refer
+to them as bogies conjured up to justify an attack on all big
+business. Such an attitude is dangerous. Cartels present the
+greatest challenge to our system of free enterprise.</p>
+
+<p>In every cartel arrangement which has come to the attention
+of the Antitrust Division of the Department of Justice technology
+has been a vital factor. It is the responsibility of government
+to see that technology remains free from artificial
+control and monopoly perversion.</p>
+
+<p>Every instance of this sort is evidence of the possibility of
+service to the public which might be expected if the government
+should see fit to provide itself with an adequately financed and
+numerically sufficient staff of technologists. It is my belief that
+the time has arrived for the adoption of legislation which will
+adequately protect and advance the public interest in technological
+development.</p>
+
+
+<hr class="chap x-ebookmaker-drop">
+<div class="chapter">
+
+<p><span class="pagenum" id="Page_36">[Pg 36]</span></p>
+
+
+  <h2 class="nobreak" id="4">
+    4
+    <br>
+    <i>Patents</i>
+  </h2>
+</div>
+
+
+<p>The importance and the position of patents in the American
+economy have been sharply defined since the outbreak of the
+present war. While the problem which patents have presented
+to our economy did not begin with the attack on Pearl Harbor,
+our experience within the past few years has crystallized many
+of the questions and issues at stake.</p>
+
+<p>Patents are fundamental factors in the cartel problem because
+patent agreements are quite frequently used as the basis of cartel
+arrangements. The vital importance of control over technology
+and research to the achievement of cartel power enhances the
+significance of patents as the foundation stones of cartel structures.
+At the same time, the effects of patent abuses upon the
+economy are magnified to a critical degree.</p>
+
+<p>We are all familiar with the historical background of the
+patent system and with the intent of the authors of the Constitution
+in stating that Congress shall have the power to promote
+the progress of science and useful arts by the grant of a patent.
+It is no accident that the original clause in the Constitution was
+phrased in careful terms. The framers of the Constitution inherited
+a concern toward the grant of any monopoly by government.
+<span class="pagenum" id="Page_37">[Pg 37]</span>They were specific in limiting the scope of the patent
+monopoly because they did not wish the patent to become the
+basis of a system of privilege.</p>
+
+<p>When the American patent system was born, we were a frontier
+nation. Pioneers in every branch of science had before them
+an inviting horizon of discovery. The recognition of their contribution
+towards the promotion of science and useful arts
+served as a stimulus to their initiative and ingenuity. During
+this period the patent system served our country well and acted
+as a major incentive in the making of industrial America.</p>
+
+<p>Our patent system was designed to “promote the progress
+of science and useful arts.” In many respects it has done so, and
+has given proper protection to inventors and enterprising businessmen.
+Where it operates to carry out this purpose, there can
+be no just complaint. But in many instances the patent system
+has been perverted to accomplish exactly the opposite effect.
+The patent has become the principal power weapon of modern
+monopoly, and the misuse of patents the major tactic of industrial
+cartels. This perversion has become so widespread as to
+jeopardize the whole patent system.</p>
+
+<p>The patent problem as it exists today arises in an environment
+vastly different from the handicraft era in which modern
+industry found its beginnings. It is not the patent grant as such
+nor is it the operation of the individual inventor that brings the
+patent system into question. Invention today is a large-scale
+industry in a complex economy. In many branches of industrial
+production vast monopolies exercise a dominating influence over
+research. It is the abuse and misuse of patents by such concentrated
+groups wielding tremendous economic power which have
+brought patents into conflict with the fundamental purpose of
+the patent law and with the Sherman Act.</p>
+
+<p>Monopoly interests, which have violated the antitrust laws in
+<span class="pagenum" id="Page_38">[Pg 38]</span>the course of their abuse of patents, have made the claim that
+the Antitrust Division of the Department of Justice is endangering
+the patent system by prosecuting restraints of trade based
+on patents. Many honest and innocent bystanders have been
+confused and misled by this propaganda. The fact of the matter
+is that danger to the patent system arises not from enforcement
+of the antitrust laws but from the flagrant abuses of those
+who use patents as the foundation stone of illegal monopolistic
+control of industry. If the patent system is finally wrecked we
+shall have to thank those who brought it into disrepute by their
+unflagging attempts to use the patent grant in a manner contrary
+both to the law and to the national interest.</p>
+
+<p>Because patents have become an instrument of power-hungry
+and power-seeking groups in industry, grave doubt now exists
+as to whether our economy can longer tolerate and permit the
+control and consolidation of patents by industrial oligarchies.</p>
+
+<p>Among the many serious abuses to which patents have become
+subject within the last few decades, it is necessary only to
+specify a few.</p>
+
+<p>1. Patents have been used illegally to establish regimented
+systems of industrial control by private groups.</p>
+
+<p>2. Patents have been used, contrary to the tradition and intent
+of the American economy, to stifle new enterprise, to limit
+capacity and production, to divide world markets, to impose
+artificial and arbitrary price levels, and to set up private tariff
+walls.</p>
+
+<p>3. In their determination to eliminate competition among
+themselves and to prevent the emergence of new enterprise,
+monopoly groups in industry have used patents as a shield for
+conspiracy to violate the antitrust laws.</p>
+
+<p>4. Employing the instruments of law designed to secure
+justice and protection to the small inventor and small businessman,
+<span class="pagenum" id="Page_39">[Pg 39]</span>monopoly interests have used litigation and threats of
+litigation based on patents to compel the submission or surrender
+of independent enterprise to the dictates of monopoly control.</p>
+
+<p>5. Patents have been used by industrial giants here and
+abroad to fasten their grip on international trade by setting up
+patent cartel agreements which slice world markets into exclusive
+trade areas. In many instances these international patent
+cartels have made it plain that they consider adherence to
+monopoly rules to be above and beyond the laws of the United
+States and other countries.</p>
+
+<p>6. Our experiences in the first World War and the present
+global war have demonstrated conclusively that the interests of
+hostile countries have been able to use patents as weapons in
+economic warfare against the United States. By delaying the
+development of strategic new industries, by withholding know-how,
+and by strangling the market with exorbitant prices for
+critical materials, monopoly groups in aggressor nations have
+sought to weaken the war potential of the American economy.</p>
+
+<p>7. In numerous instances, scientific research has been perverted
+and misused in order to strengthen monopoly restrictions
+illegally based on patents.</p>
+
+<p>In the scores of Department of Justice cases involving patents
+and illegal agreements based on patents and in the testimony
+before various congressional committees investigating the facts,
+it has become overwhelmingly clear that if free enterprise is to
+be maintained, patent abuses must be eliminated. At the same
+time, the protection which the patent right was designed to give
+to the independent inventor and businessman must be strengthened
+and restored. If the system of economic competition on
+which this nation depends for its well-being is to be preserved,
+it is imperative that economic opportunity be granted to all on
+<span class="pagenum" id="Page_40">[Pg 40]</span>equal terms. This cannot be accomplished if privileged groups
+are able to obtain unfair advantage over new enterprise or to
+amass huge patent structures which block the road to industrial
+initiative.</p>
+
+<p>In a whole roster of industries, patents have been employed
+as the police power of private economic governments. Our industrial
+history is replete with examples of industries dominated
+by a few small monopoly groups whose power rested on
+patents. In the radio industry, in explosives, in spectacles, in
+glass containers, in magnesium, in vitamins, in medicines, in
+building materials, in dyestuffs, in electrical equipment and
+in synthetic rubber, to mention prominent examples, the development
+of the industry has been decided by the arbitrary discretion
+of groups controlling concentrated patent structures.
+Using patents as an excuse, monopolists have sought to determine
+who shall be given permission to manufacture, to buy and
+to sell. They have determined what prices should be fixed and
+in what markets sales might also be made. Illegally wielding
+their patent power such groups have completely squelched free
+enterprise in these and in many other industries. Such control
+is regimentation and bureaucracy in an extreme and pernicious
+form. The independent businessman who falls victim to this
+system of control is without recourse.</p>
+
+<p>Many businessmen seriously object to the regulation of industry
+by government. What they do not realize is that it is
+not public government but private government which exercises
+the most rigid control over industrial conduct. Such regimentation
+violates the fundamental and elementary principles of
+economic liberty. If we believe in free enterprise, we cannot
+at the same time tolerate the existence of private economic government
+which bears no responsibility to the public. This type
+of regimentation has acquired such influence in numerous
+<span class="pagenum" id="Page_41">[Pg 41]</span>branches of industry that free enterprise no longer operates.</p>
+
+<p>A striking example of the manner in which patents are misused
+to create private industrial governments is afforded by the
+glass container industry. For more than a generation this industry
+has been dominated by a monopoly group whose main
+function it has been to acquire and license patents. This private
+governing body produced nothing itself, yet the production of
+practically all the glass containers made in this country was subject
+to its will. The amount of glass containers to be produced
+by any manufacturer was closely regulated and limited. The
+type of bottle he could make was determined by a system which
+permitted practically no competition. Outsiders who attempted
+to enter the industry were promptly eliminated by vigorous
+and costly patent suits.</p>
+
+<p>The patent policy of the monopoly group was neatly set
+forth in a company memorandum which states:</p>
+
+<p>“In taking out patents we have three main purposes: (a) To
+cover the actual machines which we are putting out and prevent
+duplication of them ... (b) to block the development of machines
+which might be constructed by others for the same purpose
+as our machines, using alternative means; (c) to secure
+patents on possible improvements of competing machines so as
+to ‘fence in’ those and prevent their reaching an improved
+stage....”</p>
+
+<p>In the administration and regulation of the glass container
+industry, this group pursued a licensing policy equally intended
+to perpetuate its monopolistic position. In a memorandum outlining
+this aspect of its control, the following statement appears:</p>
+
+<p>“Consequently, we adopted the policy which we have followed
+ever since, of restricted licensing. That is to say, (a) We
+licensed the machines only to selected manufacturers of the better
+type, refusing many licenses whom we thought would be price
+<span class="pagenum" id="Page_42">[Pg 42]</span>cutters, and (b) We restricted their fields of manufacture, in
+each case, to certain specific articles, with the idea of preventing
+too much competition. (c) In order to retain more <span id="TN1">complete
+control of the situation</span>, we retained title to the machines and simply
+leased them for a definite period of years, usually 8 or 10
+years, with the privilege of renewal of a smaller additional
+term.”</p>
+
+<p>Obviously, the patent and licensing policy in the glass container
+industry constitutes a system of oppressive regulation
+which neither promotes the progress of science and the useful
+arts nor permits the operation of competitive economic processes.
+Yet, instances like the glass container industry could be multiplied
+for it is by no means unique in modern American industry.</p>
+
+<p>The restrictive effects of patent abuses on the production of
+critical materials in this country became clearly apparent following
+the outbreak of war. Shortage followed shortage, and in
+nearly every instance the basic device restricting our expansion
+of capacity and output was found to be a patent cartel agreement.</p>
+
+<p>A dramatic illustration of a shortage resulting from a restrictive
+patent agreement enforced by cartel groups is provided
+in the case of tungsten carbide. Few items are as important as
+machine tools to our economy both in peace and in war. The
+best cutting edge for machine tools is made from tungsten carbide.
+Because of a patent cartel agreement between the General
+Electric Company of this country and the Krupp Works of
+Germany, the price was maintained at such a high level that the
+second largest manufacturer of this commodity said:</p>
+
+<p>“The control of the tungsten carbide patents by the General
+Electric Company and the Krupp Company has resulted in
+keeping the prices at exorbitant levels. Now when the emergency
+has come, industry has not learned how to use tungsten
+<span class="pagenum" id="Page_43">[Pg 43]</span>carbide and has not the machines, the skilled men, or the technique
+which it would have had if the material had been available
+at the same low prices at which it was available to German
+industries.”</p>
+
+<p>Before the patent cartel was organized, the price in the
+United States was less than $50 a pound. After the cartel was
+formed in 1928, the price of tungsten carbide rose to as high
+as $453 a pound or, in other words, much more than the price
+of gold. Significantly enough, the price in Germany never rose
+above $50 a pound.</p>
+
+<p>While we recognize that technology is the most dynamic
+factor of change in the modern world, it is not sufficiently
+realized that in the struggle to control technological development
+and to confine research within their feudal domains, monopolistic
+interests divide the universe of technology in exactly
+the same way that they parcel out world territory. Using the
+huge patent structures which they have amassed, industrial
+giants divide among themselves the major branches of technology
+and allow no one to encroach on their preserves.</p>
+
+<p>Although we depend upon research as the principal source
+of those advances which promise a better and a healthier world,
+we tend to overlook the fact that the power which modern monopoly
+wields over research, by virtue of patents, often perverts
+the spirit of discovery. How the deliberate misdirection of research
+is carried out is clearly indicated in at least three cases involving
+electric lamps, plastics, and dyestuffs.</p>
+
+<p>Electric lamps in the United States are practically the private
+preserve of a domestic monopoly. The history of this industry
+can be written in terms of the elimination of competition, based
+largely on the abuse of patent litigation and price fixing. One
+of the great threats to monopoly control can come from the
+virility and imagination of our inventive genius. For this reason
+<span class="pagenum" id="Page_44">[Pg 44]</span>the vested interests attempt not only to control their current
+monopoly, but take every precaution to project their control
+into the future and to guard against the development and exploitation
+of inventions by outsiders.</p>
+
+<p>One of the greatest developments in the lighting art since
+Edison invented the incandescent lamp is fluorescent lighting.
+It has already proven to be many times more efficient, and
+cheaper, than incandescent lighting. The rapid development of
+this newer type of lighting which would come from a competitive
+situation has been carefully suppressed by the monopoly
+group. Patent control by the monopoly group controlling incandescent
+lamps has been the main instrument for the suppression
+of fluorescent lighting. Not only the monopoly group governing
+incandescent lighting, but the electric utility companies
+as well, fear the effects of the widespread use of more efficient
+means of lighting, since it would reduce their sale of electricity
+and hence their profits. A letter from the manager of the lighting
+bureau of a large power company to the General Electric
+Company should be of interest to the public:</p>
+
+<p>“Increasingly I seem to become the ‘father confessor’ on
+fluorescent lighting as far as the utility men are concerned. This
+concerns one of the displays dealing with fluorescent lighting in
+your G. E. building at the New York World’s Fair. I must
+confess that although I have been in your exhibit twice I did
+not see this particular display.</p>
+
+<p>“It appears that 20 watts of fluorescent lighting are compared
+with 20 watts of incandescent lighting, the sign purporting to
+read something to the effect ‘See the difference between equal
+wattages of fluorescent and mazda lighting.’ Of course, the
+readings on the foot candle meters show dramatic differences.</p>
+
+<p>“If this demonstration is as explained to us, I think it does
+<em>violate the spirit of the understanding that our group had in
+<span class="pagenum" id="Page_45">[Pg 45]</span>Cleveland. As a matter of fact, I would think it violated the
+fundamental concept of the lamp department that advances in
+the lighting art should not be at the expense of wattage</em>, but
+should give the customer more for the same money. I hope you
+can find a way to change this exhibit, so that it does not give
+misleading impressions to the crowd who will see it.”</p>
+
+<p>Here is the reply by the General Electric Company:</p>
+
+<p>“When Miss Winters showed me the attached letter ... I
+immediately got in touch with Al Reas with regard to the demonstration
+at the fair. Apparently this particular demonstration
+was temporarily loaned for use at the fair, and is now being
+returned to the exhibit shop. <em>Therefore, by removing this particular
+exhibit, Sharp and the other utility men need have nothing
+to worry about.</em>”</p>
+
+<p>Even if such flagrant misuse of patents did not occur, the
+grip on our economic life which monopoly holds through patents
+would be a threat to our system of enterprise. The spirit
+and substance of free enterprise cannot exist in an environment
+where an independent businessman with an independent idea, or
+an inventor with a new discovery in a monopoly-ridden field,
+finds himself compelled either to submit to monopoly control
+or to be barred from the market. It is ironical but true that
+while a patent is supposed to give protection and encouragement
+to the inventor, possession of a patent today is little more than
+an invitation to predatory litigation. The threat of expensive
+and protracted patent litigation is perhaps the most effective
+means by which monopoly enforces its private rule on industry
+to eliminate competition.</p>
+
+<p>The small businessman facing such obstacles has limited
+choices of action. He can sue the large group, or risk suit, but
+in either event will find himself involved in a costly, lengthy
+<span class="pagenum" id="Page_46">[Pg 46]</span>process. He generally emerges with a broken spirit and a petition
+in bankruptcy.</p>
+
+<p>The files of the Department of Justice are crowded with
+complaints and pleadings of these little men. They have found
+these handicaps insuperable in their attempts to compete. In
+giving testimony before the Temporary National Economic
+Committee, one small manufacturer in the glass container industry
+recited a tale which is frequently and tragically repeated
+throughout many branches of production. This particular witness,
+sued for infringement on nine or ten counts, stated:</p>
+
+<p>“We naturally were finally forced to hire a patent attorney.
+We had to acquire the services of a Texas attorney, and I think
+there are some two or three patent attorneys in the State. They
+brought us into court in April of 1935, as I recall. Well, when
+I arrived in San Angelo and met them there in the hotel, I can
+conservatively say there was a half train load of attorneys and
+equipment. There were motion picture projectors and attorneys
+all over the place. I don’t know anyone of the Hartford legal
+staff that was not there. They were prepared to give us a nice
+battle. Well, I had only one attorney and he was considerably
+lost in that crowd. I wish you might have seen his face that
+morning. So I promptly asked for a recess until the afternoon
+in order to see if we couldn’t settle the case out of court.”</p>
+
+<p>As the witness testified at the time, the “settlement” was “a
+sort of slow death arrangement.”</p>
+
+<p>This situation has become a common condition, but it is not
+new. Thomas Edison once stated that patent litigation cost
+him more than he ever made from an invention. Unfortunately,
+the government has not as yet developed any procedure to protect
+the legitimate rights which a patent is supposed to confer
+on the little man. I have hopes that this aspect of the problem
+will be considered and met in the not too distant future.</p>
+
+<p><span class="pagenum" id="Page_47">[Pg 47]</span></p>
+
+<p>Even if every other charge of malpractice or problem of monopolistic
+abuse of patents were ignored, there would remain a
+crucial question. Technology is an index of national security,
+and technological strength depends upon technological freedom.
+Yet, in two world wars we have learned that the infiltration of
+American industry by foreign and hostile interests has been
+conducted through patents and patent agreements.</p>
+
+<p>In 1914, we experienced severe and crippling scarcities of
+dyestuffs and medicines, because patents held by German interests
+had prevented the development of American production.
+In the case of salvarsan, Ehrlich’s “magic bullet” for the cure
+of syphilis, we found that a patent protected the product, but
+did not reveal the method of its manufacture. The same situation
+occurred in other drugs, such as veronal and novocaine, and
+in other fields, such as metal alloys and special electrical equipment.</p>
+
+<p>Since the outbreak of the present war, our vulnerability to
+this method of attack has been revealed once more. The use
+of patents as the spearheads of attack in industrial and economic
+warfare, intended to weaken our war potential, is illustrated in
+the beryllium industry, in synthetic rubber, in pharmaceuticals,
+in optical goods, and in other important military and civilian
+supplies. It is clear that abuses of this nature, having consequences
+which affect both our national security and our standards
+of living, cannot be tolerated.</p>
+
+<p>Whether at the hands of domestic or foreign interests, misuse
+of the patent system and abuses of patent power militate against
+the best interest of the American people. It is our task and our
+responsibility to uproot these malpractices. Within the space of
+four years the Antitrust Division of the Department of Justice
+has brought more than forty cases involving these typical
+abuses, and this Division is investigating many more.</p>
+
+<p><span class="pagenum" id="Page_48">[Pg 48]</span></p>
+
+<p>I should like it clearly understood that I believe the patent
+system in many respects has served this country well. As long
+as it stays within its proper orbit it can continue as a great force
+in the industrial and scientific development of our country. Indeed,
+it must be one of our aims to strengthen the patent system
+to make it more effective for the protection of small business
+and for the encouragement of new invention. Those who
+have a deep belief in the patent system should support the government’s
+action in uprooting and eliminating the abuses which
+have done so much to discredit the patent system generally.</p>
+
+<p>The vigorous enforcement of the antitrust laws is, of course,
+our greatest guarantee that democratic opportunity will be kept
+alive in our economic system. Something more is needed, however,
+to make certain that free enterprise has a fighting chance.
+In this connection, it is encouraging to note that the Senate has
+had under consideration legislation intended to provide access
+to technology to government and public alike. It is, of course,
+absolutely necessary that in the present stage of technological
+development, where the military security of the nation may depend
+upon the quality of its technology, that the government
+have every facility at its disposal to keep abreast of technological
+change. From the standpoint of economic health, however,
+means must be found of granting to the small businessman or
+the small inventor, who cannot hope to compete on an equal
+footing with the massive strength and enormous resources of
+great industrial laboratories, a chance to initiate and develop
+new ideas, new processes and new products.</p>
+
+<p>In numerous instances patents have been used to discourage
+research by independent inventors and businessmen. What incentive
+is there to inventors to develop new products or processes
+when they may be, in effect, inventing themselves into a
+patent infringement suit? Very often in such cases the fact of
+<span class="pagenum" id="Page_49">[Pg 49]</span>infringement is never determined. We all know that patent litigation
+is costly and time consuming. In disputes between monopoly
+groups and smaller opponents the difference in economic
+strength between the two parties is usually the determining factor.
+In this situation small competitors often find it less expensive
+to depend upon the research and the largesse of great
+corporations, by accepting licenses which are usually restrictive.
+Under such conditions neither the opportunity nor the fact of
+free enterprise can flourish.</p>
+
+<p>Conduct of research by government does not mean that it
+would enter into competition with industry. Rather, research
+sponsored and carried on with the facilities and support of the
+government would constitute a strong stimulus to private initiative.</p>
+
+<p>The government would enter no business as a result of carrying
+on research. It would sell nothing, and it would not prevent
+others from going into business. The fruits of discoveries
+produced by government research would be open to all. It is
+primarily those interests which seek to deny access to technology
+by independent enterprise that are opposed to the entry of government
+into this field.</p>
+
+<p>The great need of small business in the post-war world for
+new opportunities and new directions cannot be fulfilled if the
+small businessman is denied access to technology. If the government
+provided the scientific and technical resources which
+placed small enterprise on an equal footing with great corporations,
+we should undoubtedly witness a revival of the spirit of
+industrial adventure.</p>
+
+<p>Ultimately, the entire public as consumers would receive the
+benefits of a government research program. When competition
+is absent and research is dominated by monopoly groups, the
+consumer not only pays higher prices for what he does get, but
+<span class="pagenum" id="Page_50">[Pg 50]</span>has no assurance that he is obtaining the best possible products.
+Monopoly has no incentive to progress, and so long as it is able
+to control research it need not strive to make better products at
+lower prices.</p>
+
+<p>In addition to meeting the needs of small business and consumers,
+the maintenance of scientific research by an over-all
+public agency is a direct concern of government. The importance
+of technology to national welfare has been shown strikingly
+during the present war. There are many areas of scientific
+research and development which private industry cannot adequately
+explore and develop. There are many branches of science
+and technology, as well as of industrial development,
+where government cannot afford to be dependent upon the
+efforts of private monopoly groups. The lists of shortages
+which hampered our war effort in early days of the present
+struggle resulted in nearly every instance from restrictive effects
+of monopoly control. Government was forced to turn to
+monopoly groups which dominated the market. It is essential
+for the future that the hazard of dependence on monopoly be
+removed.</p>
+
+<p>Industry itself, large as well as small, would profit tremendously
+if research conducted by the government supplemented
+private efforts and increased our stock of scientific knowledge.
+The creation of new industries would open up new channels for
+private investment and would help to eliminate the periodic
+effects of depression. The constant flow of new ideas into industry
+is essential if we wish to have both full production and full
+employment. Government research could become one of the
+principal means of stimulating and encouraging new industry
+and at the same time overcoming the effects of the business
+cycle.</p>
+
+<p>The means of correcting patent abuses and of renewing competitive
+<span class="pagenum" id="Page_51">[Pg 51]</span>opportunity in industry are available in existing law
+and with relatively minor modifications in the scope of governmental
+authority. Unless we are willing to accept private industrial
+government as a substitute for a free economy, it must
+be our determination that the spirit and purpose of the patent
+laws and the conditions necessary to competition shall be securely
+established. If we would avoid the destruction of the
+patent system as the consequence of its abuse, it must be made
+clear to monopoly groups and industry that they cannot base
+their restrictive practices and policies on patent privileges.</p>
+
+
+<hr class="chap x-ebookmaker-drop">
+<div class="chapter">
+
+<p><span class="pagenum" id="Page_52">[Pg 52]</span></p>
+
+
+  <h2 class="nobreak" id="5">
+    5
+    <br>
+    <i>Medicines</i>
+  </h2>
+</div>
+
+
+<p>In a very real sense the producers and distributors of medical
+products occupy a position of public responsibility. On the
+whole, those in the drug industry who are charged with this
+responsibility have carried out their obligations in a highly
+praiseworthy manner. They are to be commended and congratulated.</p>
+
+<p>In nearly every instance in which the standards of service
+and of public welfare have not been maintained we find that
+monopoly groups have been responsible for the abuse of public
+confidence. When monopoly is able to impose restrictive conditions
+on the production, the price and the distribution of vital
+medicines and to determine who may buy and sell products, it
+is in the interests of the drug industry and the public alike
+for government to intervene.</p>
+
+<p>Thus when it was found that a small ring of producers had
+been able to maintain fixed prices on insulin and to pick and
+choose those who would be allowed to distribute insulin to the
+public, it was necessary for the government to act.</p>
+
+<p>There are approximately two million persons in the United
+States suffering from diabetes. Most of these sufferers require
+<span class="pagenum" id="Page_53">[Pg 53]</span>one or more daily injections of insulin. They are dependent for
+their very lives on an adequate supply of the drug at a reasonable
+price. Yet a monopoly group exploiting its privileged position
+took advantage of the industry and of the public to impose
+arbitrary prices and unreasonable conditions of distribution.
+Wholesalers, distributors, and retailers were compelled to adhere
+to the edicts of the monopoly group under the threat that
+if they did not do so, no insulin would be sold to them.</p>
+
+<p>The possible consequences of this exercise of monopoly power
+on the well-being of victims of diabetes are appalling, yet in
+the hands of monopoly the needs of the public become subordinated
+by the edicts which are imposed on the industry and the
+public alike. It is for this reason that the industry itself, as well
+as government, must continuously be vigilant to oppose the
+growth and exercises of monopoly power and to stimulate
+wholesome competition.</p>
+
+<p>Few effects of monopoly have been more insidious than the
+consequences of cartel control over many areas in the drug and
+medical field.</p>
+
+<p>Because of cartel and patent agreements which carve up world
+markets and divide fields of production, American drug manufacturers
+have in some cases been denied the right and the
+chance to develop the American drug industry to its full possibilities.
+Because international cartels have been able to set up
+their own trade restrictions, American drug manufacturers have
+been prevented from competing within the United States. In
+many cases American manufacturers have been barred from engaging
+in competition in other countries and from exporting to
+such countries. In particular, American producers have found
+themselves shut off from South American markets. Illegal patent
+abuses and agreements have in other cases prohibited American
+manufacturers from entering production or carrying on
+<span class="pagenum" id="Page_54">[Pg 54]</span>research in many important fields dominated by foreign interests.</p>
+
+<p>The fight against disease is a primary concern of society
+everywhere. Yet the brilliance and the industry of modern
+scientists have all too often been perverted by the efforts of
+selfish groups to fasten the grip of monopoly on products essential
+to health and welfare. There have been numerous illustrations
+of the malignant effects of monopoly on national
+health and on the maintenance of free enterprise in the pharmaceutical
+industry. It is instructive to recall some of the more
+flagrant examples of the abuse of monopoly power in the drug
+and medical field.</p>
+
+<p>The cartel spirit in the pharmaceutical field is exemplified
+by the following paragraph, written in July 1938 by the German
+company, I. G. Farbenindustrie:</p>
+
+<p>“There is an agreement between German and Swiss firms of
+the Chemical Pharmaceutical Industry for the protection of
+original preparations which are marketed by the individual
+members of the group.... This agreement provides that products
+which compete with the original products of members of
+the association and their subsidiaries or affiliated firms shall not
+be introduced in any country throughout the world.”</p>
+
+<p>This agreement may be described as a conspiracy to deprive
+the world of the benefits of research in new drug products
+wherever such benefits may conflict with the vested interests of
+any of the participating drug manufacturers.</p>
+
+<p>The present war is not the first time that the United States
+has found itself dependent in a period of crisis for vitally needed
+drugs and medicines on cartels dominated by foreign interests.
+During the first World War the scarcity of salvarsan, of veronal,
+of novocaine, and similar synthetic medical products seriously
+affected the health of our people. It was not until after
+<span class="pagenum" id="Page_55">[Pg 55]</span>the war was over that we were able to relieve some of these
+shortages. In the years between the World War and the present
+global war cartel interests once more were able to reestablish
+their monopolistic control over new pharmaceutical products.</p>
+
+<p>The myth of German superiority in the production of organic
+medical compounds has been dispelled for many years.
+It is necessary, however, to recall that this prestige rested not
+on superior skill but on the abuse of monopoly and patent privileges.
+A well-known instance of the way in which the German
+cartel interests sought to exploit their monopoly position is the
+story of Bayer 205, sometimes called Germanin. Shortly after
+the end of the World War I. G. Farben announced that it had
+discovered a cure for sleeping sickness, the disease which is so
+prevalent in Africa. The Germans refused to reveal the formula
+for Bayer 205. Instead they sought to use their discovery
+as the basis of an exchange of the secret process in return for the
+restoration of Germany’s lost colonies. While this bold attempt
+to balance medical achievement against political advantage
+is an extreme case, it nevertheless reflects a cartel attitude.</p>
+
+<p>From the standpoint of the progress and growth of the
+American drug industry it must be realized that the influence
+of cartels has been the principal factor in keeping American
+products from world markets. Foreign concerns, by making
+treaties with monopoly groups in the American drug industry,
+have been able to monopolize practically the entire continent of
+South America. One typical agreement between an American
+corporation and a German concern divided the world market
+for more than 400 pharmaceutical and chemical products into
+non-competitive areas. Among the fields included in the agreement
+were quinine derivatives, sulfa drugs, vitamins and narcotics.
+The American firm was prohibited from exporting. This
+same pattern of restriction by which American producers were
+<span class="pagenum" id="Page_56">[Pg 56]</span>barred from selling to South America has been found in a whole
+roster of cartel agreements involving pharmaceutical products.
+The effects of these agreements have severely handicapped our
+good neighbor relations with South America and have made
+more difficult the establishment of healthy trade between the
+United States and Latin American countries.</p>
+
+<p>If we are to succeed in our efforts to create a better postwar
+world, it should be evident that we must uproot every vestige
+of illegal monopoly control over products essential to the
+health and welfare of our people. Whether the restriction stems
+from the efforts of a cartel to confine American industry to the
+domestic market, or to strangle research and production by
+American concerns, or to use patents to impose unlawful restraints
+on trade in the drug industry, it must be our determined
+purpose to restore free enterprise in the pharmaceutical field.
+Given freedom of opportunity and the incentive to enter
+branches of the industry heretofore dominated by cartel interests,
+we may rest assured that American drug manufacturers
+will demonstrate their outstanding capabilities in research and
+their ability to compete both at home and abroad. Competition
+will benefit the American drug industry and permit it to attain
+its maximum development. What is perhaps even more important,
+this country will be assured that in the future the
+health and welfare of its citizens will not be dependent upon
+the arbitrary exercise of monopoly power.</p>
+
+<p>I am sure that responsible persons in the pharmaceutical industry
+will not argue that European technology in this field is
+so superior to ours that competition is futile. If American
+manufacturers have free access to technology and are not barred
+by the misuse of patents and the resurrection of cartel arrangements,
+then the industry will find itself in a healthier financial
+and technological position as well as in a position more fully to
+<span class="pagenum" id="Page_57">[Pg 57]</span>discharge its obligations to the American people. The myth of
+European superiority in the medical field has been carefully
+nurtured by foreign interests which have used this propaganda
+as a commercial device. Only free competition and free enterprise
+can fully dispel this myth. This cannot be done, however,
+unless the pharmaceutical industry sees to it that victims of
+diabetes, malaria, pellagra, rickets and arthritis are not at the
+mercy of privileged groups who have abused public confidence
+and exploited human suffering.</p>
+
+<p>The laboratories of our pharmaceutical industry have brought
+forth wonderful discoveries. Their achievements have been a
+boon to the human race. But they have a responsibility to erase
+the blemish caused by those few who have misused their economic
+power to violate their trust.</p>
+
+<p>The promotion of public welfare as well as the best interests
+of the pharmaceutical industry are served when research, production
+and distribution are carried on free from the taint of
+monopoly. National health, like national economic well-being,
+demands that freedom of opportunity to conduct research, to
+engage in business, and to compete in domestic and foreign
+markets be preserved. No compromise is possible with monopoly
+control in an industry which is so directly concerned with
+human welfare.</p>
+
+
+<hr class="chap x-ebookmaker-drop">
+<div class="chapter">
+
+<p><span class="pagenum" id="Page_58">[Pg 58]</span></p>
+
+
+  <h2 class="nobreak" id="6">
+    6
+    <br>
+    <i>Synthetic Hormones</i>
+  </h2>
+</div>
+
+
+<p>The use of synthetic hormones in the United States has grown
+to such an extent that the annual sales amount to many millions
+of dollars. Something more than half of the entire business in
+this country has been carried on by four companies. Each of
+these companies is the subsidiary or affiliate of a corresponding
+company in Europe. The European companies belong to a
+hormone cartel which has controlled the hormone business most
+effectively abroad and in the United States.</p>
+
+<p>After investigating the ramifications of the cartel’s activities
+in this country the Department of Justice prosecuted the four
+American companies for violations of the antitrust laws. Pleas
+of <span lang="la">nolo contendere</span> were entered by the four corporations and
+by five of their officials and fines totalling $54,000 were assessed
+and paid. At the same time, on December 17, 1941, the defendants
+consented to the entry of a decree in a civil action
+brought by the government, which enjoined them from further
+activities in violation of the antitrust laws.</p>
+
+<p>These are the basic aspects of the hormone cartel:</p>
+
+<p>1. Research has been seriously affected by restrictions imposed
+by foreign cartel members.</p>
+
+<p><span class="pagenum" id="Page_59">[Pg 59]</span></p>
+
+<p>2. German interests have entered into patent licensing arrangements
+with American affiliates under which they—the
+latter—agreed to withhold their products from Latin American
+markets.</p>
+
+<p>3. During the war American companies have aided their
+German affiliates in evading the British blockade.</p>
+
+<p>4. American companies have participated in the use of paper
+corporations and dummy consignees to avoid the effects of the
+Black List in Latin America.</p>
+
+<p>5. American concerns have devised deceptive labels to preserve
+markets for their German affiliates and to aid the spread
+of German propaganda in Latin America.</p>
+
+<p>6. Members of the cartel have misused patents in schemes
+to camouflage flagrant violations of the laws of the nation.</p>
+
+<p>7. The recognized benefits which might be obtained by the
+widespread use of hormones have been to a large extent curtailed
+by reason of the restrictions and illegal policies of the
+cartel members.</p>
+
+<p>8. In the case of one of the synthetic hormones, there is evidence
+indicating that it may have a substantial contribution to
+make in connection with treatment of wounded soldiers for
+shock. The cartel restrictions have had their effect upon the
+production and wide use of this hormone as well as the others.</p>
+
+<p>9. Two of the American companies have been taken over
+by the Alien Property Custodian and one of these has been sold.</p>
+
+<p>The following explanation of the nature of hormones does
+not purport to be a scientific discussion. It represents my understanding
+of the subject based upon what I believe to be reliable
+authority. I merely give it for what it may be worth as background
+for the discussion of this cartel.</p>
+
+<p>Hormones are the secretions of certain ductless glands. As
+they enter the bloodstream they regulate chemically practically
+<span class="pagenum" id="Page_60">[Pg 60]</span>every function of the human body. They are really special
+agents of chemical coordination of the body. They regulate,
+order and correlate bodily functions with the same precision as
+that achieved by the nervous system. Since their first definite
+isolation by the great English physiologists, Bayliss and Starling,
+in the early years of this century, there has grown up a
+whole new field of research. Infinitely small amounts of certain
+hormones have the most profound effects upon the human
+body and its emotions. As in the case of vitamins, much of our
+present knowledge is the result of observing the striking pathological
+defects and abnormalities produced by excess or deficiency
+of hormones.</p>
+
+<p>Thus deficiency of certain of these drug-like substances from
+the small thyroid gland causes a marked decrease in metabolism
+and mental and physical sluggishness. Excess of this same hormone,
+or complex of substances, has the opposite effect, increasing
+oxidation and pulse rate, and causing nervousness and emaciation.
+It also has striking effects upon growth and development.
+Deficiency in children results in dwarfism and idiocy.</p>
+
+<p>Other hormones such as those from the anterior lobe of the
+pituitary gland affect the growth of bone. Hormones from the
+adrenal glands, located near the kidneys, cause constriction of
+blood vessels, accelerate the heart beat and cause discharge of
+glucose from the liver. Insulin, one of the most widely known
+of the hormones, plays an essential role in the metabolism of
+carbohydrates. Its absence causes diabetes which is characterized
+by a failure of normal carbohydrate metabolism.</p>
+
+<p>Medical investigators and chemists have been exploring this
+vast new field of research for many years. They have learned
+more and more about the actions and composition of these complex
+substances. For many years they have worked with the
+extracts from the glands of certain animals to obtain the hormone
+<span class="pagenum" id="Page_61">[Pg 61]</span>itself, or as much of it as could be saved in the process of
+extraction. At the same time they have been analyzing the composition
+of the hormones, and endeavoring to synthesize the
+active principles. Among those which have been produced in
+synthetic form are the male sex hormone, testosterone; the follicular
+and <span lang="la">corpus luteum</span>, both being female sex hormones; and
+desoxycorticosterone acetate, a synthetic substance which has
+effects similar to those of cortin.</p>
+
+<p>Cortin is derived from the cortex of the adrenal glands.
+There is still some question as to the role which this hormone
+plays, but there is no doubt that it is essential to life. It apparently
+affects the metabolism of sodium, potassium, and carbohydrates.
+This hormone plays an important role in the
+concentration of body fluids and their distribution between the
+inside and outside of body cells. The hormone is therefore of
+some use in diseases or conditions where there occur marked
+changes in the distribution of the body fluids. Specifically, it
+means the hormones of the adrenal cortex are useful in the treatment
+of Addison’s disease, where it seems to strike a balance in
+the intake of salt. It has also been suggested that since surgical
+shock is associated with unbalance of body fluids, this hormone
+may be of value in counteracting the shock effects. Shock is
+so complex a condition, however, that there is no general agreement
+on the effects of the hormone. However, the hormone,
+or crystalline preparations possessing hormonal activity, are
+being used by army surgeons both here and abroad for whatever
+value they possess.</p>
+
+<p>It is with these and certain other pharmaceutical specialties
+that the hormone cartel has concerned itself. The cartel is composed
+of five large European companies: Schering A. G. (Berlin);
+Ciba (Basle); N. J. Organon (Oss, Holland); C. F.
+Boehringer &amp; Sons (Mannheim); and Chimio (France). Each
+<span class="pagenum" id="Page_62">[Pg 62]</span>of the first four has had a subsidiary or affiliate in this country
+which has been used to carry out the policies of the European
+company and of the cartel. I shall describe in some detail the
+practices which were followed in aiding the German companies
+to avoid the effect of the British blockade and Black List in
+Latin America.</p>
+
+<p>The Schering A. G. firm is one of the most important pharmaceutical
+and chemical manufacturers in Germany. It makes
+photographic supplies, soaps, cosmetics and many other products.
+However by far the largest part of its production consists
+of medicinal specialties and fine chemicals, the former being the
+more important. It is the largest German exporter of pharmaceutical
+and medical specialties, specializing in sex hormones,
+vaccines, remedies for venereal and other contagious diseases,
+rheumatism, tuberculosis, <abbr>etc.</abbr>, and also laxatives, anti-acids, opiates,
+<abbr>etc.</abbr> It is also one of the larger German exporters of fine
+chemicals, laboratory chemicals and plant protection chemicals.</p>
+
+<p>At the time of the first World War, Schering A. G. did comparatively
+little export business. Its export system, established
+and carefully developed after 1918, is mainly the result of the
+work of one man, its former president <abbr>Dr.</abbr> Julius Weltzien.
+This export system spreads over the entire world. The procedure
+in establishing outlets abroad has been as follows: At
+first sales are made to all who may wish to buy; then, with increasing
+turnover, a local firm is made sole agent. When the
+yearly turnover reaches about $25,000, an expert sent from Berlin
+is coordinated with the sole agency firm. When the yearly
+turnover exceeds about $50,000, Schering A. G. sets up a firm of
+its own, directed by managers sent from Berlin. Germans, or
+men of German descent, are placed in all key positions, and the
+remainder of the staff is partly German, partly persons of the
+country in which the agency is located. The final step is to set
+<span class="pagenum" id="Page_63">[Pg 63]</span>up factories in the most important markets which are equipped
+to ampule the finished solutions and to tablet the finished substances
+which are used in that form. The supervision of all
+firms abroad is strongly centralized in Berlin.</p>
+
+<p>Until recently, Schering A. G. was one of the largest sellers
+of pharmaceutical and medicinal specialties in South and Central
+America. Testimony before the Truman Committee indicated
+that approximately one-third of all materials shipped into South
+America by airmail over the German controlled <i>Lati</i> airline,
+during a six months period in 1941, were chemical and pharmaceutical
+products. Approximately the same amount of books,
+maps, <abbr>etc.</abbr>, intended for espionage and propaganda work was
+also shipped by air since it was the only means of avoiding the
+British blockade. On the return trips four-fifths of the air
+cargoes were of mica for the Nazi war machine and most of the
+remaining fifth was made up of other important war materials.
+The important role played by the pharmaceutical exports in providing
+the exchange for purchase of war materials should not
+be overlooked.</p>
+
+<p>The interruption of exports due to the war caused Schering
+A. G. to adopt several different methods of continuing its foreign
+business. Prior to the invasion of Belgium and Holland,
+firms in those countries and in the Scandinavian countries were
+used as blinds to avoid the British blockade. Before Italy
+entered the war, the Milan factory was utilized as a point from
+which the German goods, labeled in Italy, could be sent out to
+the rest of the world.</p>
+
+<p>The final step was to transfer to the United States the business
+of supplying the markets cut off by the blockade. In
+preparation for this emergency, several measures had been
+taken long before the actual outbreak of the war.</p>
+
+<p>The center of the new supply system was Schering Corporation
+<span class="pagenum" id="Page_64">[Pg 64]</span>(Bloomfield, New Jersey), a firm now held by the <abbr title="United States">U. S.</abbr>
+Alien Property Custodian. This firm was established as a
+Schering A. G. subsidiary in 1929 to manufacture medical specialties
+for the market in this country. Differing from most
+other Schering factories outside Germany it developed the
+finished solutions and substances out of raw or semi-manufactured
+imported materials, where the others merely finished the
+process by placing the material in ampule, tablet and package
+form. Gradually extending its research, laboratory and manufacturing
+facilities it came to be as fully equipped to manufacture,
+although on a much smaller scale, all Schering medical
+specialties as Schering A. G. itself.</p>
+
+<p>All of the common stock of this New Jersey corporation was
+owned by Chemical and Pharmaceutical Enterprises, <abbr title="Limited">Ltd.</abbr>
+(Chepha) and held in the name of a nominee of the Swiss Bank.
+Chepha was owned 51 per cent by the Swiss Bank and 49 per
+cent by other related interests. However, it has recently come
+to light that the transaction in 1937 by which Chepha and the
+Swiss Bank got apparent control of the Schering Corporation,
+included an option agreement which made it possible for Schering
+A. G. to regain its interest at any time it so desired. Obviously
+the transaction was a mere sham to make it appear that
+the American corporation was controlled from Switzerland
+rather than from Germany. Actually Schering A. G. had never
+ceased to exercise its domination over Schering Corporation up
+to the very outbreak of war between Germany and the United
+States.</p>
+
+<p>As of January 1, 1938 the two corporations entered into an
+extensive and detailed agreement. Two paragraphs of the preamble
+of this agreement are as follows:</p>
+
+<p>“Schering A. G. is engaged in the development, manufacture
+and/or sale of medicinal, pharmaceutical, biological, and bacteriological
+<span class="pagenum" id="Page_65">[Pg 65]</span>preparations. It is the owner of processes and
+formulae used in the production of such preparations and is also
+the owner of <abbr title="United States of America">U. S. A.</abbr> patents and patent applications pertaining
+to such preparations. For many years it has maintained and operated
+and still does maintain and operate laboratories to carry
+on research and development work in connection with such preparations,
+and has thereby acquired valuable scientific knowledge,
+data and material concerning the aforesaid sphere of activities.</p>
+
+<p>“Schering <abbr title="Corporation">Corp.</abbr> has an organization suited for national distribution
+and promotion of such preparations in the United
+States of America, and is equipped to manufacture such preparations.
+It also maintains and operates laboratories to carry
+on research and development work in connection with such
+preparations, but has not acquired the extensive scientific knowledge
+and practical experience in this field that Schering A. G.
+commands by reason of its longer and more extensive research
+work and experience.”</p>
+
+<p>This language portrays the true relationship of the parent
+and subsidiary companies.</p>
+
+<p>The parties agreed to exchange patents and information and
+to deal in each other’s products in their respective territories.
+The division of territory, as in so many of these German-American
+agreements, gave the United States to the American corporation
+as its territory and the remainder of the world to the
+German firm.</p>
+
+<p>Article <abbr title="5">V</abbr>, Paragraph 5 is as follows:</p>
+
+<p>“Schering A. G. agrees not to deal in selected preparations
+nor to sell selected preparations to any corporation or person
+in the <abbr title="United States of America">U. S. A.</abbr> except to Schering <abbr title="Corporation">Corp.</abbr>, nor knowingly to sell
+them to any corporation or person for purposes of exportation
+to or resale in the <abbr title="United States of America">U. S. A.</abbr> unless Schering <abbr title="Corporation">Corp.</abbr> shall first
+have given its written consent.”</p>
+
+<p><span class="pagenum" id="Page_66">[Pg 66]</span></p>
+
+<p>Article <abbr title="5">V</abbr>, Paragraph 7 is as follows:</p>
+
+<p>“Schering <abbr title="Corporation">Corp.</abbr> undertakes not to export, either directly or
+indirectly, from the <abbr title="United States of America">U. S. A.</abbr>, or knowingly to sell for purposes
+of export to any third party any such preparations unless Schering
+A. G. shall have previously given its written consent.”</p>
+
+<p>A letter from Schering Corporation to Schering A. G. dated
+June 2, 1939 contained the following:</p>
+
+<p>“In view of your assignment to us of certain patents in the
+female-sex-hormone field and your assistance in connection with
+the acquisition by us of licenses under patents in the male-sex-hormone
+and cortin fields, we agree not to sell or offer for sale
+any product made pursuant to the said assigned and/or licensed
+patents or any of them in any country outside of the <abbr title="United States">U. S.</abbr>”</p>
+
+<p>All Schering A. G. patents and trademarks in the United
+States are owned by Schering Corporation or its affiliates. However,
+the agreement is not limited in its terms to the mere fixing
+of compensation for the use of patents and trademarks. The
+American corporation agreed to pay Schering A. G. a royalty
+on all its sales of pharmaceutical products which had nothing
+to do with Schering A. G. patents and trademarks. It even
+went so far as to agree to pay the German firm a royalty of not
+to exceed <abbr title="12 and a half">12½</abbr> per cent on sales of new preparations developed
+by itself in this country. The following provisions of Article
+<abbr title="10">X</abbr> of the agreement make clear this unusual relationship:</p>
+
+<p>“In either of such cases [if net sales of Saraka, a proprietary
+laxative, are more or less than $1,200,000] the royalty shall
+be as follows:</p>
+
+<p>“(b) On that portion of such amount derived from sales of
+preparations commonly available in the open market and not
+sold under a trademark, such as insulin, milk of magnesia, thyroid,
+or codliver oil, and in the manufacture of which no special
+Schering A. G. process is utilized, <abbr title="6 and one-quarter percent">6¼%</abbr>;</p>
+
+<p><span class="pagenum" id="Page_67">[Pg 67]</span></p>
+
+<p>“(c) On that portion of such amount derived from sales of
+new preparations developed by Schering <abbr title="Corporation">Corp</abbr>, wholly independent
+of Schering A. G. and which do not fall within a field
+of preparations already developed or in process of development
+by Schering A. G., a percentage, less than <abbr title="12 and a half percent">12½%</abbr>, to be determined
+and agreed upon by the parties from time to time.”</p>
+
+<p>Up to the outbreak of the war there was a constant exchange
+of experience and knowledge by frequent mutual visits. This
+differs radically from the conditions which prevailed in many
+other fields. In the case of synthetic rubber for instance, the
+Hitler government flatly prohibited the giving out of technical
+information while using every means of securing the information
+of developments in this country. It seems obvious that in
+the case of Schering A. G., the plan, as subsequently carried
+out, was to place Schering Corporation in a position of being
+able to carry on Schering A. G.’s overseas business. In this
+rapidly changing field of hormones, this meant keeping the
+American corporation completely informed as well as getting
+from it all available information.</p>
+
+<p>Schering Corporation, before the outbreak of war, was provided
+with complete instructions about the technicalities of exporting
+Schering products, with a complete set of Schering export
+packages, labels, prescriptions, <abbr>etc.</abbr>, indicating all details
+of the complicated system of packages which differ from country
+to country and from product to product. This was done to
+enable Schering Corporation to start exporting without delay
+in case of emergency. For these products which, before the
+war had not been made by Schering Corporation, the necessary
+manufacturing directions were sent from Berlin. About these
+products until as recently as 1941 there was a constant exchange
+between Bloomfield and Berlin.</p>
+
+<p>In addition to establishing a “neutral” manufacturer and supplier
+<span class="pagenum" id="Page_68">[Pg 68]</span>in the United States which in case of emergency could
+be resorted to as a new center of the overseas business, Schering
+A. G. took other measures as well. The Schering subsidiary in
+London, Schering, <abbr title="Limited">Ltd.</abbr>, was also sold to Chepha. It is understood
+that it has since been or is being wound up by the British
+government. Shortly before the outbreak of the war in 1939,
+all Schering A. G. firms in the British Empire, except London,
+and those in Latin America, were transferred to Foreign Investments
+and Invention Company, <abbr title="Limited">Ltd.</abbr> Basle (Forinvent.) This
+was done to “neutralize” these Schering firms and thus to protect
+them from seizure in the British Empire or blacklisting
+in Latin America. Forinvent is wholly owned by Palladium
+A. G., also a Swiss holding company which in turn is wholly
+owned by the Swiss Bank Corporation, Basle. Forinvent, like
+Chepha, is within the premises and organization of the Swiss
+Bank. The president is the same <abbr>Dr.</abbr> Samuel Schweitzer of the
+Swiss Bank, who is in charge of Chepha, and the connections of
+Forinvent and Chepha with the Swiss Bank are practically identical.
+Due to the fact that the selling transaction in the case of
+Forinvent took place immediately before the outbreak of war,
+Forinvent could not escape being placed on the blacklist. The
+same holds true for the Forinvent (Schering A. G.) subsidiaries
+in Latin America, while the Forinvent (Schering A. G.) subsidiaries
+in the British countries were placed under enemy alien
+control.</p>
+
+<p>The carefully laid plans were put into effect upon the outbreak
+of war. Forinvent advised the British Empire companies
+to get their further supplies from Schering Corporation and at
+the same time advised the latter to supply them, which it did.</p>
+
+<p>The fact that the British government acted quickly and placed
+Forinvent and its subsidiaries in Latin America on the blacklist
+partially upset the plans which had been made. In view of the
+<span class="pagenum" id="Page_69">[Pg 69]</span>increasing anti-German attitude in the United States and the
+possibility of this country entering the war sooner or later,
+Schering Corporation had to be very careful of its outward connections
+with the Schering A. G. set-up. Therefore when Schering
+Corporation was finally advised to supply Latin America,
+steps were taken to conceal any connections with the blacklisted
+Forinvent firms. On January 2, 1940 Schering A. G. gave a
+release to Schering Corporation as to all products excepting hormones,
+and on March 1, 1940, cabled a blanket release in the
+following terms: “We authorize you until further notice to deliver
+pharmaceutical and technical chemicals to our South and
+Central American representatives or through their mediation
+to their customers.” These releases, of course, did not apply to
+foreign firms not associated with Schering A. G., and evidence
+shows that the restrictions as to these other companies were still
+continued, and Schering Corporation refused to sell to them.</p>
+
+<p>Two paper corporations were created to avoid use of the name
+Schering although both corporations are in the same building
+with Schering Corporation and are completely identified with
+it except as to name. Pharmex, <abbr title="Incorporated">Inc.</abbr>, owned by Gregory Stragnell,
+vice president of Schering Corporation, dealt directly with
+the ex-Schering A. G. subsidiaries in the British Empire, except
+Schering Corporation, Limited, of Canada. The latter deals
+directly with Schering Corporation of Bloomfield.</p>
+
+<p>Delta Pharmaceutical Corporation, owned by Sherka Chemical
+Company (which was in turn owned by Chepha), purchased
+raw materials from Sherka and hormone products from Schering
+Corporation and sold them to Atlantis, a corporation organized
+in Panama. These two companies, Pharmex and Delta, were
+really the export department of Schering Corporation. Part of
+their employees were on the pay roll of Schering and part on the
+pay rolls of Pharmex, Delta and Sherka. Both companies were
+<span class="pagenum" id="Page_70">[Pg 70]</span>under the direction of <abbr>Dr.</abbr> Weltzien and <abbr>Dr.</abbr> Stragnell, then
+president and vice president, respectively, of Schering <abbr title="Corporation">Corp.</abbr></p>
+
+<p>Atlantis S. A., Panama, is a wholly owned subsidiary of Forinvent
+organized in 1940. Its president is <abbr>Dr.</abbr> Samuel Schweitzer,
+who is likewise in charge of Chepha and Forinvent. At first it
+was considered advisable to set up an actual office in Panama.
+However since so many technical questions, passport difficulties
+and tax questions were involved, the whole Atlantis business
+was centralized in Basle, Switzerland, under the direct supervision
+of the Swiss Bank Corporation, in closest cooperation
+with Schering A. G. of Berlin.</p>
+
+<p>One of the problems faced by Schering Corporation in its
+new foreign trade was that of packaging and labeling the products
+so that they would seem to be identical with those formerly
+supplied by Schering A. G. Since one of the chief considerations
+prompting this whole scheme was preservation of good will,
+in order that the business could be turned back to Schering A. G.
+after the war, this factor was most important. On February
+10, 1940 Forinvent cabled Pharmex as follows: “fundamental
+changes of packing latinamerica may jeopardize turnover on account
+customers mentality and will probably cause difficulties
+with registration authorities therefore please adopt present
+style of packing and labeling ... suggest airmailing you immediately
+films for making plates [for printing Schering A. G.
+type of labels].” It was not necessary to use the films in question
+inasmuch as Delta had samples of all the Latin America
+packages it had used as a standard pattern. Delta on January
+28, 1941, sent to Swiss Bank samples of all packages used for
+export, pointing out that the differences between the new and
+old packages were very slight.</p>
+
+<p>From early in 1940 until Pearl Harbor the supplying of
+Schering A. G. firms in Latin America was accomplished in a
+<span class="pagenum" id="Page_71">[Pg 71]</span>circuitous manner. Each of the firms kept in close touch with
+Basle and so with Berlin. They advised Atlantis of their requirements.
+Atlantis, in Basle, cabled the orders to Delta at
+Bloomfield and instructed Swiss Bank in New York to honor
+Delta’s drafts. Delta delivered the goods to a forwarding agent
+of Atlantis in New York, which shipped them to a dummy consignee
+in Latin America and they were there received by the
+particular Schering firm which had placed the order.</p>
+
+<p>About 40 or 45 cents of each dollar paid by the Latin American
+firm went to Atlantis and thus to Schering A. G. Out of
+its share, 55 or 60 cents, Delta (actually Schering Corporation)
+made its manufacturing costs and whatever profit there might
+be for it. The advertising expense was borne by Atlantis or
+Schering A. G. The advertising and continuance of the familiar
+German packages, labels and Schering trade-mark constituted
+an important form of German propaganda. It was possible for
+the German agents in Latin America to point to the continuance
+of German pharmaceutical supplies as indicative of their ability
+to overcome the British blockade and to carry on their commerce
+with this hemisphere.</p>
+
+<p>It has been mentioned that the Germans used pharmaceuticals
+which have a high value in proportion to bulk and weight to
+make up one third of the air cargoes which were flown into
+South America along with propaganda and other materials.
+Pharmaceuticals also constituted an important part of the air
+cargo which was carried eastward, ranking third among the
+materials which were flown over the blockade. One order of
+10 kilos (22 pounds) of testosterone propionate, the semi-manufactured
+male hormone, valued at $50,000 was shipped
+one kilo a week by air mail from Argentina to Spain and from
+there to the Schering factory at either Milan or Berlin. This
+and other similar orders, were placed by a dummy of Schering
+<span class="pagenum" id="Page_72">[Pg 72]</span>A. G. in Portugal.</p>
+
+<p>Thus far I have been discussing the relations of two firms,
+one, the largest of the European manufacturers of synthetic
+hormones, and the other its affiliate or subsidiary, the largest
+American producer. There are other large European members
+of the cartel and each has its subsidiary in this country.</p>
+
+<p>Ciba (Society of Chemical Industry in Basle, Switzerland) is
+another important cartel member. It has been in existence for
+some sixty years, engaged in the manufacture and sale of dyestuffs
+and pharmaceutical products throughout the world. In
+July 1936 it organized a subsidiary, Ciba Pharmaceutical Products,
+<abbr title="Incorporated">Inc.</abbr>, of Summit, New Jersey. Ciba Basle also came to own
+several other corporations in fields other than pharmaceuticals
+and hormones in this country, and companies in Canada, Brazil
+and Argentina which sell dyestuffs and pharmaceuticals. Ciba’s
+close relation to Schering A. G. is indicated by its joint ownership
+with the Swiss Bank of the common stock of Chepha, which
+in turn owns all the common stock of Schering Corporation.</p>
+
+<p>Until just before the war Ciba Pharmaceutical of Summit,
+New Jersey, produced no hormone products. These were all
+purchased by it from Ciba Basle. However, since its organization
+it has been distributing hormones under its own label.</p>
+
+<p>The subservient attitude of Ciba Summit to the Society (Ciba,
+Basle) is clearly shown in the following paragraph from a letter
+of October 17, 1939, from H. Kamp, vice president of the New
+Jersey corporation, to James Brodbeck, Secretary of Ciba Basle:</p>
+
+<p>“As I have repeatedly said, I am not interested in making
+profits for Summit out of sales of raw materials or even finished
+packages sent to foreign countries. <em>All I am interested in is to
+help Society in getting the business</em>, but we must have a certain
+rule as regards profits for Summit. The simplest way would
+be if Basle fixed a percentage profit over our price II on all
+<span class="pagenum" id="Page_73">[Pg 73]</span>products shipped in bulk to any foreign country. The same, of
+course, could apply to finished packages if we were to supply
+finished packages to foreign countries later on. <em>We want to
+help Society as I fully realize that we are working for the interest
+of Society and not for the interest of Ciba Summit alone.
+Whatever seems most advantageous from your point of view
+will meet with my approval.</em>”</p>
+
+<p>The same attitude is also reflected in a letter of September
+22, 1939 from H. Kamp of Ciba Summit to <abbr>Dr.</abbr> J. Weltzien,
+president of Schering Corporation:</p>
+
+<p>“At the meeting which took place on May 10, 1939 in your
+offices, among other points, the introduction of desoxycorticosterone
+acetate was discussed. It was finally agreed that Ciba
+would introduce the product, but would abide by your suggestion
+that no other indications be mentioned in the literature than
+Addison’s Disease. We were, therefore, more than surprised
+to read your advertisement in the ‘Druggists Circular’ announcing
+‘CORTATE,’ where it is suggested that the drug
+may be of use in the more chronic constitutional types of cortical
+deficiency, in asthenias, and that certain allergies should be
+benefited by the administration of Cortate....</p>
+
+<p>“It is again one of your usual methods by putting the other
+parties before accomplished facts. I have discussed your tactics
+very thoroughly while in Basle, and I can assure you that our
+friends in Basle are more than fed up with your <em>methods. In
+fact, I have the full authority to give you a dose of your own
+medicine at the next opportunity, and this I am going to do
+without any hesitation whatsoever!</em>”</p>
+
+<p>N. V. Organon of Oss, Holland, is a large manufacturer of
+hormone products and so is F. Hoffman-LaRoche of Basle,
+Switzerland. The latter company has had a subsidiary in Nutley,
+New Jersey called Hoffman-LaRoche, <abbr title="Incorporated">Inc.</abbr> N. V. Organon
+<span class="pagenum" id="Page_74">[Pg 74]</span>of Oss and Hoffman-LaRoche, <abbr title="Incorporated">Inc.</abbr>, of Nutley, have
+jointly owned a corporation called Roche-Organon, <abbr title="Incorporated">Inc.</abbr>, organized
+in 1937 and engaged in the sale of hormones. In 1940
+Ciba licensed Roche-Organon to manufacture products in the
+cortin field under a patent for which it had made application in
+1938. Ciba agreed to pay Roche-Organon 20 per cent of all
+royalties collected from other licensees except Schering. Roche-Organon
+agreed to pay Ciba 6 per cent on its entire turnover in
+the United States in the Cortin field from January 1, 1940 to
+June 17, 1955 regardless of whether the turnover involved
+products made under Ciba’s patent.</p>
+
+<p>The German firm of C. F. Boehringer and Sons of Mannheim-Waldhof,
+Germany formerly owned 50 per cent of the
+stock of Rare Chemicals, <abbr title="Incorporated">Inc.</abbr>, Nepera Park, New York. The
+president of the German firm was the father of E. T. Fritzsching,
+formerly secretary and more recently president of Rare
+Chemicals. A memorandum of the younger Fritzsching of
+Rare, dated March 29, 1939, contains the following opening
+paragraph:</p>
+
+<p>“In view of the boycott situation and in view of a number of
+other reasons I have come to the conclusion that the best way
+to avoid any further trouble for Rare Chemicals is to arrange
+for a definite purchase of the Boehringer shares by an American
+citizen. It is my intention to make an offer to Boehringer, by
+which I shall take over their assets in this country and pay for
+them at whatever price I could possibly obtain them. I am assuming
+this obligation personally for the reason that it really
+makes very little difference whether the shares are owned by
+Boehringer or by me, since through this transaction the assets
+would morally still remain within the same family interests.
+It would also work along the lines of my personal interest and
+that of my family in the event of war.”</p>
+
+<p><span class="pagenum" id="Page_75">[Pg 75]</span></p>
+
+<p>The remaining 50 per cent of Rare’s stock was owned by
+Pyridium Corporation also of Nepera Park, New York. A letter
+to Erwin Fritzsching <abbr title="care of">c/o</abbr> C. F. Boehringer &amp; Soehne,
+<abbr class="spell">G.m.b.H.</abbr>, Mannheim-Waldhof from W. S. Lasdon of Pyridium
+and president of Rare dated August 18, 1939 contained the
+following statement: “I agree with your suggestion to the transfer
+of the B.&amp;S. stock to a Swiss Company, instead of to you, and
+of course, your participation in the profits of Rare is to be cancelled
+upon the signing of this agreement, the understanding
+being that you and W. S. Lasdon will represent the stockholding
+interests.” The products of the two companies were exchanged
+with definite restrictions upon their distribution. The following
+excerpt indicates that the German firm kept a tight rein on
+the use by the American firm of the former’s products. It is
+taken from a letter from Fritzsching of C. F. Boehringer &amp;
+Soehne, <abbr class="spell">G.m.b.H.</abbr> to Rare Chemicals, <abbr title="Incorporated">Inc.</abbr>, dated October 31,
+1936. It concerns a request of Rare to be allowed to manufacture
+a product called Eucupin.</p>
+
+<p>“We are acknowledging the receipt of your letter of October
+<abbr>19th</abbr> and regret to say that we cannot comply with your wishes.</p>
+
+<p>“We must take into consideration also the German interest
+when weighing the question whether it is right to send manufacturing
+processes to foreign countries, even though they may
+go to our friends in these countries. We cannot be responsible
+for it to give you manufacturing processes, the use of which is
+not to be expected within a reasonable time. In such a case
+we cannot truthfully answer any possible questions from authorities
+to the effect that we can say that when giving away a manufacturing
+process it will make it possible to manufacture and sell
+in a foreign country a German preparation, the sale of which
+from Germany due to duty difficulties and other restrictions
+<span class="pagenum" id="Page_76">[Pg 76]</span>cannot be considered. In this fact lies the German interest,
+and this we have to consider in first line.”</p>
+
+<p>In the summer of 1942 Rare was taken over by the Alien
+Property Custodian and subsequently sold at public auction to
+a wholly American independent organization.</p>
+
+<p>After certain separate agreements and considerable negotiation
+a five party agreement was entered into on May 26, 1937
+to which the European firms Schering A. G.; Ciba, Basle; N.
+V. Organon, Oss, Holland; C. F. Boehringer &amp; Sons, and Les
+Laboratoires Francais de Chimiotherapie of France (Chimio)
+were the parties. The male hormone, female sex hormones, and
+cortin, the cortico adrenal hormone, are covered by the agreement.
+It involved a division of territories with certain parties
+being definitely excluded from certain territories. Competing
+producers of pharmaceutical products were expressly named as
+firms with which any kind of cooperation is prohibited. Among
+these were E. Merck, Darmstadt, Germany, and Merck &amp; <abbr title="Company">Co.</abbr>,
+<abbr title="Incorporated">Inc.</abbr>, of Rahway, New Jersey. Subsequent agreements removed
+the prohibition as to these firms.</p>
+
+<p>Of course, one of the chief purposes of the cartel agreement
+was to fix prices. The European parties agreed upon prices and
+their American affiliates did likewise. A memorandum of a
+meeting held at Summit on October 6, 1938 between representatives
+of Ciba and of Schering discusses the fixing of prices on
+various hormones. The artificial and arbitrary character of the
+pricing policies is indicated by quotations from some of the documents
+which were written following this meeting. One of them
+indicates an agreed price of $3 for a certain hormone product.
+It then states: “This price was later refused by <abbr>Mr.</abbr> Kamp
+[Ciba’s general manager] who then advocated $4.00. This
+was submitted to the other with our O.K.”</p>
+
+<p>A memorandum of a discussion held at Bloomfield, New
+<span class="pagenum" id="Page_77">[Pg 77]</span>Jersey on October 7, 1938 between representatives of Rare and
+of Schering, recites a detailed list of prices agreed upon between
+Schering and Ciba the preceding day as having been
+submitted to Rare.</p>
+
+<p>As to the item on which the price had been changed as just
+indicated an endorsement on this memorandum states: “Informed
+<abbr>Mr.</abbr> Landon [Rare official] by phone of Summit’s desire
+to change this price to $4. He agreed to this.”</p>
+
+<p>The entire world cartel system has been bound together with
+patents. The contracts among the American companies have
+been carefully planned and drafted abroad to avoid any appearance
+of violating the antitrust laws. They were couched in
+terms of licensing patents to give the impression that the parties
+were merely procuring rights under patents and not engaging
+in restraints of competition. The evidence indicates that the
+cartel participants in Europe had attempted to allocate the issue
+of patents in the United States to the associated firms in such
+a manner as to strengthen the defense of the American firms
+against charges of antitrust law violations. At a discussion in
+Berlin on March 18, 1939 among representatives of Ciba, Organon,
+and Schering, A. G. there was set in motion reciprocal
+concessions of priority in interferences between Organon and
+Ciba in the <abbr title="United States">U. S.</abbr> Patent Office relating to the male hormone,
+and to cortin. It was arranged for Schering to drop out of the
+interference proceedings. It appears from a circular letter from
+Organon to Ciba and Schering that the plan was for Organon
+to concede priority to Ciba in the male hormone interference
+and for Ciba to concede priority in the interference regarding
+cortin. The intent of the parties, as to the male hormone interference,
+was to transfer the application of Organon to the
+United States Ciba firm. This circular letter of April 4, 1939,
+from Ciba to Organon and Schering, A. G. reads in part:</p>
+
+<p><span class="pagenum" id="Page_78">[Pg 78]</span></p>
+
+<p>“It is up to Ciba to take care in accordance with the several
+single agreements in the United States for a correct and clear
+basis of the agreements relating to the male hormone field because
+corresponding proceedings are intended in the paranephros
+[cortin] hormone field in which Roche-Organon shall
+obtain the basic patent claims. In accordance with the opinion
+expressed here since Ciba gives its consent already in the letter
+of March 9, 1939 to transfer the basic application in which the
+patent claims for paranephros are established (Case 1577/1-4)
+to Roche-Organon, that however, is dependent upon corresponding
+proceedings of the Organon in the male hormone field.”</p>
+
+<p>The reasons for this “swapping” were very clearly indicated
+in the last mentioned document:</p>
+
+<p>“As it is known in the United States the antitrust legislation
+is of extremely great significance. The different agreements
+which are in the state of preparation in the United States are
+intended to put all contractors into position to sell hormone
+compounds in the United States without any violation of those
+statutes.... So far as ... cross promises to maintain prices
+exist, this promise is only lawful if the licensee, in this case
+Ciba, possesses the protection of a patent claim....</p>
+
+<hr class="tb">
+
+<p>“According to the information of <abbr>Dr.</abbr> Joseph Engi almost
+daily new indictments based on the antitrust legislation are
+made. Under such circumstances it is extremely important to
+obtain as fast as possible the protection of the most important
+patent claims.”</p>
+
+<p>However, Roche-Organon resisted the transfer of the application,
+writing in its circular letter to Ciba and Schering, A. G.,
+dated April 15, 1939: “An expert would understand immediately
+that the transfer of this application served only aims which
+have to be considered as lawful according to the antitrust legislation.
+<span class="pagenum" id="Page_79">[Pg 79]</span>We couldn’t even mention any consideration given the
+Ciba.”</p>
+
+<p>Although Organon’s male hormone application was in fact
+not transferred to Ciba, the result which the parties contemplated
+appears to have been effected. Ciba, apparently relying
+upon its own male hormone patents in the United States, became
+the licensor of Roche, Schering, and Rare, while Roche-Organon
+participated in the licensing arrangements only under
+its cortin patents.</p>
+
+<p>There are numerous indications in the Schering correspondence
+that the American license agreements are so bound up with
+the basic cartel agreements that the sums of money paid by the
+American firms to each other are regarded as parts of the total
+considerations which the European firms are bound to pay each
+other.</p>
+
+<p>As in the case of Schering A. G. and Schering Corporation the
+other cartel members bound their United States affiliates to
+agreements which precluded exports in any manner which would
+interfere with the division of territory among members of the
+cartel. The agreement of April 1, 1938 between N. V. Organon
+and Roche-Organon contains the following provisions:
+“Roche-Organon agrees not to deal in or manufacture glandular
+and hormone preparations other than those originated by
+Oss [N. V. Organon], nor to export or sell for export from the
+territory any glandular and hormone preparations.” (The territory
+is defined as the United States, its territories and possessions,
+Canada and the Philippine Islands, and Cuba.) The other
+agreements contain similar restrictions with some variations as
+to the exact territory.</p>
+
+<p>The principles of competition, price, and research heretofore
+discussed are well exemplified by the case of Stilbestrol (diethylstilbestrol),
+a recently discovered pharmaceutical which
+<span class="pagenum" id="Page_80">[Pg 80]</span>has effects similar to those of the female sex hormones. It is
+the product of research supported by Government grant in
+England, several scientists of the University of London and of
+Oxford University, headed by E. C. Dodds, being responsible
+for the development. Throughout all of the work of Dodds
+and his colleagues the Medical Research Council, a British government
+organization, undertook the necessary financial support.
+(While Stilbestrol is not a synthetic hormone, it has most of the
+valuable therapeutic effects of these substances although it may
+not be entirely free from side reactions. Its cost of manufacture—and
+the price to the consumer—are much lower than
+those of the equivalent hormones).</p>
+
+<p>The American hormone cartel members were aware of Stilbestrol
+and its possibilities as early as 1939. In a conference
+of Roche-Organon, Ciba and Schering officials, held on August
+1, 1939 the following discussion took place, according to
+minutes found in Ciba’s files:</p>
+
+<p>“<abbr>Mr.</abbr> Kamp [Ciba] brought up the subject stilbestrol.</p>
+
+<p>“<abbr>Mr.</abbr> Hammer [Schering] said he thought that any concern
+would have a hard time getting stilbestrol accepted in this country.</p>
+
+<p>“<abbr>Dr.</abbr> Oppenheimer [Ciba] pointed out that in this country
+estradiol prices may not be too much out of line with those of
+stilbestrol compared with Great Britain.</p>
+
+<p>“The question of side effects from stilbestrol was then discussed.</p>
+
+<p>“<abbr>Dr.</abbr> Josephy [Roche-Organon] told of reports from Amsterdam
+on the use of stilbestrol in animal experimentation. He
+said that he thought the government would look not only at
+the favorable reports on a preparation which was submitted but
+also the unfavorable ones.</p>
+
+<p>“<abbr>Mr.</abbr> Kamp said he thought some concern had already filed
+with the government a request to market stilbestrol.”</p>
+
+<p><span class="pagenum" id="Page_81">[Pg 81]</span></p>
+
+<p>A memorandum in Schering’s file concerning this same conference
+of August 1, 1939 is somewhat more revealing:</p>
+
+<p>“<abbr title="18">XVIII</abbr> <i>Stilbestrol</i>. Ciba and Roche-Organon want to have
+it just to be able to knock it with physicians. They say the hormone
+business in England has been destroyed just by this new
+product. On the other hand, it is said to injure the liver and
+there is doubt that the <abbr title="United States">U. S.</abbr> Government will allow it to be
+used.”</p>
+
+<p>In the minutes (from Ciba’s files) of a conference of representatives
+of the three companies on Friday, October 27, 1939,
+there is this statement: “During the discussion Stilbestrol was
+mentioned and <abbr>Dr.</abbr> Weltzien [President of Schering] remarked
+he hoped ‘none of us will introduce Stilbestrol’.” These quotations
+indicate the hostility of cartel members towards a new
+product which endangers their control of the market. Stilbestrol
+was put on the market in this country late in 1941 and had an
+immediate effect upon the sales of the higher priced hormone
+products.</p>
+
+<p>From what has been said it seems clear that in the field of
+synthetic hormones the cartel control has been such as to be
+detrimental to our national interest. When such control can
+be used to make American corporations the tools of those of
+other countries it is exceedingly unfortunate. When carried to
+the point of causing corporations in this country to aid the Axis
+it could not be and was not tolerated. The seizure of two of
+these companies by the Alien Property Custodian has put an
+end to the German control. From the point of view of encouragement
+of research those two companies are much better
+off than they were when tied to the apron strings of their parent
+companies in Germany. Complete removal of cartel restrictions
+from the entire industry would be definitely in the interest
+of the general public in this country and throughout the world.</p>
+
+
+<hr class="chap x-ebookmaker-drop">
+<div class="chapter">
+
+<p><span class="pagenum" id="Page_82">[Pg 82]</span></p>
+
+
+  <h2 class="nobreak" id="7">
+    7
+    <br>
+    <i>Vitamins</i>
+  </h2>
+</div>
+
+
+<p>The monopolistic control of one of the most essential products
+of our modern era—the sunshine vitamin, also known as
+Vitamin D—has been magnified by the fact that it is the poorer
+elements of our country which have the greatest need for this
+product, since it is a preventative and a cure for certain diseases
+most commonly found among the lower economic strata of our
+population. Vitamin D is essential for proper bone growth and
+development, the prevention and cure of rickets, and the prevention
+or reduction of tooth decay.</p>
+
+<p>The Wisconsin Alumni Research Foundation acts as a screen
+behind which a group of monopolistic chemical, pharmaceutical
+and food companies control Vitamin D. The story of the Wisconsin
+Alumni Research Foundation is of extreme importance
+because it indicates how a quasi-public research organization
+can be flagrantly misused.</p>
+
+<p>At the outset I should like to state that the Wisconsin Alumni
+Research Foundation has no formal connection with the University
+of Wisconsin, and that the University of Wisconsin has
+absolutely no control over the policies and practices of the
+Alumni Foundation. It should be clearly understood, therefore,
+<span class="pagenum" id="Page_83">[Pg 83]</span>that what I say here does not reflect in any manner upon
+the University of Wisconsin.</p>
+
+<p>A report of the Trustees of the Foundation dated June 22,
+1931, defines the objectives and purposes of the Foundation
+as follows:</p>
+
+<p>“Indeed one of the soundest reasons for the development of
+the Foundation as a suitable means of handling the Steenbock
+process lies in the rigid control through which it is possible to
+protect the public and prevent unscrupulous commercialism
+from capitalizing the Steenbock discovery.”</p>
+
+<p>The investigation by the Antitrust Division of the Department
+of Justice indicates, however, that somewhere along the
+line these laudable objectives were lost. Instead, a summary
+of our investigation discloses the following facts about the Wisconsin
+Alumni Research Foundation:</p>
+
+<p>(1) It has been the vehicle for creating a domestic monopoly
+resulting in division of fields, price fixing, control of container
+size, and limitation of potency of vitamin products—as a result
+of which the public has been charged excessive and arbitrarily
+high prices. (The Foundation has been described by a licensee
+as being “merciless in beating out competition” in the field of
+vitamins.)</p>
+
+<p>(2) It has considered plans to denature and adulterate Vitamin
+D preparations in order to maintain high prices.</p>
+
+<p>(3) It has exhibited a lack of interest in research unless a
+commercial advantage could be obtained.</p>
+
+<p>(4) It has used threats of patent litigations under patents
+which it knew were very weak to eliminate competition. (Some
+of these patents upon which the monopolistic scheme rested
+were, in fact, declared invalid in 1943 by the Circuit Court of
+Appeals for the Ninth Circuit.)</p>
+
+<p>(5) It has suppressed the use of competing processes.</p>
+
+<p><span class="pagenum" id="Page_84">[Pg 84]</span></p>
+
+<p>(6) It has organized international cartels with I. G. Farben
+of Germany and Joseph Nathan &amp; <abbr title="Company">Co.</abbr>, of Great Britain, in
+order to eliminate world competition by dividing world territory
+into noncompetitive areas.</p>
+
+<p>(7) It has attempted to suppress the publication of scientific
+research data which were at variance with its monopoly interests.</p>
+
+<p>(8) It has acted as a police organization for its licensees—in
+order to maintain its price fixing arrangements—by setting
+up a black list of price-cutting distributors.</p>
+
+<p>(9) It has used its licensing scheme to discourage research
+by its licensees.</p>
+
+<p>(10) It has endeavored to suppress or prevent truthful
+advertising in order to eliminate competition.</p>
+
+<p>(11) It has required its licenses to charge unreasonable
+prices to the government.</p>
+
+<p>(12) It has forced farmers to buy vitamin-enriched animal
+feeds in a monopoly market.</p>
+
+<p>Since 1925 the production and use of Vitamin D has been
+under the control of the Wisconsin Alumni Research Foundation.
+The control has been based upon the so-called Steenbock
+patents, especially upon patent <abbr title="Number">No.</abbr> 1680818, which the Foundation
+regards as the basic patent on Vitamin D.</p>
+
+<p>About 1925 <abbr>Dr.</abbr> Steenbock, then a professor at the University
+of Wisconsin, conducted experiments which eventually resulted
+in the Steenbock patents. Recognizing the commercial possibilities
+of his developments, Steenbock offered his patents to
+the University, but the Regents of the institution did not feel
+they were in a position to commercialize them. The President
+of the Wisconsin Alumni Association at that time was George I.
+Haight, a very able patent lawyer of Chicago, who immediately
+recognized the commercial possibilities of the Steenbock
+development. Together with some of the other leading alumni
+<span class="pagenum" id="Page_85">[Pg 85]</span>of the University, Haight founded the Wisconsin Alumni Research
+Foundation to undertake the exploitation of the Steenbock
+patents and such other patents as the Foundation might
+from time to time acquire.</p>
+
+<p>The Foundation was chartered on November 14, 1925 as a
+non-profit corporation. Its purposes, as stated in its charter
+were “to promote, encourage and aid scientific investigation
+and research at the University of Wisconsin by the faculty,
+staff, alumni and students thereof, and those associated therewith,
+and to provide or assist in providing the means and machinery
+by which their scientific discoveries, inventions and
+processes may be developed, applied and patented, and the public
+and commercial uses thereof determined, and by which such
+utilization or disposition may be made of such discoveries, inventions
+and processes, and patent rights or interests therein, as
+may tend to stimulate and promote and provide funds for further
+scientific investigation and research within said University
+or colleges or departments thereof.”</p>
+
+<p>The Foundation is managed by a Board of Trustees. Originally
+these trustees personally handled the work of the Foundation
+but, in 1931, they secured the services of Henry L. Russell,
+former dean of the University of Wisconsin College of Agriculture.
+Russell was made Director and executive head of the
+Foundation. Later, as business increased, L. D. Barney was
+employed as business manager, and Ward Ross, an associate of
+Haight, was retained as General Counsel. Steenbock himself
+appears to have handled most of the technical matters of the
+Foundation insofar as they relate to Vitamin D. The royalties
+received by the Foundation are invested and the resulting income
+is utilized for research.</p>
+
+<p>The Foundation has controlled Vitamin D by reason of its
+ownership of the Steenbock patents <abbr title="Numbers">Nos.</abbr> 1680818, 1871135,
+<span class="pagenum" id="Page_86">[Pg 86]</span>1871136, and 2057399. The underlying concept of all of these
+patents is that certain substances called pro-vitamins may be
+“activated” so as to result in a product having a high Vitamin
+D potency. This “activation” is accomplished by exposing the
+pro-vitamin to ultra-violet light, and the basic patent is limited
+to activation by ultra-violet light produced by an artificial
+source such as a quartz mercury vapor lamp.</p>
+
+<p>The commercialization of the Steenbock patents was phenomenally
+successful almost from the very outset. The report
+of the Trustees of the Foundation dated June 22, 1931, states:</p>
+
+<p>“The accumulation from royalties so far has been almost
+wholly from the ultra-violet patents. During the calendar year
+1930, the gross income was $354,590, or very nearly $1,000 a
+day throughout the year. This income has been developed
+within less than three years.”</p>
+
+<p>The Foundation’s annual royalties showed a steady increase
+until 1936, when they amounted to nearly $1,100,000. After
+1936, the annual royalties decreased slightly, and in 1939 they
+amounted to $936,610.70 or over $2,500 per day. Up to 1940,
+the Foundation had received more than $8,500,000 in royalties.</p>
+
+<p>The royalty rates charged by the Foundation vary from 10%
+to 3% and less, with higher royalties applying to only a few
+products. The enormous size of the market is indicated by the
+munificent revenues yielded by royalties at these rates.</p>
+
+<p>The first requirement for the success of the Foundation’s
+licensing program was the elimination of competition from non-licensees.
+The Foundation’s practices in this respect are aptly
+described in a memorandum dated February 20, 1935, from
+Connolly, a du Pont patent attorney, to Kupperian, of du Pont:
+“The Foundation has been merciless in beating out competition
+throughout the United States whenever such competition threatened
+to encroach upon the synthetic vitamin D field.”</p>
+
+<p><span class="pagenum" id="Page_87">[Pg 87]</span></p>
+
+<p>Some of the leading manufacturers in the country are licensees
+of the Foundation. Many of these manufacturers have
+been licensees for years, while in some cases licenses were obtained
+by the acquisition of companies holding licenses. Both
+du Pont and Standard Brands obtained their licenses by the
+latter method.</p>
+
+<p>Acetol Products, <abbr title="Incorporated">Inc.</abbr>, had a license from the Foundation
+dated November 15, 1929. Du Pont acquired the assets of
+Acetol and on April 30, 1935, Acetol assigned its license to du
+Pont. On November 15, 1935, a new agreement was executed
+between the Foundation and du Pont which superseded the
+Acetol agreement of November 15, 1929.</p>
+
+<p>Standard Brands succeeded to the rights of the Fleischmann
+Company under an agreement dated August 8, 1928.</p>
+
+<p>The question naturally arises why these powerful manufacturers
+paid the Foundation such large royalties on the basis of
+the weak and limited Steenbock patents. The correspondence
+indicates that the licensees were not only willing but anxious
+to pay the royalties in return for the profit opportunities offered
+under the Foundation’s schemes.</p>
+
+<p>The desire of the licensees to cooperate in the Foundation’s
+promotional schemes is well expressed in a letter dated July 8,
+1935, from Atkins of du Pont to Barney, the Foundation’s
+business manager:</p>
+
+<p>“The writer feels certain that you understand our desire and
+willingness to be considered as a part of the Foundation. You
+know our desire to prevent the Vitamin D field from falling into
+disrepute because of too many producers of various types of so-called
+Vitamin D. We would much prefer centralized control
+in the hands of the Foundation and you may count on us to support
+you even though, at times, we may have differences of
+opinion.”</p>
+
+<p><span class="pagenum" id="Page_88">[Pg 88]</span></p>
+
+<p>A memorandum dated January 25, 1937, from H. W. Elley,
+associate chemical director of du Pont, to a number of the executives
+of du Pont, explains the reason for centralizing “control
+in the hands of the Foundation”:</p>
+
+<p>“He [<abbr>Mr.</abbr> Protto, assistant general manager of du Pont]
+felt that it would be preferable to deal with the Wisconsin
+Alumni Foundation since they could be of considerable value to
+the industry in policing and regulating matters. If, for any
+reason such arrangements become unnecessary, it would then be
+possible to consider alternative procedures not involving the
+use of the Foundation patents, that is, we might commercialize
+the Milas process.”</p>
+
+<p>The Foundation is organized along the lines of an international
+cartel insofar as its licensing program is concerned. It is
+party to agreements with the omnipresent I. G. Farbenindustrie
+of Germany and Joseph Nathan &amp; <abbr title="Company">Co.</abbr>, of Britain. The agreements,
+following the standard cartel pattern, create exclusive
+noncompetitive territories. Nathan and I. G. are prohibited
+from exporting to the United States and the domestic
+licensees of the Foundation are prohibited from exporting to
+Germany or Great Britain.</p>
+
+<p>The domestic licensing policy of the Foundation is characterized
+by a most complex and minute division of fields into noncompetitive
+areas. Generally speaking, these fields of activity
+are made exclusive so that all competition between the different
+licensees or groups of licensees is eliminated. Provisions of
+the various agreements, which will be later described, prevent
+any substantial overlapping of these fields. Often the provisions
+merely prohibit the licensee from accurately describing his
+product but the essential object, elimination of competition, is
+attained.</p>
+
+<p>Fields are divided along three distinct lines: (a) the product
+<span class="pagenum" id="Page_89">[Pg 89]</span>to be activated, (b) the method of activation, and (c) the use
+of the activated product. In the first category there are 13
+principal divisions: (1) the pharmaceutical licensees are permitted
+to activate ergosterol, (2) Standard Brands is licensed
+to activate yeast and yeast products, (3) du Pont is allowed to
+activate ergosterol cholesterol and other sterols except yeast and
+yeast products, (4) S. S. Kovaks is allowed to activate sterols
+derived from yeasts but not yeast, (5) a group of licensees are
+permitted to activate evaporated milk, (6) a number of licensees
+are permitted to activate fluid milk, (7) Quaker Oats is allowed
+to activate cereals, (8) Borden is allowed to activate a milk
+product known as Dryco, (9) The Wanter Company is allowed
+to activate Ovaltine, (10) the Commander Larrabee Company
+is allowed to activate flour, (11) R. B. Davis and Company is
+allowed to activate Cocomalt, (12) Loose-Wiles Biscuit Company
+is allowed to activate crackers, and (13) Ayerst, McKenna
+and Harrison are allowed to activate a food product known as
+Glucose-D.</p>
+
+<p>The extent to which the division of fields is carried is exemplified
+in an agreement dated June 27, 1938, between the Foundation
+and the Loose-Wiles Biscuit Company. This agreement
+authorizes Loose-Wiles to activate “Graham Crackers” and
+“Wafers slightly sweetened to such as English Style Arrowroot
+Wafers,” but does not permit the activation of “cakes” and
+“cookies.”</p>
+
+<p>According to the method of activation, fields are divided into
+direct irradiation and activation by the introduction of an irradiated
+substance. Some few licensees are permitted to use either
+method of activation, but most are restricted to a single method.
+One of the most curious licenses issued by the Foundation permits
+the activation of milk by feeding cows irradiated material.</p>
+
+<p>The division of fields according to use is most detailed, but
+<span class="pagenum" id="Page_90">[Pg 90]</span>can be broken into several general classes. Licenses are issued
+for the human medicine field, for the human food field, for the
+fluid milk field, for the evaporated milk field, for the animal
+feed field, and for a field in which the product is not intended
+for internal use.</p>
+
+<p>At the outset, it was pointed out that the stated objectives of
+the Foundation are “to protect the public” and “to prevent unscrupulous
+commercialization.” Over the years the Foundation’s
+devotion to these objectives appears to have wavered.
+The Foundation appears to be primarily interested in royalties,
+with little or no regard for the public interest. Article <abbr title="7">VII</abbr> of
+the agreement of November 1, 1938, with the milk companies
+states that if “it should be found that the activation of unsweetened
+evaporated milk <span id="TN2">by ultra violet rays</span> under this
+license is substantially harmful to the user of such milk, or to
+the milk itself, the licensee shall have the right to cancel this
+license.”</p>
+
+<p>In a memorandum dated February 8, 1939, <abbr>Dr.</abbr> Russell described
+a similar position of the Foundation in regard to high
+dosages of Vitamin D: “Steenbock is of the opinion that in view
+of the fact that Vitamin D is no longer a distinctive Steenbock
+product but can be secured from a variety of sources that the
+Foundation might as well favor the commercialization of high
+dosages unless there is <em>very</em> serious objection on the part of the
+<abbr class="spell">A.M.A.</abbr> officials toward a move of this sort.”</p>
+
+<p>It is to be noted that in neither of these cases is the Foundation
+concerned with public benefit or medical approval, but only
+with <em>substantial harm</em> and a <em>very serious medical objection</em>.</p>
+
+<p>Another instance of the Foundation’s regard for the public
+interest was the Snider Packing Company matter. In 1931 the
+Snider Packing Company obtained <span id="TN3">irradiated yeast from
+Fleischmann</span> to add to Snider’s tomato juice. The results were
+<span class="pagenum" id="Page_91">[Pg 91]</span>apparently not too satisfactory. After this 1931 failure, Snider
+was persuaded to continue the license and the Foundation undertook
+to supervise the activation of the tomato juice. Steenbock
+and Scott recommended Acetol irradiated ergosterol and
+this recommendation was followed.</p>
+
+<p>Despite the recommendations and supervision and guarantees
+of the Foundation, the Vitamin D content of the Snider tomato
+juice did not come up to expectations. This inadequacy was
+known to Snider, Acetol, and the Foundation, and on February
+27, 1933, Russell wrote to Acetol stating:</p>
+
+<p>“It would be most unfortunate if any publicity was to occur
+as a result of the reduced potency of the Snider product and it
+would not only ruin the Snider business in this product, but
+would affect most disastrously you as well as ourselves. If the
+Government were to discover this situation and publish the result,
+it would do irreparable injury to the whole Vitamin D
+situation in foods.”</p>
+
+<p>The correspondence does not show whether any of the Snider
+products reached the market under false labels, but the Foundation’s
+concern in the matter is clear. The Foundation feared
+only publicity or discovery by the Government.</p>
+
+<p>In 1934 and 1935 some research workers, and especially
+<abbr>Dr.</abbr> Reed of the University of Illinois, found that large doses
+of Vitamin D were highly beneficial in severe cases of asthma,
+hayfever and arthritis. These large doses required a highly
+concentrated product which was most easily used in the form of
+gelatin capsules. The Foundation and its licensees were greatly
+interested in this project, but feared the effect this concentrate
+might have on the pricing structure of viosterol. These
+fears and a suggested solution are referred to in a report of a
+conference between Russell and Ross of the Foundation and
+<span class="pagenum" id="Page_92">[Pg 92]</span>Nielsen of Abbott, held early in February 1935. This report,
+signed by Nielsen, states:</p>
+
+<p>“<abbr>Mr.</abbr> Nielsen stated that if the capsules were priced considerably
+lower than the commercial product unit for unit, nothing
+would prevent the hospitals from opening the capsules and
+diluting the content with vegetable oil to obtain a ‘250D’ solution
+far below the regular cost.</p>
+
+<p>“Dean Russell asked for suggestions to prevent this. <abbr>Mr.</abbr>
+Nielsen stated that Abbott Laboratories would give further
+thought to this problem. Tentatively, he suggested that the
+concentrate might be denatured by the addition of a drug also
+indicated in these cases—Ephedrine, for example—that the
+product be considered as a drug, not a vitamin, and that it be
+distributed for clinical trial under a special name—all provided
+that the licensees agree. <em>Any untoward effects from it thus
+would not reflect on the Viosterol products on the market.</em>”</p>
+
+<p>Despite its lofty objectives, the licensing program of the
+Foundation appears to have resulted actually in a substantial
+reduction of research and development. Its attitude toward
+research is indicated in a letter from Russell to the licensees
+dated August 24, 1936:</p>
+
+<p>“We are hardly interested in the prosecution of problems of
+a purely scientific character that come to us from outside institutions.
+Nevertheless, if this is a problem that has definite commercial
+possibilities, we should not make a hasty adverse decision.”</p>
+
+<p>In a letter dated January 6, 1937, addressed to Elley of
+duPont, Waddell of duPont referred to a meeting in Madison
+with members of the Foundation and stated:</p>
+
+<p>“He [Steenbock] mentioned that most of the pharmaceutical
+licensees had not been interested in obtaining rights to the manufacture
+of crystalline Vitamin D (from ergosterol) and that
+<span class="pagenum" id="Page_93">[Pg 93]</span>the present situation might find them in the same attitude. He
+admitted, however, that if the patent situation and licensing
+arrangements worked out so that the five pharmaceutical companies
+were again in a position of having an exclusive hold on
+the synthetic Vitamin D field that undoubtedly they would be
+very much interested.”</p>
+
+<p>Thus, in spite of the acknowledged physiological superiority
+of Vitamin D<sub>3</sub>, the Foundation was reluctant to do any research
+whatever unless the willingness and cooperation of the
+licensees showed a definite promise of substantial profits.</p>
+
+<p>The effect of the licensing policy on the research activities of
+licensees is explained in a letter from Kupperian of Acetol to
+Waddell, research director of Acetol. This letter states:</p>
+
+<p>“According to my reading of the contract with Wisconsin
+Alumni Research Foundation, we are not at liberty to use yeast
+in connection with irradiated ergosterol, this field being reserved
+exclusively to Fleischmann. In view of this fact, I think we
+ought not to waste time and money on experiments in connection
+with yeast.”</p>
+
+<p>In at least one case where the Foundation sponsored and
+financed research, the publication of the results of the research
+were suppressed by the Foundation because they were at variance
+with the Foundation’s commercial interests. In an attempt
+to eliminate the non-infringing product of General Mills from
+competition with the Viosterol of the pharmaceutical licensees,
+the Foundation attempted to prove that Viosterol was clinically
+superior to the General Mills product. To accomplish this, the
+Foundation made a grant to <abbr title="Doctors">Drs.</abbr> Smith and Owens of Freedmen’s
+Hospital in Washington, D. C., to run certain tests comparing
+the effectiveness of the General Mills product and Viosterol,
+and to prepare an article for the medical journals on the
+results. On June 17, 1936, <abbr title="Doctors">Drs.</abbr> Smith and Owens submitted
+<span class="pagenum" id="Page_94">[Pg 94]</span>to the Foundation their article, which contains the following
+conclusion:</p>
+
+<p>“A comparative study of nine cases of varying degrees of
+rickets receiving 800 <abbr class="spell">U.S.P.</abbr> units of Squibb’s Viosterol daily
+with eleven comparable cases receiving 800 <abbr class="spell">U.S.P.</abbr> units of
+American Pharmaceutical Company Viosterol [General Mills’
+product] shows no significant difference in rate or degree of
+healing as determined (1) by X-ray of the wrists and (3) Ca
+and P determination on the blood.”</p>
+
+<p>The attitude of the Foundation and its licensees to this article
+is described in a letter from Lescohier of Parke-Davis to Anderson
+of Squibb, dated July 6, 1936:</p>
+
+<p>“If this article is published the Steenbock group are certainly
+in the position of being hung with their own rope. I should like
+to see the publication suppressed but am pretty certain that
+Meade Johnson will see that it is published since they are no
+longer vitally interested in Viosterol. Certainly anything that
+can be done to delay publication would be advisable.”</p>
+
+<p>In a letter dated August 17, 1936, Scott of the Foundation
+expressed the Foundation’s attitude on this article as follows:</p>
+
+<p>“From the outset, of course, we have been opposed to publication
+of this paper in any form. We have advised <abbr>Dr.</abbr> Smith
+that it was necessary to get the opinions of the pharmaceutical
+committee, and we intend to confer with them in the near future
+advising them that publication of the work is not desirable.”</p>
+
+<p>The Foundation has also suppressed the use of competing
+patents. Article <abbr title="2">II</abbr> of the Supplemental Agreement of June 3,
+1937, between the Foundation and Meade Johnson, Squibb,
+Parke-Davis, and Abbott provides for the licensing of additional
+pharmaceutical manufacturers who had been using Sperti Patent
+<abbr title="Number">No.</abbr> 1,676,579 on the irradiation of pharmaceutical products.
+This section provides:</p>
+
+<p><span class="pagenum" id="Page_95">[Pg 95]</span></p>
+
+<p>“It is understood and agreed that such additional Licensees
+shall be prohibited, by appropriate restrictions in any license
+agreements that may be entered into between the Licensor and
+such additional Licensees, from employing the process described
+and claimed in United States Letters Patent <abbr title="Number">No.</abbr> 1,676,579 to
+George Sperti and from advertising the use of said process in
+connection with products sold under said license agreements....”</p>
+
+<p>Thus, the results of the Foundation’s licensing program have
+been to stifle its own research activities and the research activities
+of its licensees, to prevent the publication of information
+which might jeopardize the Foundation’s financial interests, and
+to suppress competing patents. Certainly, these are peculiar
+results of a program instituted “to protect the public” and “to
+prevent unscrupulous commercialism.”</p>
+
+<p>One of the most important fields in the Foundation’s scheme
+of exploitation is the pharmaceutical field. All Vitamin D products
+used in the treatment or prevention of human ills are embraced
+within the pharmaceutical field, and restrictions in this
+field thus have a direct and immediate effect on the health
+and well-being of the general public. Also, at the time the
+Foundation embarked on its licensing program, the pharmaceutical
+field probably was one of the most promising, both from
+a publicity and a profit standpoint.</p>
+
+<p>In or about March 1929, the Foundation made agreements
+with five licensees, all manufacturers of pharmaceuticals: Meade
+Johnson &amp; <abbr title="Company">Co.</abbr>, Winthrop Chemical Company, Abbott Laboratories,
+Parke-Davis &amp; Company, and E. R. Squibb &amp; Sons.
+These agreements have been amended several times by letter
+agreements and supplemental agreements. Two letters, dated
+March 20, 1939 and April 27, 1939, offer the licensees certain
+royalty reductions, and it is assumed that these reductions were
+<span class="pagenum" id="Page_96">[Pg 96]</span>accepted. These letters do not, however, make any substantial
+changes in the restrictive provisions of the agreement.</p>
+
+<p>This combination in restraint of trade between the Foundation
+and its licensees is expressed in various ways throughout
+the pharmaceutical licenses. For example, Article <abbr title="12">XII</abbr> of the
+agreement of March 21, 1929, fixed minimum prices for the
+sale of irradiated pharmaceutical products. This article contains
+the following language: “Such prices so established shall remain
+in effect indefinitely but may be changed by the Licensor not
+less than ninety (90) days after consultation with all of the
+Licensees of this group.”</p>
+
+<p>Article <abbr title="13">XIII</abbr> of the agreement of March 21, 1939, states
+that the potencies of the pharmaceutical products shall remain
+fixed “until and unless changed by the mutual understanding
+of a majority of the licensees of this group.” Article <abbr title="17">XVII</abbr>
+prevents the assignment of the licenses “without the written
+consent of the Licensor, the Patentee and the Licensees under
+similar licenses.” Each of the agreements with Abbott, Meade
+Johnson, Squibb and Parke-Davis, executed June 3, 1937, also
+contains long recitals regarding the provisions to be introduced
+into a new contract with Winthrop Chemical <abbr title="Company">Co.</abbr>, <abbr title="Incorporated">Inc.</abbr></p>
+
+<p>Price stabilization was one of the main considerations offered
+by the Foundation to its licensees in exchange for the royalties.
+It might almost be said that this price stabilization was the bait
+which made the licensing scheme of the Foundation so attractive
+to the various manufacturers. Clough of Abbott wrote to
+Russell of the Foundation on April 21, 1936, and referred to
+the importance of price-fixing activities of the Foundation as
+follows: “It was argued by your Trustees that under our arrangement
+with the Foundation, we were given certain benefits
+of price stabilization which was well worth the additional 5%.”</p>
+
+<p>That price-fixing was one of the most important points in the
+<span class="pagenum" id="Page_97">[Pg 97]</span>pharmaceutical licensing plan and is described in a memorandum
+of a conference between Anderson and Lewis of Squibb
+and Ross and Barney of the Foundation on February 23, 1939:</p>
+
+<p>“We outlined the high potency D situation both with respect
+to Merrell and Winthrop. Their reaction was first that Squibb
+would have no objection to Merrell’s continuing to sell its concentrated
+viosterol if we could line up Merrell on its regular
+viosterol from the standpoint of container size and price. We
+indicated that this latter could be accomplished.”</p>
+
+<p>Further, the papers indicate that this price-fixing was carried
+over into the field of resale prices. This is brought out in a
+letter from R. D. Keim of Squibb to Dean Russell of the
+Foundation dated July 23, 1934:</p>
+
+<p>“We gave this matter our very serious consideration and
+wrote to all the licensees, under date of July 19, 1934, as per
+copy enclosed and we firmly believe that our suggested <em>Full
+Retail Prices per package to the consumer and Minimum Retail
+Prices per package to the consumer</em> for Viosterol in Oil and Cod
+Liver Oil with Viosterol are more in line with present market
+trends and the present economic market conditions than those
+proposed by Parke-Davis &amp; Company.</p>
+
+<p>“We are desirous of acting in harmony with all the other
+licensees of the Wisconsin Alumni Research Foundation in regard
+to the stabilization of the market for Viosterol in Oil and
+Cod Liver Oil with Viosterol. However, we firmly believe that
+it is necessary to establish a schedule of Minimum Retail Prices
+to the consumer such as we have suggested in order to bring
+about such stabilization.”</p>
+
+<p>Prices were not only fixed; they were fixed arbitrarily at levels
+which can only be regarded as extortionate in view of the
+economic status of the people whose need for Vitamin D was
+the greatest. (Barney, the business manager of the Foundation,
+<span class="pagenum" id="Page_98">[Pg 98]</span>once stated on examination in a lawsuit: “It is my understanding
+that rickets is found to a great extent in the so-called
+poorer class of people.”) Despite this full awareness of the
+incidence of their high price policy, the Foundation and its
+licensees remorselessly maintained prices on the Viosterol products
+so high that their use was practically restricted to those
+who had least need for them. This is recognized in a letter
+dated March 30, 1934, from Russell to the pharmaceutical
+licensees: “Very severe criticism from certain prominent pediatricians
+has been lodged against the Foundation on account of
+the alleged high retail prices of certain Vitamin D preparations.”</p>
+
+<p>The price-fixing activities of the Foundation also extended to
+sales to Federal, State and local governments and government
+agencies. On May 10, 1940, W. S. Merrell Company wrote
+to the Foundation:</p>
+
+<p>“We have an inquiry from the Government for a substantial
+quantity of Irradiated Ergosterol and are wondering if we shall
+have to abide by the price schedule in our license agreement in
+quoting. In other words, would our quotation have to be the
+same as our minimum price to wholesalers, or could we figure
+on a reasonable profit basis taking our cost on such a large quantity
+for one shipment into consideration?”</p>
+
+<p>The letter also contained a postscript: “We know that the
+price would have to be much lower than our price to the wholesalers
+to secure the order.” In spite of the fact that Merrell
+was merely asking to quote on a “reasonable profit basis” and
+assured the Foundation that the price would have to be “much
+lower ... to secure the order,” the business manager of Foundation
+replied on May 13, 1940:</p>
+
+<p>“Under the present license agreement with your company
+and the other pharmaceutical licensees of the Foundation under
+<span class="pagenum" id="Page_99">[Pg 99]</span>the Steenbock patents, the minimum price to be quoted to government
+institutions is the minimum wholesale price as outlined
+in your contract, less two per cent discount for cash if paid by
+the tenth of the following month.</p>
+
+<p>“All of the other pharmaceutical licenses of the Foundation
+have operated under this arrangement for some time. We note,
+however, your postscript which indicates that the quotation to
+the government will have to be lower than the price to wholesalers
+in order to secure the order. We dislike to see your
+company or any of our other licensees lose business.”</p>
+
+<p>The pharmaceutical agreements fix both the potency and the
+quantities in which Vitamin D concentrates may be sold by the
+pharmaceutical licensees. The purpose and effect of these additional
+controls were stated by an official of the Foundation. “We
+feel that it is perfectly proper to control the price of Viosterol
+and cod liver oil from a legal standpoint and, unless we control
+the potency of the product and size of the container, price control
+of the product, of course, would be rather useless.”</p>
+
+<p>The pharmaceutical agreements specified that potencies could
+be changed only by “mutual agreement of Licensees of this
+group,” while container sizes could be changed by “mutual understanding
+of a majority of the Licensees of this group.” Operations
+were in exact accord with these provisions, and only
+unanimous approval by the licensees could authorize potency
+changes. Notes of a phone conversation of March 30, 1932, between
+Nielsen of Meade Johnson and Russell of the Foundation
+state: “Russell said under no condition could such approval be
+given. That Meade Johnson had no warrant in changing the
+potency without the knowledge and approval and consent, not
+only of the Foundation but also of the other four licensees.”</p>
+
+<p>Prior to December 24, 1936, the Foundation and its pharmaceutical
+licensees maintained a very effective black list and
+<span class="pagenum" id="Page_100">[Pg 100]</span>white list of dealers. While the approval of dealers was ostensibly
+within the exclusive control of the Foundation, actually
+it was again a matter for vote by the licensees. L. D.
+Barney, business manager of the Foundation, described the program
+to <abbr>Dr.</abbr> Russell, director of the Foundation, in a memorandum
+dated November 6, 1935:</p>
+
+<p>“As you know, the usual procedure in handling requests of
+wholesale drug concerns with respect to their addition to the
+approved wholesale list for the sale of Viosterol products is for
+the Foundation to send the name and address of this company
+to the five licensees. They, in turn, investigate the company and
+report back to whether or not they favor the addition of the
+said company to the list. The general procedure set up several
+years ago was that a majority of the licensees (three) would
+constitute sufficient authority on the part of the Foundation to
+add the name of the company to the approved list.</p>
+
+<p>“By reason of the manner in which these are handled, it is
+impossible for us to tell the licensee when we refuse their request
+anything other than the fact that the Committee, which
+handles the request, did not approve their application, or, stated
+in another way, the Committee voted in the negative. Obviously,
+we cannot say that our licensees did not favor the addition
+of this company to the group.”</p>
+
+<p>W. N. Larson of Meade Johnson recognized that this black
+list and white list might be illegal, and referred to it in a letter
+dated December 22, 1936, to Ward Ross, Counsel for the
+Foundation. He sent copies to each of the other pharmaceutical
+licensees. Larson’s letter states:</p>
+
+<p>“We would have no objection to the Foundation acting as a
+clearing house for information relative to those to whom wholesale
+terms on Viosterol and Cod Liver Oil with Viosterol are
+extended, except we wonder if such action might not be construed
+<span class="pagenum" id="Page_101">[Pg 101]</span>as a violation of law. Anyone investigating this activity
+might well inquire as to why this was done, if some action
+which could be construed as collusion or restraint of trade were
+not contemplated.”</p>
+
+<p>One of the principal functions of the black listing and white
+listing of wholesalers and retailers was the maintenance of resale
+prices. This is explained in a letter dated June 29, 1931, from
+W. N. Larson of Meade Johnson to N. A. Buttle of Winthrop,
+with copies to the other licensees and to the Foundation. This
+letter states:</p>
+
+<p>“To our knowledge there have been very few departures
+from the suggested minimum price, and these departures have
+been confined to a very few relatively unimportant wholesale
+druggists whose objectives unlike ours, are not to stabilize conditions
+in the drug trade. It is the legal right of any manufacturer
+to refuse to sell to a wholesaler or any other customer in
+fact, who will not carry out his wishes. I hope that it will not be
+necessary, but it is entirely possible that it may become desirable
+for the Foundation to make the list of preferred jobbers a
+trifle more exclusive than it is at the present time. We would
+work with the Foundation in any reasonable steps in that direction.
+Better proof of our desire to have this matter straightened
+out could hardly be given, we believe.”</p>
+
+<p>At least as early as 1933, the Foundation and the pharmaceutical
+licensees realized that this black list was illegal. On
+May 11, 1933, Larson of Meade Johnson wrote to Gunn, attorney
+for the Foundation, regarding this black list:</p>
+
+<p>“Licensees cannot make agreements among themselves in
+these matters and must, of course, take the position that they
+are acting under instructions from the Wisconsin Alumni Research
+Foundation. The revelation that that is not the case
+might prove to be very embarrassing, as you probably realize.
+<span class="pagenum" id="Page_102">[Pg 102]</span>My suggestion is that, in cases of this kind, you simply inform
+the inquiring party that your action was guided by a committee,
+operating under the Wisconsin Alumni Research Foundation,
+and that this committee does not reveal its reasons for taking
+any action of this kind.”</p>
+
+<p>Probably in part on account of this growing disquietude concerning
+the lawfulness of their undercover boycott, in part also,
+perhaps, because of the vast amount of detail work involved in
+maintaining the list, the Foundation ceased rendering this service
+for its licensees some time late in 1936. On December 24,
+1936, the business manager of the Foundation referred a prospective
+wholesaler to the pharmaceutical licensees for direct
+action.</p>
+
+<p>The pharmaceutical agreements were thus far more than
+mere restrictive patent licenses. Prices, potencies, dosages and
+container sizes were fixed by the licensees jointly and black lists
+of price-cutting dealers were established and maintained. The
+Foundation offered little more than a facade of respectability to
+conceal these activities, and it was for this concealment that the
+licensees were willing to pay so handsomely.</p>
+
+<p>The remaining agreements of the Foundation prohibit the
+other licensees from invading the pharmaceutical field. Several
+of the agreements prohibit, in express terms, sales of activated
+products for pharmaceutical uses, others so limit the potency of
+the licensed product as to make it worthless for medicinal purposes,
+while still others merely limit the right of the licensee
+to claim curative properties for his product in his advertising.</p>
+
+<p>All the agreements of the Foundation clearly show the intention
+to protect the exclusive market of the pharmaceutical
+licensees in the human medicine field. Actually this practice is
+carried to a ridiculous extent. The following statement appears
+in a memo note of November 14, 1935, written by Ward Ross,
+<span class="pagenum" id="Page_103">[Pg 103]</span>General Counsel for the Foundation, regarding a conference
+with <abbr>Dr.</abbr> Hooper of Winthrop:</p>
+
+<p>“With regard to the comparison between Viosterol and Drisdol,
+I asked Hooper how he would like it if our milk licensees
+said that one quart of irradiated milk was equal to 10 drops of
+Viosterol. Hooper claimed that this would be an invasion of
+the pharmaceutical field by our milk licensees and that they
+would be selling milk as medicine.”</p>
+
+<p>Apparently, the licensees are prevented from telling the
+truthful merits of their products if the truth would cause an
+overlapping of the artificial division of fields.</p>
+
+<p>Another industry capable of using large quantities of Vitamin
+D was the bread industry. Under an agreement dated November
+15, 1939, this field is allocated exclusively to duPont. DuPont’s
+chief concern in the bread field was price “stabilization”
+which to duPont meant the maintenance of high price levels.
+DuPont was even willing to share the field with Standard
+Brands to accomplish this end. A memorandum, dated September
+19, 1935, from <abbr>Mr.</abbr> Kenneth T. King of duPont to
+<abbr>Mr.</abbr> Ralph Horton and <abbr>Mr.</abbr> W. S. Kies, a Trustee of the
+Foundation, states: “We would be willing for the Foundation
+to grant non-exclusive license for the sale of Vitamin D from
+Ergosterol in the bread field to the Fleischmann Company, providing
+the price of Vitamin D in the bread field shall be stabilized.”
+The agreement between duPont and the Foundation
+expressly stipulates the limits of licensees’ discretion in price
+policy. Article 2 (C) provides: “DuPont shall not sell said
+irradiated or activated Ergosterol or its derivatives at a higher
+price than one dollar and a half ($1.50) or a lower price than
+ninety-five cents ($.95) per million <abbr class="spell">U.S.P.A.</abbr> (revised 1934)
+Vitamin D Units.”</p>
+
+<p>The Foundation’s support of duPont’s policy of high prices
+<span class="pagenum" id="Page_104">[Pg 104]</span>is indicated in a letter dated July 18, 1935, from Barney to Atkins
+of duPont which states: “<abbr>Dr.</abbr> Waddell stated that it was
+his opinion that if General Baking came back into the picture a
+higher price for ergosterol should be charged. We discussed
+the possibility of a price of $1.25 to $1.50 per million Steenbock
+units.”</p>
+
+<p>So long as the Foundation could be “merciless in beating out
+competition” price-fixing at these levels was quite attractive.
+But by 1940 the weakness of the Steenbock patents was so apparent
+that the fixed prices became a competitive hazard. On
+March 5, 1940, King of duPont wrote to the business manager
+of the Foundation:</p>
+
+<p>“In reply to your letter of February <abbr>24th</abbr> we are very much
+interested in modifying our contract with respect to the maximum
+and minimum provisions in the baking field. In fact, we
+believe the simplest way to handle this question is to delete
+from our present contract the clause specifying maximum and
+minimum provisions. This, of course, was explained to you over
+the telephone in our recent conversation concerning General
+Baking. I believe unless some change is made in the maximum
+and minimum provisions all business in this field will be lost
+by the licensees of the Foundation.”</p>
+
+<p>The Foundation recognized the need for abandoning these
+artificially high price levels and on March 14, 1940, Barney of
+the Foundation wrote to King of duPont referring to “a quotation
+from General Mills at a price of 60¢ per million” and
+stated: “This will acknowledge receipt of your letter of March
+<abbr>5th</abbr> regarding the maximum and minimum price provisions with
+respect to the baking field. Shortly, Ward [Ross of the Foundation]
+will send Art [Connolly of duPont] either a letter
+agreement or supplemental contract deleting this provision
+from the contract.” On July 19, 1940, Connolly wrote Ross
+<span class="pagenum" id="Page_105">[Pg 105]</span>again asking elimination of the price-fixing provision and finally
+on July 30, 1940, Ross of the Foundation wrote to duPont deleting
+the price-fixing paragraph from Article 2 (C) of the
+agreement.</p>
+
+<p>DuPont’s aim in all of its Vitamin D operations was to obtain
+high, non-competitive prices for its products. This thought
+is expressed time and time again. A memorandum dated July
+26, 1932, from Bradshaw to Atkins, both of Acetol, states:
+“This morning I reported to <abbr>Mr.</abbr> Protto and <abbr>Mr.</abbr> Robinson regarding
+conversation with Dean Russell and also the known
+facts concerning Lever <abbr title="Brothers">Bros.</abbr> business. It was <abbr>Mr.</abbr> Protto’s feeling
+that we should raise our prices as much as possible and not
+sell the material cheap.” The next day Atkins replied:</p>
+
+<p>“It seems obvious to me that we should always try to get
+the maximum price for any of our goods, keeping in mind the
+possible potential volume and competitive conditions.</p>
+
+<p>“According to authentic price information which we have
+secured, Fleischmann have been selling and offering Vitamin D
+at slightly less than $1.00 per 1,000,000 Steenbock Rat Units.
+This is what influenced my suggested price of $1.00 to Lever
+Brothers and I was very much surprised when you informed me
+that Fleischmann was not in a position to furnish irradiated ergosterol.
+If this were true, I apparently had gone too low on
+our initial price in view of the fact that we were the exclusive
+source of supply.”</p>
+
+<p>The profit levels resulting from the Foundation’s activities
+were enormous. In a letter dated March 9, 1938, addressed to
+Ward Ross of the Foundation, King of duPont stated: “With
+respect to the Chesney matter, all I know is that 35¢ per million
+units was quoted to General Baking Company.”</p>
+
+<p>Vitamin D is of the greatest importance to expectant and nursing
+mothers, infants, and children and, consequently, milk is
+<span class="pagenum" id="Page_106">[Pg 106]</span>one of the most natural and most important vehicles for this
+vitamin. The Council on Foods of the American Medical Association
+stated in the <cite>Journal of the American Medical Association</cite>
+for January 16, 1937, “Of all the common foods available,
+milk is most suitable as a carrier of added Vitamin D. Vitamin
+D is concerned with the utilization of calcium and phosphorous
+of which milk is an excellent source.” Next to the pharmaceutical
+industry, milk was probably the most promising outlet for
+Vitamin D from a profit standpoint. The Foundation therefore
+became active in promoting the use of Vitamin D in the milk
+industry.</p>
+
+<p>On November 1, 1938, the Foundation granted licenses to
+five producers of evaporated milk, The Borden Company, Carnation
+Company, Indiana Condensed Milk Company, Nestle’s
+Milk Products, <abbr title="Incorporated">Inc.</abbr>, and Pet Milk Company, to activate evaporated
+milk. The agreements allocate the evaporated milk
+field exclusively to these five producers. Like the Foundation’s
+other agreements, these evaporated milk agreements provide
+for the maintenance of the division of fields. Article <abbr title="20">XX</abbr>, in
+protecting the evaporated milk field, states: “The Licensor
+agrees that in all licenses for the activation of fluid milk by the
+use of irradiated ergosterol or by direct application of ultra
+violet rays, it will incorporate a provision preventing the use or
+sale of such activated milk by such licensees for the manufacture
+of activated unsweetened evaporated milk.”</p>
+
+<p>The rights of the evaporated milk producers were similarly
+restricted to prevent encroachment on other exclusive fields.
+Article <abbr title="12">XII</abbr> specifically protects the pharmaceutical field by
+providing that “said evaporated milk shall not be intended or
+sold as a cure for rickets.” The other fields of use of Vitamin D
+are protected from invasion by activated evaporated milk by
+Article <abbr title="9">IX</abbr> which provides: “The Licensee agrees that it will
+<span class="pagenum" id="Page_107">[Pg 107]</span>not knowingly directly or indirectly sell its unsweetened evaporated
+milk activated under this license to others ... as a source
+of Vitamin D for any other product when such product is intended
+to be sold or resold on a commercial basis.”</p>
+
+<p>There are several methods by which fluid milk may be activated
+and the Foundation has issued licenses for each of these
+methods. In one method, irradiated yeast is fed to cows to increase
+the Vitamin D content of the milk; in the second method,
+the milk is irradiated directly; and in the third method, an
+activated concentrate is introduced into the milk.</p>
+
+<p>The Bill of Particulars in the Vitamin Technologists suit lists
+138 dairies licensed to activate milk by feeding irradiated yeast
+to cows. In its agreement with West Haven Creamery, <abbr title="Incorporated">Inc.</abbr>,
+which is typical of all of the licensees of this class, the Foundation
+licensed and empowered the licensee to purchase from
+Standard Brands, Incorporated, dried yeast “antirachitically activated”
+upon the following terms and conditions:</p>
+
+<p>“First: The Licensee shall buy and use such yeast for no
+other purpose than that of feeding cows to impart antirachitic
+qualities to milk.</p>
+
+<hr class="tb">
+
+<p>“Fourth: The Licensee shall not sell any of its antirachitically
+activated milk to others for use or incorporation in any other
+marketed product when Vitamin D or antirachitic claims are
+made or intended to be made for such other marketed product.</p>
+
+<p>“Fifth: The activated yeast purchased by Licensee pursuant
+to this License shall not be resold or otherwise used except for
+feeding the same to the Licensee’s animals, pursuant to the conditions
+of this license.”</p>
+
+<p>The Steenbock patents do not even purport to cover anything
+more than a process of irradiating or an irradiated product.
+Under no circumstances could the milk from an irradiated-yeast-fed
+<span class="pagenum" id="Page_108">[Pg 108]</span>cow be an infringement of the Steenbock patents.
+Article Fourth is a bare-faced attempt to carry out the artificial
+division of fields. Milk from an irradiated-yeast-fed cow could,
+for example, be used in the commercial making of bread, but
+such use would be an invasion of the exclusive bread and breadstuffs
+field. It was, therefore, necessary for the Foundation to
+insert this limitation in the West Haven Creamery’s license
+even though the limitation was entirely outside the Steenbock
+patents.</p>
+
+<p>The prohibition of resale in Article Fifth likewise lacks any
+taint of legal justification. A patentee’s right under a patent is
+completely exhausted by the first sale of the patented product.
+Here again the Foundation is seeking to prevent any use of the
+irradiated yeast which may in any way conflict with the division
+of fields.</p>
+
+<p>As the demand for activated milk increased, the addition of
+concentrates was accepted by the medical profession. This business
+was so attractive that the Foundation decided to engage in
+the sale of these concentrates for addition to milk. The Foundation
+did not, however, wish to enter a market in which any
+competition existed and since Standard Brands had rights in
+this field, it was essential that the Standard Brands competition
+be eliminated. In the agreement of February 1, 1939, the
+Foundation agreed to pay Standard Brands 40% of the profits
+derived by the Foundation from the sale of concentrates in
+return for Standard Brands’ withdrawal and agreement not to
+compete.</p>
+
+<p>Vitamin D is of the utmost importance in the poultry industry
+since it is essential for the prevention and cure of rickets and
+for bone development, egg production and hatchability. Prior
+to the war some Vitamin D could be obtained from cod and
+other fish liver oils, but at the present time, the requirements
+<span class="pagenum" id="Page_109">[Pg 109]</span>must be obtained almost exclusively from synthetic Vitamin D.
+Even apart from war time shortages, synthetic Vitamin D presents
+certain advantages over fish liver oils. The synthetic product
+may be used for forced feeding without adversely affecting
+the flavor of the poultry, while too generous use of fish liver
+oils results in a somewhat fishy flavor.</p>
+
+<p>The size of the poultry market in the United States involves
+almost astronomical figures. The crop report of September 1,
+1943 of the United States Department of Agriculture on poultry
+and egg production states that there were over 316,000,000
+laying hens; over 318,000,000 pullets and over 224,000,000
+chicks. The egg production for August 1943 was 3,863,000,000.
+This crop report also states that the average cost of feed
+for farm poultry ration on August 15, 1943 was $2.13 per
+hundred pounds. <abbr>Dr.</abbr> Harry Titus of the Poultry Nutrition
+Section of the Bureau of Animal Industries of the Department
+of Agriculture estimates that 25,000,000 <span id="TN4">tons of commercial
+mixed feed</span> are used annually in the poultry industry and that
+75% of this feed is fortified with Vitamin D.</p>
+
+<p>The wartime demands on meat make the poultry market unusually
+important and any artificial restraints or artificial price
+levels affecting the poultry market are of the most serious national
+importance.</p>
+
+<p>The discovery upon which Steenbock’s patent <abbr title="Number">No.</abbr> 1680818
+is based is that certain substances, known as pro-vitamins take
+on antirachitic properties when irradiated with ultra violet light.
+These pro-vitamins are sterols which may be obtained from
+either vegetable or animal sources and the effectiveness of the
+irradiated product is dependent upon the nature of the pro-vitamin.</p>
+
+<p>In the early days, vegetable pro-vitamins were used almost
+exclusively but it was subsequently found that the animal pro-vitamins
+<span class="pagenum" id="Page_110">[Pg 110]</span>were superior. Vegetable pro-vitamins were unsuitable
+for poultry feeding and the exploitation of this market
+awaited the development of the animal pro-vitamins, cholesterol
+and 7-dehydrocholesterol.</p>
+
+<p>The animal and poultry feed field had been exclusively allocated
+to duPont and its predecessor, Acetol. This exclusive arrangement
+highlights the artificial nature of the Foundation’s
+division of fields. In the case of cows Vitamin D in the feed will
+result in a Vitamin D content in the milk. Vitamin D may also
+have some antirachitic effect on the cow itself. In interpreting
+this provision of its agreement with the Foundation, duPont
+was obliged to consider the question whether the effect of the
+Vitamin D feed is in the cow or in the milk. Finally, however,
+duPont resolved the doubt in its own favor. A letter dated
+February 20, 1935, addressed to Kupperian of duPont, from
+Connolly, a duPont attorney, states: “Irradiated cholesterol
+may therefore be used in feed for cows regardless of whether
+its purpose is to enhance the Vitamin D content of the milk
+or prevent rickets in the cow itself.”</p>
+
+<p>Prior to 1936, duPont recognized the importance of the
+animal sterols, cholesterol and 7-dehydrocholesterol, in the
+poultry feed field. DuPont immediately set out to secure a
+monopoly over these pro-vitamins and through them to control
+the entire poultry feed field. The first step in this direction is
+described in a letter dated January 21, 1936 from King of
+duPont to Nielsen of Abbott which states:</p>
+
+<p>“We were, of course, largely interested in the poultry field,
+and to protect our position had made tentative arrangements to
+secure all of the available cholesterol in the country, or perhaps
+we might say, in the world.”</p>
+
+<p>Apart from attempting to corner the sources of animal sterols,
+duPont also sought exclusive rights in the field of animal sterols
+<span class="pagenum" id="Page_111">[Pg 111]</span>within the licensing scheme of the Foundation. The agreement
+of November 15, 1935 between the Foundation and duPont
+grants duPont an exclusive license to irradiate sterols from animal
+sources. When the Foundation wished to grant new licenses
+and submitted the proposed licenses to duPont for approval,
+duPont insisted upon retaining exclusive rights in the animal
+pro-vitamin field. In a report to the Executive Committee of
+duPont recommending approval of the Foundation’s license to
+Merrell, E. G. Robinson states:</p>
+
+<p>“The Foundation now wishes to grant a license to the William
+S. Merrell Company of Cincinnati, Ohio, limited to Vitamin
+D from non-animal sources for sale only as medicinals or
+pharmaceuticals for human use, which this department is willing
+to approve. It is limited to non-animal sources in the pharmaceutical
+field and, therefore, we do not think it will materially
+interfere with our own developments. Also, the Foundation
+is able to grant a license with respect to yeast ergosterol without
+our permission, since that product is not in our license field;
+and if the license to Merrell is limited to yeast we will not have
+the opportunity of selling Merrell our own ergosterol.”</p>
+
+<p>Thus, while duPont desired to protect its animal sterol field
+it did not wish the Merrell license so limited as to deprive
+duPont of a potential market for non-yeast ergosterol. In both
+instances the Foundation was most willing to cooperate.</p>
+
+
+<hr class="chap x-ebookmaker-drop">
+<div class="chapter">
+
+<p><span class="pagenum" id="Page_112">[Pg 112]</span></p>
+
+
+  <h2 class="nobreak" id="8">
+    8
+    <br>
+    <i>Quebracho Extract</i>
+  </h2>
+</div>
+
+
+<p>Quebracho extract is of great use to the nation in the war
+effort. It is a material which has been found most desirable
+for tanning the leather which goes into the shoes, harness,
+straps and other leather articles of the armed forces. It is of
+some interest to every man, woman and child whose ration
+stamps are used to buy a pair of shoes.</p>
+
+<p>Practically all heavy leather tanned in this country has been
+tanned by use of a blend in which this material is an important
+ingredient. It comes from the southern part of South America,
+and there have been times when it was difficult, and others when
+it appeared it might be impossible, to ship the material to this
+country. The production and sale of the material is controlled
+by a monopoly pool or cartel, and this country is at the mercy
+of the pool in procuring the material in adequate quantities
+and at a reasonable price. The pool has exercised its power to
+curtail the quantity shipped to this country, to prevent any adequate
+stock pile in this country, and to raise prices out of proportion
+to any increase in costs.</p>
+
+<p>In the Spring of 1942 the Department of Justice submitted
+the facts of this monopoly pool to a Federal Grand Jury in
+<span class="pagenum" id="Page_113">[Pg 113]</span>New York, and it promptly returned an indictment against five
+American corporations, one Canadian and one British corporation,
+and five individuals, officials of four of the American corporations.
+Pleas of <i lang="la">nolo contendere</i> were subsequently entered
+by three of the American corporations and four of their officials.
+Fines were levied against and paid by these defendants, totalling
+$59,002. A <i lang="la">nolle prosequi</i> was entered as to the two
+remaining American corporations, the two British corporations,
+and one official. The reason for the <i lang="la">nolle prosequi</i> in the case
+of the two foreign corporations was that they were outside the
+jurisdiction of the court.</p>
+
+<p>The national interest in such a situation plainly warranted a
+diligent effort long ago to find an adequate substitute which
+would relieve us from entire dependence upon the ability and
+willingness of a foreign cartel to supply us with a vital material.</p>
+
+<p>The extract is obtained from the quebracho tree. For commercial
+purposes the growth of these trees is limited to Argentina
+and Paraguay. Although there are quebracho forests in
+southern Brazil, the extract manufactured from these trees is
+inferior to Argentine and Paraguayan extract, and cannot compete
+favorably with it in the market. Ninety-eight per cent of
+the world production of quebracho wood and extract comes
+from Argentina and Paraguay. In 1942 the total production
+amounted to approximately 300,000 metric tons of extract and
+was valued at $25,000,000.</p>
+
+<p>This war has naturally affected the market for quebracho in
+Europe. Several years before the war the German Government
+took steps to render that country less dependent upon the continuance
+of quebracho imports. Clauses were inserted in all
+Army and Navy contracts for the purchase of leather goods that
+at least 12 per cent of such goods should be tanned by German-manufactured
+<span class="pagenum" id="Page_114">[Pg 114]</span>tanning agents. This resulted in the development
+of a new industry based upon the production of tanning material
+from German trees. Tannic acid was extracted from the oak
+trees of South Germany and was permitted to find a place in
+the tanning industry by reason of the Government policy. Thus
+the German leather industry gradually became independent of
+quebracho importation from South America.</p>
+
+<p>The loss of the continental European market due to the war
+was not felt to any great extent by the quebracho exporters because
+of the great increase of exports to the United States. During
+the war the imports of quebracho almost doubled due to the
+tremendous production of leather goods for the armed forces.</p>
+
+<p>The quebracho industry consists of twenty-two producers in
+Argentina and Paraguay. Five of these are owned or controlled
+by the British corporation, The Forestal Land, Timber and
+Railways, <abbr title="Limited">Ltd.</abbr>, through its Argentine subsidiary, La Forestal
+Argentina S. A. de Tierras, Maderas y Explotaciones Commerciales
+e Industriales. These five companies have a productive
+capacity which constitutes approximately 57 per cent of the
+total capacity.</p>
+
+<p>All producers, except four having a capacity of about eleven
+per cent of the entire industry, are members of a Quebracho
+Pool which regulates the production and sale of the product.
+Quebracho is sold by official agents of the Pool, and it recognizes
+two official agents in the United States: The Tannin Corporation
+and the International Products Corporation, both of
+New York.</p>
+
+<p>Forestal of England controls La Forestal of Argentina
+through the ownership of a majority of its stock and a substantial
+portion of its bonds. One John B. Sullivan, Chairman of
+the Board of Forestal of England, is also the manager of Forestal
+of Argentina. Sullivan is an Argentine citizen who was
+<span class="pagenum" id="Page_115">[Pg 115]</span>formerly a citizen of the United States and a graduate of Harvard
+College.</p>
+
+<p>By reason of La Forestal’s ownership of 57 per cent of the
+total productive capacity of quebracho in South America, which
+is approximately eight times the capacity of its next largest competitor,
+Forestal has completely dominated the quebracho industry.
+Its policy has been to restrict production and maintain
+high prices. Forestal’s economic dominance in Argentina has
+enabled it to exert a great influence upon the government of
+Argentina. For example, in 1942 the efforts of John B. Sullivan
+alone were primarily responsible for the imposition by the
+Argentine Minister of Agriculture of highly restrictive export
+quotas upon each producer. These restrictions were imposed
+upon the industry at a time when it appeared that the efforts of
+Forestal to continue similar restrictions upon the South American
+producers might fail.</p>
+
+<p>Forestal’s domination extends not only over the production
+of quebracho, but over its distribution as well, including importation
+into this country. Through <abbr title="Saint">St.</abbr> Helen’s <abbr title="Limited">Ltd.</abbr>, a Canadian
+corporation, Forestal of England owns substantially all
+of the stock of Tannin Products Corporation, a Delaware corporation,
+which in turn owns all the capital stock of The Tannin
+Corporation, a New York corporation.</p>
+
+<p><span id="TN25">The Tannin Corporation imports approximately</span> 70 per
+cent of all quebracho extract consumed in the United States.
+The Tannin Corporation has been controlled by Forestal of
+England since 1913 and during the past thirty years its controlling
+officials have been completely subservient to the policies
+of Forestal of England. Thus Forestal controls this material
+from the tree to the United States consumer.</p>
+
+<p>The questionable character of the functioning of these American
+subsidiaries is indicated by portions of a letter written December<span class="pagenum" id="Page_116">[Pg 116]</span>
+23, 1941, by Carl B. Ely, President of the Tannin
+Corporation, to J. B. Sullivan of Forestal, whom he addressed
+as “My dear Jack”:</p>
+
+<p>“You will recall the formation for good and practical reasons
+of the Tannin Products Corporation in 1925, at which time a
+very large dividend was paid, which procedure continued in a
+more or less degree during the following years, particularly in
+1929 and 1934. The company, as you will see, earned $3,284,427.28
+and paid out dividends of $4,200,000.00. In other
+words, we declared practically $1,000,000 more during the
+sixteen-year period than we earned.</p>
+
+<p>“Under the circumstances I have no fault to find with this,
+provided our principal stockholders, the Forestal Company, are
+aware of it and are prepared to take care of our money situation
+as the same arises....</p>
+
+<p>“To come right down to the last analysis, we have been living
+on Government funds, which under proper business procedure
+should be reserved for income tax payments, but, as these
+payments are not due until next year, it has been possible to use
+this money. We owe the Government today $500,000. This
+money, together with your most helpful postponement of payments,
+has made it possible for us to have cash to pay the dividend
+we did. I believe that with the extra terms on future
+purchases of extract we will make our position stronger during
+the next six months, and we are trying diligently not to borrow
+from the banks, as in this particular case it would appear that
+such borrowing was done to pay dividends. This I believe would
+have a very bad effect on our good will and financial standing—and
+we enjoy today the good will and respect of the tanning industry
+as we never have before.”</p>
+
+<p>I have already pointed out that Forestal controls five of the
+South American producers. One of the other seventeen is the
+<span class="pagenum" id="Page_117">[Pg 117]</span>International Products Corporation of New York. Another
+producer, Samuhi S. A., is controlled through ownership of a
+majority of its stock by two American corporations, Proctor Ellison
+and Howes <abbr title="Brothers">Bros.</abbr> of Massachusetts. International Products
+Corporation and Samuhi together have a capacity of about
+eight per cent of the entire industry. Both of these producers
+have been ineffective in preventing La Forestal from carrying
+out its policy of restricted output and high prices, and International
+Products has in the past frequently <span id="TN5">cooperated closely
+with La Forestal</span> to further such a policy.</p>
+
+<p>Since 1934 International Products Corporation has consulted
+with Tannin about the prices to be charged to quebracho extract
+consumers in the United States, so that the prices of both
+companies have been fixed, uniform and high. From May,
+1934 to July, 1939, Tannin owned a substantial amount of the
+stock of International Products Corporation, and from May,
+1934 until May, 1936, the president of Tannin, Carl B. Ely,
+was a member of the Board of Directors of International Products
+Corporation. On February 26, 1935, Ely wrote to Sullivan:</p>
+
+<p>“I am giving the <abbr class="spell">I.P.C.</abbr> problems a lot of my time, and, as
+previously told you, have found that there is a lot to be
+done to straighten out that problem. I am working slowly so as
+not to upset the apple cart any more than is necessary....</p>
+
+<p>“I am getting their sales policies straightened out and believe
+now there will be no more monkey business.”</p>
+
+<p>From 1934 to 1939 International Products Corporation was
+a member of the Quebracho Pool, and by reason of its designation
+as an official pool agent for the United States gave up its
+business of selling extract in England and in Asia.</p>
+
+<p>American purchasers of quebracho might well wonder whether
+this American company was more concerned with giving them
+<span class="pagenum" id="Page_118">[Pg 118]</span>a good deal or with favoring certain foreign concerns, from the
+concluding paragraph of a letter from one of its officials to its
+President dated November 16, 1939:</p>
+
+<p>“You undoubtedly know that <abbr>Mr.</abbr> Seldes was successful in
+substituting Casado extract to fill the order we had for Forestal
+for 535 tons of Supremo for delivery in Buenos Aires for shipment
+to Japan. We paid for the Casado extract with a dollar
+draft and have since received from Forestal the sterling representing
+the sale. The net result of the whole transaction represents
+a loss of a little more than a $1.00 per ton, which, as explained
+in a previous letter, is really not a loss at all, as we will
+use this extract to fill orders for North America which will net
+us a nice profit.”</p>
+
+<p>The production of Samuhi was so small, being about one per
+cent of the entire industry, that it could hardly contain any
+competitive threat to La Forestal. Nevertheless, our records
+show that for many years Forestal harassed this company by
+every means and sought to buy up its assets and its stock.</p>
+
+<p>It is interesting to observe in what manner the quebracho extract
+pool operated to carry out Forestal’s policy of restricted
+output and high prices. Before the formation of the Pool the
+price per pound of quebracho extract was <abbr title="2 and a half">2½</abbr> cents. By the
+terms of the pool agreement a directive committee, dominated
+by Forestal, was empowered to fix the prices of all its members.
+The directive committee between November, 1934 and January,
+1941, decreed six price rises, raising the basic price of quebracho
+extract for the whole world market from <abbr title="2 and a half">2½</abbr> cents up to <abbr title="4 and seven-eighths">4⅞</abbr>
+cents, an increase of nearly 100 per cent. Sullivan admitted in
+July, 1942, that at the then existing price, which prevails at
+present, Forestal was making a net profit of 33 per cent on
+every ton of quebracho it sold.</p>
+
+<p>The exorbitant profits of the quebracho manufacturers were
+<span class="pagenum" id="Page_119">[Pg 119]</span>severely criticized by the famous leading Argentine newspaper,
+<cite lang="es">La Prensa</cite>. The following excerpt was taken from a letter of
+May 20, 1936, written by the manager of the Buenos Aires office
+of the International Products Corporation to its president:</p>
+
+<p>“Another matter, which has caused a lot of excitement
+amongst the manufacturers has been the inopportune declaration,
+made by the Chairman of the Forestal during the annual
+meeting of the shareholders, <abbr title="videlicet" lang="la">viz.</abbr> that the understanding of the
+manufacturers was performed under the auspices of the Argentine
+Government, in other words, that the Argentine Government
+was really responsible for the agreement and that it
+was protecting the same. This news was reproduced all over the
+world and the <cite lang="es">La Prensa</cite>, the most important paper on the
+Southern Hemisphere, has seized the opportunity to denounce
+the huge profits made by the quebracho manufacturers, profits
+which in their opinion mean a loss for the Argentine Republic
+on account of the decrease in the export of both, Quebracho Extract
+and Logs. I am enclosing herewith the article, as appeared
+in the <cite lang="es">La Prensa</cite> of Monday the <abbr>18th.</abbr> <abbr>inst.</abbr>, and we
+would add this paper has on more than one occasion criticized
+the so-called ‘gentlemen agreement.’ <abbr>Mr.</abbr> Marti told
+me that he is at a loss to understand how the Baron made these
+declarations as <abbr>Mr.</abbr> Sullivan has always stressed the necessity
+of not mentioning the Argentine Government in connection
+with the manufacturers’ agreement, a fact which can be noted in
+the balance sheets of the other companies, who, referring to the
+higher prices, explain that they are due to a better understanding
+in the sales policy abroad. Anyway, I hope that his faux pas
+will have no serious consequences.”</p>
+
+<p>To maintain high prices it was necessary to limit the production
+and the sale of quebracho in the world market. The method
+used to limit production under the pool agreement was to
+<span class="pagenum" id="Page_120">[Pg 120]</span>allocate a quota to each producer in accordance with his respective
+productive capacity. These quotas limited the amount of
+quebracho extract which any manufacturer could sell during a
+given period. Each member of the pool was compelled to make
+substantial contributions at regular periods to a so-called “battle
+fund” of the pool. These contributions were retained by
+the pool unless the producers adhered to the pool’s regulations
+relating to prices and quotas, in which case a portion of each
+producer’s contribution was refunded. So restrictive were these
+quota limitations that producers who desired to sell above their
+quotas often paid enormous prices to acquire the quota rights of
+other producers.</p>
+
+<p>This rigid control of the market so severely limited the production
+of many companies that in 1941 several deserted the
+pool. These companies were LaChaquena S. A. and Cotan S. A.
+These two companies, together with International Products
+Corporation, Samuhi, and Weisburd &amp; <abbr>Cia.</abbr> <abbr>Ltda.</abbr>, a new concern,
+have been the only producers outside of the pool since
+1941. Although the total productive capacity of these five companies
+did not exceed 12 per cent of the total industry, their
+threat of full production and decreased prices jeopardized its
+whole structure. To meet this threat, Forestal succeeded in
+persuading the Ministry of Agriculture in February, 1942, to
+impose export restrictions upon each producer which prevented
+exportation of more than approximately one-third of their total
+capacity. In addition, Forestal attempted to prevent companies
+outside the pool from shipping their extract to the United
+States.</p>
+
+<p>One instance is the experience of Hammond and Carpenter
+Corporation, an independent importer which has sought to
+compete with The Tannin Corporation and International Products
+Corporation in the importation of quebracho. In February
+<span class="pagenum" id="Page_121">[Pg 121]</span>or March, 1942, J. A. Barkey, its Vice-President, attempted to
+import some extracts produced by Weisburd, an Argentine extract
+manufacturer, who entered the industry in 1941. He
+called at the offices of the Sprague Steamship Company and
+spoke to <abbr>Mr.</abbr> Bodemann of that company. <abbr>Mr.</abbr> Barkey later
+described the conference as follows:</p>
+
+<p>“<abbr>Mr.</abbr> Bodemann retorted that it was very unlikely that our
+firm would be given any space for the reason that we were newcomers
+in the import of quebracho extract and for the further
+reason that the ‘Pool’ had supported his line during the lean
+years before the war and by reason of such support his line
+would be obliged to support the ‘Pool’ during the present emergency.”</p>
+
+<p>Similar sentiments were voiced by <abbr>Mr.</abbr> Horgan of the Stockard
+Steamship Corporation. The aid of the Buenos Aires Agency
+of Moore-McCormack was also previously enlisted. In October,
+1941, the Moore-McCormack line stated that “at the
+request of the Forestal Company they had promised their cooperation
+for the purpose of keeping out any of the new brands....
+The understanding was that whenever they were offered
+outside extract and they had space they were to reject it and
+advise the other manufacturers, who would try to offer replacement.”</p>
+
+<p>Forestal’s tactics are well illustrated by the case of <abbr>Mr.</abbr> T.
+Valentine, exporter and concessionnaire of a projected new company.
+International Products Corporation was informed in September,
+1941:</p>
+
+<p>“[It] has proved impossible so far to reach a satisfactory
+agreement with the new factory at Santiago del Estero. For this
+reason, the Forestal Company, in an endeavor to impede the
+exportation of the extract, has seen all the steamship companies
+<span class="pagenum" id="Page_122">[Pg 122]</span>requesting them not to give space to any outsiders, but to advise
+the Forestal who would immediately offer replacement cargo.
+The steamship companies promised to act accordingly.”</p>
+
+<p>The Basal Agency had obtained shipping space for Valentine
+in the past. “The Basal Agency,” an official of International
+Products wrote to Feeney a week later, “has informed us that
+Valentine wants to book a further 200 tons on the next steamer
+but that they would refuse to take it if we or the Forestal would
+offer them replacement cargo.”</p>
+
+<p>The effect of the restrictive government decrees and other
+measures taken by Forestal has been to force one independent,
+Cotan, S.A., back into the Pool, while another, Samuhi, S.A., is
+contemplating rejoining the Pool. It appears inevitable that
+within a short period of time the remaining independents will
+be forced into full cooperation with the Pool and that the industry’s
+policy of restrictive production and high prices will
+continue unless some completely satisfactory substitute may be
+found for quebracho extract. Apparently the tanners in this
+country find that wattle extract is the only tanning product interchangeable
+with quebracho extract, and it is therefore significant
+to observe that the wattle extract industry, which is located
+in South and East Africa, is also controlled by Forestal
+of England, and that the principal importers of wattle in the
+United States are the Tannin Corporation and International
+Products Corporation.</p>
+
+<p>The chief official of one of the companies which stood up
+against the bulldozing tactics of the Pool wrote a letter to American
+Tanners <abbr title="Limited">Ltd.</abbr>, on February 7, 1935. After discussing in a
+critical manner the actions of the Pool and referring to a conversation
+with an individual whom he said could be “interpreted
+as a stool pigeon for Forestal,” he wrote:</p>
+
+<p><span class="pagenum" id="Page_123">[Pg 123]</span></p>
+
+<p>“We also pointed out the fact that if the arbitrary methods
+of the gentlemen [the Pool] were pursued, that they were
+throwing away their markets, they were encouraging the fields
+of research and that they would wake up one day and find that
+the volume of consumption of Quebracho Extract had been
+greatly reduced due to the introduction of other materials
+which supplanted Quebracho and I cited the instance of what
+the tanners went through with substituted leather and how the
+volume of the market had never been regained and that the
+same thing would happen to Quebracho.”</p>
+
+
+<hr class="chap x-ebookmaker-drop">
+<div class="chapter">
+
+<p><span class="pagenum" id="Page_124">[Pg 124]</span></p>
+
+
+  <h2 class="nobreak" id="9">
+    9
+    <br>
+    <i>Titanium</i>
+  </h2>
+</div>
+
+
+<p>The titanium industry is controlled by a typical cartel. That
+it is a cartel there can be no question. The president of one of
+the American companies which dominate it was thoughtful or
+thoughtless enough to define it. He wrote to one of the European
+officials as follows:</p>
+
+<p>“May I call the proposed combination, for simplicity, a cartel?
+The whole purpose of the cartel is to obtain a monopoly of
+patents, so that no one can manufacture it [titanium] excepting
+the members of the cartel, and so can raise the prices by reason
+of such monopoly to a point that would give us much more
+profit on our present tonnage, but also prevent a growth in
+tonnage that would interfere with their greater profits in lithopone
+[a competing but inferior product].”</p>
+
+<p>It is typical because it has utilized the devices and followed
+the practices which are found in greater or lesser degree in all
+cartel arrangements. The members of this cartel include I. G.
+Farbenindustrie, the German chemical trust and many other
+foreign companies. The American scene is dominated by three
+American corporations, the National Lead Company, E. I.
+duPont de Nemours and <abbr title="Company">Co.</abbr>, and Titan <abbr title="Company">Co.</abbr>, <abbr title="Incorporated">Inc.</abbr> (These three
+<span class="pagenum" id="Page_125">[Pg 125]</span>companies and four of their leading officials were indicted by a
+grand jury in the Southern District of New York on June 28,
+1943.)</p>
+
+<p>The story of the titanium cartel is significant for these reasons:</p>
+
+<p>1. Titanium, the most valuable and useful of all white pigments
+for paints, rubber products, glass, paper, enamel and
+other materials has been priced exorbitantly and its use restricted
+because of the monopolistic control exercised over it by a worldwide
+cartel.</p>
+
+<p>2. American members of the cartel are placed in a position
+where they have felt obliged to help the Japanese evade the
+British embargo.</p>
+
+<p>3. American members have seen fit to aid I. G. Farben in
+attempting to prevent seizure of German owned patents by the
+American Alien Property Custodian by the execution of specious
+patent assignments.</p>
+
+<p>4. To attain such monopolistic control, the cartel has resorted
+to flagrant misuse of patents and has gone so far as to actually
+pay large sums to potential competitors to keep them out of the
+titanium business.</p>
+
+<p>5. I. G. Farben, the German chemical trust, as one of the
+leading parties to the cartel, has dictated the terms upon which
+American members might do business.</p>
+
+<p>6. The fact that duPont, Imperial Chemical Industries and
+I. G. Farben are also members of other cartels, such as that involving
+dyestuffs, makes their control of a fine pigment such as
+titanium the more objectionable.</p>
+
+<p>It is difficult to think of any material which is more universally
+used by private citizens and by governments alike than is
+paint. In time of peace, the United States government buys and
+uses enormous quantities of paint. In this time of war its purchases
+<span class="pagenum" id="Page_126">[Pg 126]</span>account for by far the greater portion of all the paint
+manufactured in the entire country.</p>
+
+<p>It is a fact which is not widely known that the finest of all
+white pigments, useful in colored paints as well as white, is
+titanium dioxide. It is also not generally known that titanium is
+the ninth most abundant element in the earth. Crude titanium
+is found in combination with iron in an ore called ilmenite in
+many places in this and other countries. It is found in purer
+form in the sands of Travancore Beach in India and in lesser
+concentration in many places.</p>
+
+<p>While the element itself is abundant, no commercially practical
+processes for reducing it to pigment form were known until
+about the time of the first World War. In the relatively
+short period which has passed since then, technology has been
+developed which makes possible the manufacture of the finest
+pigment from titanium. It has already displaced white lead,
+lithopone and other pigments in a large share of the market.
+In hiding power (covering qualities), opacity and chemical
+inertness—all essential qualities for paints—titanium compounds,
+chiefly titanium dioxide, excel all other kinds of pigments.</p>
+
+<p>Shortly after the Civil War it was discovered that titanium
+ore could be reduced to a powder which when mixed with oil
+resulted in a paint. It was not until about the beginning of
+World War <abbr title="1">I</abbr> that a feasible method of separating titanium oxide
+from the ore was worked out. This was accomplished by
+two chemists, <abbr>Dr.</abbr> A. J. Rossi and L. E. Barton, whose research
+was done for the Titanium Alloy Manufacturing Company organized
+by <abbr>Dr.</abbr> Rossi and others in 1906. As a result of their
+discovery, a new corporation called the Titanium Pigment Company
+was formed in 1916. At that time, as well as subsequently,
+the leading manufacturer of white pigment was the National
+<span class="pagenum" id="Page_127">[Pg 127]</span>Lead Company. Recognizing the implications of titanium’s excellence
+in this field, National Lead purchased a substantial interest
+in the Titanium Pigment Company in 1920. The two
+companies continued to operate more or less separately until
+1932 when National Lead acquired the entire stock of Titanium
+Pigment. In 1936, the latter was dissolved as a corporation and
+its business and properties were taken over and operated as a
+division of National Lead.</p>
+
+<p>During substantially the same period in which this development
+was taking place in this country, a different process for the
+manufacture of titanium compounds was being developed in
+Norway by Gustav Jebsen. His process was patented and was
+exploited by a Norwegian corporation called Titan <abbr title="Company">Co.</abbr> <abbr class="spell">A/S</abbr>.
+At about the same time a Russian chemist named Joseph Blumenfeld
+was perfecting, in France, another method of manufacture,
+which was likewise patented. Thus prior to 1920 three
+groups working independently of one another had developed
+processes for utilizing titanium ore for production of pigments.
+These groups are:</p>
+
+<p>1. Titanium Pigment Company, subsequently absorbed in
+National Lead Company.</p>
+
+<p>2. Titan <abbr title="Company">Co.</abbr> <abbr class="spell">A/S</abbr>, originally organized in Norway by Jebsen
+for the exploitation of his developments. Eighty-seven percent
+of its stock was purchased by National Lead in 1927, the remaining
+13% being retained by Jebsen. This company was
+originally intended to exploit the foreign interests of National
+Lead, but in 1929 <span id="TN6">National Lead and Jebsen organized</span> in Delaware
+a holding company called Titan <abbr title="Company">Co.</abbr>, <abbr title="Incorporated">Inc.</abbr>, the sole function
+of which was to hold all foreign interests of the parties.
+Titan <abbr title="Company">Co.</abbr> <abbr class="spell">A/S</abbr> remained in existence in Norway solely as the
+sales agent for Titan <abbr title="Company">Co.</abbr>, <abbr title="Incorporated">Inc.</abbr></p>
+
+<p>3. The Blumenfeld Interests. Whereas National Lead and
+<span class="pagenum" id="Page_128">[Pg 128]</span>Jebsen chose to exploit their patents by means of operating
+companies, Blumenfeld followed a general policy of licensing
+other interests.</p>
+
+<p>Titanium Pigment and Titan <abbr title="Company">Co.</abbr> <abbr class="spell">A/S</abbr> entered into a contract
+dated July 30, 1920, which is the foundation upon which the
+parties and their successor companies have been able to build a
+cartel with monopoly ramifications extending throughout the
+world. This contract was to extend to 1936 and was to be
+automatically renewed for 10-year periods unless terminated
+by 5-year notice. By the terms of this agreement, National
+Lead (as Titanium Pigment and its successor in interest will be
+called) was assigned the markets of North America as its exclusive
+territory. Titan <abbr title="Company">Co.</abbr> <abbr class="spell">A/S</abbr> was given the rest of the world
+with the exception of South America which was to be common
+territory. The two companies granted each other exclusive
+licenses under their patents for their respective territories, excluding
+even the licensor from the licensee’s territory. Each
+agreed not to ship into the other’s territory and to prevent its
+licensees from shipping their finished products into the other’s
+territory if it would interfere with the other party’s sales. Any
+sublicensee was required to be governed by the same restrictions
+as the parties imposed upon themselves. The parties agreed to
+exchange know-how and also to permit visits of representatives
+to their respective plants. Each party undertook to secure from
+its employees assignment of any and all inventions developed
+by them. In acquiring rights to inventions from third parties,
+each agreed to secure rights for all countries within the territory
+of the other party.</p>
+
+<p>Following the execution of the 1920 agreement, the parties
+operated under it until 1927.</p>
+
+<p>Jebsen, having Europe as part of his territory, set up a selling
+company in France. This was originally intended to become a
+<span class="pagenum" id="Page_129">[Pg 129]</span>manufacturing company also, but this idea was never carried
+out. National Lead acquired a majority interest in this company
+in 1927. At the same time it acquired 87% interest in
+Titan <abbr title="Company">Co.</abbr> <abbr class="spell">A/S</abbr>, the Norwegian company, Jebsen retaining the
+remaining 13%.</p>
+
+<p>Also in 1927 National Lead and Jebsen formed a new company
+in Germany in conjunction with I. G. Farben. This company,
+Titangesellschaft, <abbr class="spell">G.m.b.H.</abbr>, was organized as part of a
+series of transactions including the execution of nine separate
+contracts. Titangesellschaft was given as its exclusive territory
+for manufacture and sale of titanium compounds the following
+countries: Germany, Russia, Austria, Hungary, Czechoslovakia,
+Switzerland, Rumania, Serbia, Jugoslavia, Bulgaria, Greece,
+Turkey, Japan, China and Spain. In 1933 Titangesellschaft
+eliminated potential competition on the part of the Sachtleben
+Company in Germany by the simple expedient of paying it a
+large sum of money for its agreement to stay out of the titanium
+business.</p>
+
+<p>In 1929, National Lead and Jebsen organized in Delaware a
+company called Titan <abbr title="Company">Co.</abbr>, <abbr title="Incorporated">Inc.</abbr>, for the purpose of holding their
+foreign interests. Titan <abbr title="Company">Co.</abbr>, <abbr title="Incorporated">Inc.</abbr>, succeeded to the position of
+Titan <abbr title="Company">Co.</abbr> <abbr class="spell">A/S</abbr> (the Norwegian firm) under the basic agreement
+of 1920. Thus we have National Lead as successor to Titanium
+Pigment as one party to the basic agreement and Titan <abbr title="Company">Co.</abbr>, <abbr title="Incorporated">Inc.</abbr>,
+owned 87% by National Lead, as the other party. However,
+the 1920 agreement continues in existence inasmuch as its territorial
+and license exchange restrictions form the basis and pattern
+for all the subsequent agreements. Thus, Titan <abbr title="Company">Co.</abbr>, <abbr title="Incorporated">Inc.</abbr>,
+became entitled to all territory outside North America except
+as yielded up by the German agreements and others subsequent
+to them.</p>
+
+<p>Blumenfeld transferred all his patent rights to a French
+<span class="pagenum" id="Page_130">[Pg 130]</span>company known as Societe de Products Chemiques des Terres
+Rares. This concern then licensed or sold them to different companies
+operating in various European countries, the British Empire
+and United States.</p>
+
+<p>In the United States, the patents were first owned by the
+Commercial Pigments Corporation which sold them in 1931
+to the Krebs Pigment and Color Corporation. At that time,
+duPont owned 70% of the stock of Krebs. It subsequently acquired
+100% and now operates it as the Krebs Division of
+duPont. National Lead entered upon negotiations with duPont
+looking toward an agreement which would allow the two companies
+to maintain a monopoly of the titanium business in this
+country and eliminate competition between them. I. G. Farben
+insisted that in any such agreement duPont must obligate itself
+not to compete or allow its sublicensees to compete in I. G.
+Farben’s territory, <abbr>i.e.</abbr>, the world outside the Western Hemisphere.
+When a proposed form of agreement was submitted to
+I. G. Farben for approval, it objected because the license given
+by duPont for foreign territory was a “non-exclusive license.”
+A National Lead official reassured I. G. Farben on this score in
+the following language, quoted from a letter written in 1933:</p>
+
+<p>“In regard to the phrase ‘non-exclusive license’ to which you
+call our attention ... we have to refer to the United States
+Anti-Trust Laws which absolutely forbid the granting of exclusive
+licenses between two manufacturers in the United States
+as such a practice would tend to create a monopoly. Therefore,
+the use of this phrase ‘non-exclusive license’ is simply to comply
+with the United States Laws and in practice the licenses under
+each other’s patents will undoubtedly prove to be, to all intents
+and purposes, exclusive.”</p>
+
+<p>I. G. Farben’s objections having been met and other difficulties
+overcome, Titanium Pigments <abbr title="Company">Co.</abbr>, <abbr title="Incorporated">Inc.</abbr>, and Krebs Pigment
+<span class="pagenum" id="Page_131">[Pg 131]</span>and Color Corporation, subsidiaries of National Lead and
+duPont, respectively, entered into an agreement dated January
+1, 1933. It provided for a mutual grant of irrevocable and
+“non-exclusive rights” and a license within the United States
+to use all processes, methods and apparatus of manufacture including
+present and future processes and patents. It also provided
+that each party might sell the products resulting from the
+exercise of the processes in the United States, Central and
+South America. The territorial division of the basic agreement
+of 1920 was thus preserved.</p>
+
+<p>The agreement also provided for the exchange of the most
+detailed information with respect to technical developments and
+know-how “to the end that all the knowledge and experience
+of each party in the licensed field shall be at the full disposal
+of the other.” This provision caused some little difficulty between
+the parties. About 1937 I. G. Farben developed a new
+titanium pigment (rutile) of exceptionally fine quality which
+gave a great competitive advantage. It passed the information
+concerning it to National Lead. The latter failed to inform
+duPont of this development and when duPont later discovered
+that such had been the case, it charged National Lead with violation
+of its agreement. The net result was an amendment in
+1941 of their agreement with the elimination of the exchange
+of information provision. Actually, duPont itself developed a
+similar rutile pigment and started production of it while National
+Lead was still guarding the secret it had received from
+I. G. Farben without producing the pigment.</p>
+
+<p>The 1933 agreement further provided that each party was to
+pay a royalty to the other on the basis of titanium dioxide produced
+and packed by it. DuPont was to pay National Lead a
+royalty of <abbr title="2 and a half percent">2½%</abbr> based on the average published carload price
+and National was to pay Krebs (duPont) 1% on a similar basis.
+<span class="pagenum" id="Page_132">[Pg 132]</span>It was provided, however, that in no event was royalty to either
+party to exceed $10,000 in any given year and all royalties were
+to cease as of December 31, 1936. The parties undertook to
+use their best efforts to acquire the rights for each other from
+third parties and duPont further agreed to offer licenses to the
+foreign associates of National Lead for the various countries of
+the world. This virtually was a commitment by duPont to give
+National Lead’s foreign subsidiaries a preference in granting
+licenses.</p>
+
+<p>Following the execution of the duPont-National Lead
+Agreement in 1933, duPont <span id="TN7">entered into a series</span> of four contracts
+with Titan Company, <abbr title="Incorporated">Inc.</abbr> By these agreements, duPont
+agreed to turn over all its foreign patents to the various foreign
+associates of Titan Company, <abbr title="Incorporated">Inc.</abbr> The result was a virtual
+consolidation of all the important titanium interests throughout
+the world. All commercially useful patents were under the control
+of the parties involved. Future control was assured by the
+various provisions of the agreements requiring the continuing
+exchange of licenses and patents to the practical exclusion of all
+would-be competitors.</p>
+
+<p>At the time of the formation of Titangesellschaft, it was the
+intention of the National Lead-I. G. groups to extend their
+facilities into any country if and when it seemed necessary.
+From time to time beginning in 1933 the National-Titan-I. G.
+group because of threatened competition in one country after
+another was forced to take action to control the various competitive
+forces. This happened in Great Britain, Canada and
+Japan.</p>
+
+<p>As early as 1930 the British Chemical Trust, Imperial Chemical
+Industries, <abbr title="Limited">Ltd.</abbr>, evidenced a desire to engage in the titanium
+business and in fact carried on considerable research work
+in that connection. This came to the attention of the National
+<span class="pagenum" id="Page_133">[Pg 133]</span>Lead-Titan group and prompted them to take action to control
+the development in the British Empire. At that time, the
+Blumenfeld British patents were owned by National Titanium
+Pigments <abbr title="Company">Co.</abbr>, <abbr title="Limited">Ltd.</abbr> It was feared by the National Lead-Titan
+group that National Titanium Pigments, I. C. I. and Imperial
+Smelting Corporation would undertake a joint enterprise and
+thus offer formidable competition in that territory. After considerable
+negotiation, a jointly owned corporation, British Titan
+Products <abbr title="Limited">Ltd.</abbr>, was formed. The stock was owned 49% by
+Titan <abbr title="Company">Co.</abbr>, <abbr title="Incorporated">Inc.</abbr>, and 51% by I. C. I., Imperial Smelting and
+Goodlass Wall Lead Industries, <abbr title="Limited">Ltd.</abbr>, in equal shares. In conjunction
+with the formation of the new corporation, the participating
+companies executed a series of agreements, the purpose
+and result of which was to divide territory and avoid competition
+among the various companies. The principal contract
+between Titan <abbr title="Company">Co.</abbr>, <abbr title="Incorporated">Inc.</abbr>, and British Titan Products was to extend
+to 1963 and to continue in force thereafter until cancelled
+by either party upon twelve months’ notice. It is still in effect.
+The Blumenfeld patents had been acquired by the British Laporte
+<abbr title="Company">Co.</abbr> and negotiations between Laporte and British Titan
+Products were carried on in 1940 and 1941. In August 1941 an
+agreement in principle was arrived at. This provided that Laporte
+was to receive 20% of the British market for the duration
+of the war. British Titan Products tried to make it for a longer
+period and stated its willingness to concede a larger proportion
+of the market, but Laporte refused. Jebsen, now as an officer
+of a National Lead subsidiary, gave his approval to this agreement
+and stated that he was quite satisfied that it was only for
+the duration because he felt that British Titan Products would
+be much better off after the war as a result of the developments
+which they would get from National Lead. He felt that they
+<span class="pagenum" id="Page_134">[Pg 134]</span>could use these developments to advantage in dealing with
+Laporte in postwar negotiations.</p>
+
+<p>The most important chemical company in Canada is Canadian
+Industries, <abbr title="Limited">Ltd.</abbr> (C. I. L.), most of the stock of which is
+owned by duPont and I. C. I. Under the basic agreement of
+1920 Canada was within the territory assigned to National Lead
+and it supplied most of the Canadian market until the early
+thirties when British Titan Products was allowed to ship into
+Canada on a preferential basis. The British Laporte Company
+was also shipping into the Canadian market. Although it held
+the Canadian Blumenfeld patents, it did not undertake to manufacture
+in that country. DuPont also was exporting to Canadian
+buyers and for a number of years the various companies participated
+in price stabilizing agreements.</p>
+
+<p>In 1937 National Lead and C. I. L. organized Canadian Titanium
+Pigments, <abbr title="Limited">Ltd.</abbr> (51% C. I. L.—49% National Lead)
+for the manufacture and sale of titanium in the Canadian market.
+At the same time, they purchased the Blumenfeld Canadian
+patents from Laporte. A series of contracts executed by National
+Lead, C. I. L. and Canadian Titanium Pigments contain
+the usual provisions for division of territory, licensing of
+patents, control of shipment of manufactured products, exchange
+of know-how, <abbr>etc.</abbr> The principal contract extends until
+1967. National Lead continues to sell Canadian Titanium Pigments
+all its requirements for the Canadian market. However,
+it is obligated to cease all exports to Canada as soon as Canadian
+Titanium Pigments builds a factory which is scheduled for erection
+immediately after the war.</p>
+
+<p>The only remaining country of any commercial consequence
+was Japan. By virtue of the European cartel agreements, the
+Japanese market had been assigned to the Titangesellschaft and
+to the Blumenfeld French company in the ratio of 70–30. The
+<span class="pagenum" id="Page_135">[Pg 135]</span>Titan <abbr title="Company">Co.</abbr>, <abbr title="Incorporated">Inc.</abbr>, owning 50% of Titangesellschaft, profited by
+this arrangement. From the time of the execution of these
+agreements until 1937, the Japanese market was supplied with
+products manufactured in Germany. From time to time, however,
+there were indications of independent competition which
+finally became so threatening to their control that the National
+Lead-I. G. Farben interests thought it necessary to undertake
+development of a domestic manufacturing plant in Japan.</p>
+
+<p>After considerable negotiation and the overcoming of many
+difficulties, the various interested companies executed a series
+of seven contracts providing for the formation of a new company
+known as Titan Kogyo Kabushiki Kaisha. The participating
+companies were National Lead and I. G. Farben operating
+through their jointly owned subsidiary, Titangesellschaft, Blumenfeld’s
+French company, and a Japanese chemical company,
+the Kokusan Kogyo Kabushiki Kaisha. Neither National
+Lead nor Blumenfeld had any direct contact with the operations
+of the Japanese company inasmuch as all matters were handled
+through I. G. Farben by its Japanese representative, Doitsu
+Senryo Gomei Kaisha. By virtue of the executed contracts,
+Kokusan was given 50% of the stock of Titan Kogyo. Titan
+<abbr title="Company">Co.</abbr>, <abbr title="Incorporated">Inc.</abbr> (representing National Lead’s interests) received
+<abbr title="17 and a half percent">17½%</abbr>; I. G. Farben, <abbr title="17 and a half percent">17½%</abbr> and Blumenfeld’s French company,
+15%. Because of restrictions of the German government,
+I. G. Farben was unable to supply capital necessary to subscribe
+for its share of the stock. Consequently, Titan <abbr title="Company">Co.</abbr>, <abbr title="Incorporated">Inc.</abbr>, subscribed
+for I. G. Farben’s share and gave the latter an option
+to purchase these shares at any subsequent time.</p>
+
+<p>Because of German participation in the Japanese Titanium
+Company, the British Government refused to permit titanium
+from Travancore, India, to be exported to Japan in the fall and
+winter of 1940–41. Titanium was badly needed in Japan and
+<span class="pagenum" id="Page_136">[Pg 136]</span>the Japanese government had not permitted any titanium pigments
+to be exported for a long time. Knowing this and in
+spite of the fact that the situation in this country was very serious
+because of disruption of shipping and inadequacy of domestic
+supplies, nevertheless Titanium Pigment (National Lead)
+shipped 700 tons to Titan Kogyo Kaisha, <abbr title="Limited">Ltd.</abbr> on March 9,
+1941, thus aiding the Japanese to evade the embargo which
+the British had with good cause placed on sale to Japan. In a
+letter dated April 3, 1941, the manager of Titanium Pigments
+wrote to the Japanese company:</p>
+
+<p>“Even at the time we made shipment to you of 700 tons on
+March <abbr>9th</abbr>, the situation was so serious that we should have
+much preferred not to have released even this quantity, but in
+view of the fact that we had promised it to you early last fall,
+we felt that we should not withdraw our offer. Incidentally,
+at the time we made this shipment to you in March, the replacement
+value of that ore was more than double the price at which
+we invoiced it to you.”</p>
+
+<p>The extent to which one member of a cartel will go in protecting
+the interests of a foreign partner and incidentally in
+attempting to safeguard its own monopoly position is indicated
+by the following letter and resolution. The letter dated December
+11, 1939, is from the manager of National Lead’s Patent
+Department to the General Manager of the Titanium Division.</p>
+
+<p>“Confirming our recent conversations, regarding exchange
+of title to patents, I beg to review the situation for you.</p>
+
+<p>“On September <abbr>7th</abbr> I wrote <abbr>Dr.</abbr> Jebsen, pointing out that in
+view of the war certain questions arose affecting the United
+States patents which stand in the name of Titangesellschaft and
+the I. G. Farbenindustrie under which we enjoy an exclusive
+license. We suggested to <abbr>Dr.</abbr> Jebsen that it might be desirable
+<span class="pagenum" id="Page_137">[Pg 137]</span>to assign to National Lead Company, in trust, the patents of
+the I. G. Farbenindustrie and Titangesellschaft against the possibility
+of the United States entering the war and taking over
+these patents. <em>The suggestion was primarily designed to protect
+the patent property of the I. G. Farbenindustrie and Titangesellschaft
+and at the same time would have protected our exclusive
+license by insuring that no one else could have petitioned
+the government to secure licenses under them.</em> On December
+<abbr>7th</abbr> I received the following cable from <abbr>Dr.</abbr> Jebsen:</p>
+
+<blockquote>
+<p class="small">“‘YOUR LETTER SEPTEMBER 7 STOP SUBJECT LEADCOS AND TITANINCS
+APPROVAL <em>HAVE AGREED ASSIGNMENT</em> TG PATENTS AND APPLICATIONS
+COUNTRIES OUTSIDE TG TERRITORY TO TITANINC AND ASSIGNMENT
+LEADCOS AND TITANINCS PATENTS AND APPLICATIONS COUNTRIES
+WITHIN TG TERRITORY TO TG STOP ASSIGNMENT PATENTS BRITISH
+EMPIRE FRANCE MUST BE POSTPONED DUE WAR SITUATION STOP
+PATENTS AND APPLICATIONS OF IG CANNOT BE INCLUDED PRESENTLY
+BUT QUESTION WILL BE STUDIED STOP PLEASE CABLE APPROVAL STOP
+GERMAN PATENTS 571387 AND 588230 AND 604311 ARE IN LEADCOS
+CZECHOSLOVAKIAN PATENT 39354 IN TITANIUM PIGMENT CO INCORPORATEDS
+NAME ALL OTHER PATENTS TG TERRITORY IN TITANINCS
+NAME STOP CABLE TITANINC BOARDS AUTHORISATION I ASSIGN TITANINCS
+PATENTS AND APPLICATIONS TO TG AS ABOVE OUTLINED STOP
+SUGGEST FORMAL RESOLUTION BE MADE GENERAL REGARDING ASSIGNMENT
+AND MAILED STOP PLEASE ACKNOWLEDGE CABLE UPON RECEIPT—JEBSEN’</p>
+</blockquote>
+
+<p>“The suggestion here is that Titangesellschaft will assign
+their United States patents and applications to National Lead
+<abbr title="Company">Co.</abbr> and National Lead <abbr title="Company">Co.</abbr> and Titan <abbr title="Company">Co.</abbr>, <abbr title="Incorporated">Inc.</abbr>, will assign
+their applications and patents in Germany, and other countries
+within Titangesellschaft’s territory to Titangesellschaft....
+Several years ago National Lead Company formally renounced
+maintenance of any European patents owned by it, putting
+upon Titan <abbr title="Company">Co.</abbr>, <abbr title="Incorporated">Inc.</abbr>, the obligation to pay all maintenance
+charges and hence, under the Agreement of 1920, Titan <abbr title="Company">Co.</abbr>,
+<abbr title="Incorporated">Inc.</abbr>, could have requested formal assignment of these patents.
+They have not done so in order to save the expense of preparing
+<span class="pagenum" id="Page_138">[Pg 138]</span>the assignments and recording them in the various countries.
+The question is, therefore, whether Titan <abbr title="Company">Co.</abbr>, <abbr title="Incorporated">Inc.</abbr>,
+should assign its patents and applications to Titangesellschaft.</p>
+
+<p>“In discussing this matter with you on December <abbr>8th</abbr>, <em>it appeared
+to us that to assign these patents in Germany to Titangesellschaft
+might involve some risks for the future. For instance,
+if the Germans owned all the patents now held in Germany by
+Titan <abbr title="Company">Co.</abbr>, <abbr title="Incorporated">Inc.</abbr>, and if, as a result of the war they were forced
+by their government</em>, or through other circumstances, <em>to abrogate
+the main agreement, they would be free to export their
+products and, in general, take themselves outside of the titanium
+family cooperation</em>. I cabled this thought to <abbr>Dr.</abbr> Jebsen, soliciting
+his views. A reply has just been received which reads as
+follows:</p>
+
+<blockquote>
+<p class="small">“‘PROPOSAL MY CABLE DECEMBER 7 IS NOT TGS BUT MINE STOP
+CONSIDER THIS BEST PRESENT CIRCUMSTANCES TO SECURE LEGAL POSITION
+ALL AROUND STOP EXACTLY LEGAL POSTWAR POSITION PATENTS
+OTHERWISE VERY UNCERTAIN STOP <em>PREVENTION IMPORT PARTLY SECURED
+IN FUTURE BY PATENTS IN RESPECTIVE COUNTRIES BUT WILL BE
+CHIEFLY SECURED BY ALL COMPANIES SELFISH INTEREST IN COOPERATION
+BECAUSE OF ADVANTAGES ALREADY REALIZED BY EXPERIENCE</em>.’</p>
+</blockquote>
+
+<p>“You will see that <abbr>Dr.</abbr> Jebsen believes that in view of the war
+the best possible legal position for each of the members of the
+family is to hold title to all patents in its territory. He believes
+that prevention of import and export competition will chiefly be
+secured in the future through the individual company’s recognition
+of the advantages to be derived from maintaining the cooperation,
+having through experience appreciated the value of
+this cooperation.</p>
+
+<p>“It should be noted in this connection that even if Titan <abbr title="Company">Co.</abbr>,
+<abbr title="Incorporated">Inc.</abbr>, retained title to the patents in Germany, and should the
+government force abrogation of the main agreements, particularly
+with a view to fostering German exports, they will find
+<span class="pagenum" id="Page_139">[Pg 139]</span>means to negate Titan <abbr title="Company">Co.</abbr>, <abbr title="Incorporated">Inc.</abbr>’s patent rights also. <em>Should the
+situation develop where Titangesellschaft is forced, perhaps
+against its will, to engage in export competition with other members
+of the titanium family, then, as pointed out by <abbr>Dr.</abbr> Jebsen,
+that competition can be controlled by patents owned by the other
+members of the family in their particular territories.</em> Therefore,
+I believe we should approve <abbr>Dr.</abbr> Jebsen’s proposal.”</p>
+
+<p>That this plan was put into effect is shown by a resolution
+adopted by the Board of Directors of Titan <abbr title="Company">Co.</abbr>, <abbr title="Incorporated">Inc.</abbr>, on December
+19, 1939:</p>
+
+<p>“Resolved, in furtherance of that certain License Agreement
+between Titan <abbr title="Company">Co.</abbr> <abbr class="spell">A/S</abbr> (predecessor in interest of this corporation)
+and Titangesellschaft m. b. H., of Leverkusen, Germany,
+dated October 3/20, 1937, and pursuant to the recommendation
+of <abbr>Dr.</abbr> G. Jebsen, Vice-President of this corporation,
+the officers of this corporation be and they hereby are authorized
+and empowered to execute and deliver in its name and
+behalf appropriate assignments to said Titangesellschaft of all
+patents and patent applications of this corporation, within the
+Licensed Field as defined in said Agreement, in countries now
+embraced within the territory of said Titangesellschaft as defined
+in said Agreement and subsequent amendments thereto, in
+consideration of the execution and delivery by said Titangesellschaft
+to this corporation of appropriate assignments of all patents
+and patent applications of said Titangesellschaft, within
+said Licensed Field, in countries embraced within the territory
+of this corporation as defined in said Agreement and subsequent
+amendments thereto; and upon the express understanding and
+condition that such reciprocal assignments shall in no way alter
+or limit the general intent and operating effect of said Agreement
+of the several other rights and obligations of the respective
+parties thereto.”</p>
+
+<p><span class="pagenum" id="Page_140">[Pg 140]</span></p>
+
+<p>Among the patents so assigned to avoid seizure by the Alien
+Property Custodian is one covering the new rutile pigment previously
+mentioned.</p>
+
+<p>In the cable which has just been cited, and the action taken
+pursuant to it, there is an example of postwar planning which
+has been all too prevalent in these cartel groups. This is not the
+only instance in which a German company’s United States patents
+have been taken over by an American cartel partner to avoid
+seizure by the Alien Property Custodian. The understanding
+that such assignments shall only operate during the war and
+that after the war the game shall take up where it left off is of
+great importance. Government postwar planning should not fail
+to take into account and deal forcefully with the secret postwar
+plans of private cartels.</p>
+
+<p>In a system of free enterprise, the superior product which
+can be produced and sold at the lowest price is able to take the
+place of competing products inferior in quality or higher in
+price. Under a cartel system inferior or more expensive products
+are allowed to hold a share of the market which they would
+lose on a competitive basis.</p>
+
+<p>This is well illustrated in the case of titanium pigment and
+an inferior product called lithopone. The latter is a pigment
+in the manufacture and marketing of which duPont has taken
+a leading part for many years. Since 1933 National Lead and
+duPont have maintained identical prices for titanium compounds.
+There have been changes in market prices on the average
+of twice a year on all grades of pigments and in every instance
+the effective date of price change of each party has been
+the same. With respect to lithopone which is competitive with
+the calcium sulphate composite pigment, there has been maintained
+a constant differential. Unless the lithopone were priced
+below the titanium compound, it could not sell. Therefore, irrespective
+<span class="pagenum" id="Page_141">[Pg 141]</span>of costs of production the titanium compound has
+been priced 2 cents a pound above the price of lithopone. An
+honest technologist who knows that a better product can be
+made at a profit to undersell an inferior competing product
+cannot be expected to be happy in a situation which holds back
+the better and aids the poorer.</p>
+
+<p>One of the worst features of cartel control lies in the overlapping
+of fields which is found in the case of large companies such
+as duPont and I. G. Farben. These companies are largely concerned
+not only with the production of pigments but also many
+other chemical products.</p>
+
+<p>It is difficult to believe that the public interest has been adequately
+served by having the most valuable of white pigments
+subjected to complete control in this country and throughout the
+world by a cartel. What steps a free technology unfettered by
+cartel restrictions might have taken one cannot say with certainty.
+One may be quite sure that when the cartel shackles are
+broken, titanium will take its rightful place as not only the
+most important and useful of all pigments but also for a wide
+variety of other industrial uses.</p>
+
+
+<hr class="chap x-ebookmaker-drop">
+<div class="chapter">
+
+<p><span class="pagenum" id="Page_142">[Pg 142]</span></p>
+
+
+  <h2 class="nobreak" id="10">
+    10
+    <br>
+    <i>Optical Instruments</i>
+  </h2>
+</div>
+
+
+<p>How was it possible for Nazi Germany to emerge as a fully
+armed aggressor nation when she had been so thoroughly disarmed
+as a result of the Versailles Treaty? What can be done to
+prevent German technology from being utilized in preparation
+for another war? I propose in this chapter to discuss a particular
+cartel situation which sheds much light on the first question
+and will, I believe, be of value in finding an answer to the
+second.</p>
+
+<p>There were, of course, many factors which contributed to the
+failure of the Versailles Treaty to accomplish the permanent
+peace which was contemplated at the time of its execution. It
+is my purpose to show herein that there was a definite program
+to sabotage the effectiveness of the Treaty and that that program
+was conceived in Germany almost as soon as the peace was
+made and many years before Hitler came into power. Furthermore,
+I shall prove, on the basis of documentary evidence, that
+evasion of the disarmament provisions of the Versailles Treaty
+was facilitated by a cartel agreement between a German firm
+and an American corporation. The agreement was between Carl
+Zeiss of Jena, Germany, and the Bausch and Lomb Optical
+Company of Rochester, New York.</p>
+
+<p><span class="pagenum" id="Page_143">[Pg 143]</span></p>
+
+<p>In March, 1940, Bausch and Lomb and Carl Zeiss were indicted
+for violation of the antitrust laws. Pleas of <i lang="la">nolo contendere</i>
+were made, fines paid and thus trial of the indictment was
+avoided. A <span id="TN8">civil complaint and consent decree</span> were filed in
+July 1940. The investigations in connection with this case revealed
+the following:</p>
+
+<p>(1) Action was taken in 1921 to nullify the provisions of the
+Versailles Treaty which prohibited Germany from large scale
+manufacturing of military equipment.</p>
+
+<p>(2) The parties caused Zeiss patents in this country to be
+taken out in the name of Bausch and Lomb, thus giving an
+appearance of American ownership and consequent protection
+against seizure by an Alien Property Custodian.</p>
+
+<p>(3) Secret United States military information was given by
+Bausch and Lomb to Germans not only before but after Hitler
+came into power.</p>
+
+<p>(4) Unknown to the Navy a secret commission to Bausch
+and Lomb was included in prices paid by the Navy for equipment
+furnished by Zeiss.</p>
+
+<p>(5) Public declarations were made as to a policy of not selling
+military equipment to England and France for fear it
+might be used against this country, when the reason such policy
+existed was because of the provisions of a secret agreement with
+a German concern.</p>
+
+<p>(6) Threats of patent infringement were used to frighten
+competing firms bidding upon military equipment for the
+United States Army.</p>
+
+<p>(7) The cost to United States users of binoculars was greatly
+increased by reason of the efforts of Bausch and Lomb to protect
+itself from competition in that field.</p>
+
+<p>No one factor is of greater importance in the waging of modern
+mechanized warfare than the precision instruments which
+<span class="pagenum" id="Page_144">[Pg 144]</span>indicate the exact location of a target and permit the accurate
+aiming of the gun or other device which will throw the projectile.
+The instruments which come in this category include periscopes,
+range finders, height finders, boresights, bombsights,
+telescopes, torpedo directors, gunsights, searchlight lenses and
+reflectors, as well as others. The glass which is used in making
+such instruments is of extremely high quality, it being absolutely
+essential that it be free from striae or streaks, bubbles, cloudiness
+and other defects which would impair its transparency or
+refractivity. At the outbreak of the first World War practically
+all such glass was made in Germany at the Schott glass works
+at Jena. Moreover, practically all first quality military optical
+instruments were also made in Germany, at Jena, in the factory
+of the Carl Zeiss <span lang="de">Stiftung</span>. The latter is a foundation created
+by bequests from Carl Zeiss and <abbr>Dr.</abbr> Ernest Abbe for the purpose
+of perpetuating the instrument business which their research
+had founded. By the time of the first World War it had
+grown into a tremendous establishment employing something
+like 10,000 people and supplying most of the Kaiser’s war machine
+with optical-gunfire control instruments. Its continuance
+as a large scale producer of war instruments was entirely inconsistent
+with the aims and provisions of the Versailles Treaty.</p>
+
+<p>Prior to the first World War Bausch and Lomb had been
+manufacturing military optical goods from glass imported from
+Germany. This had resulted from an agreement made in 1907.
+Carl Zeiss had threatened to establish a factory in the United
+States and sent a representative, Professor Tschopski, to this
+country in that connection. Apparently frightened by this
+threat, Bausch and Lomb entered into a series of transactions
+intended to eliminate any such competition. This was the so-called
+Optical Triple Alliance. The Fauth Instrument Company
+of which George Saegmuller was president was absorbed
+<span class="pagenum" id="Page_145">[Pg 145]</span>by Bausch and Lomb, and Saegmuller became vice-president of
+the latter firm. Carl Zeiss acquired one-fifth of Bausch and
+Lomb’s capital stock and representation on its board of directors.
+Zeiss abandoned its plan to establish a factory in the United
+States, and Bausch and Lomb agreed to buy its glass for military
+optical instruments exclusively from Zeiss. In 1915 Zeiss
+refused to continue to supply Bausch and Lomb with glass,
+under their arrangements of 1907, because the Rochester firm
+had been supplying military instruments to countries which
+were at war with Germany. The Zeiss interest in Bausch and
+Lomb was purchased by members of the Bausch and Lomb
+families. Upon our entrance into the war in 1917 it was found
+that one of the most badly needed war materials was military
+optical goods. Neither the glass itself nor the instruments had
+been produced in this country in adequate quantities prior to
+the war. The Geophysical Laboratory, the Bureau of Standards,
+Bausch and Lomb, the Spencer Lens <abbr title="Company">Co.</abbr>, and the Pittsburgh
+Plate Glass <abbr title="Company">Co.</abbr>, worked strenuously on a program to produce
+adequate quantities of proper quality optical glass. Between
+April 1917 and November 1918 over 600,000 pounds of
+usable optical glass were produced, 65 per cent of it by Bausch
+and Lomb. Under the stress of war, the manufacture of military
+optical-gunfire control instruments was increased to the extent
+necessary to supply the fighting arms of the service.</p>
+
+<p>Confronted with the restrictions imposed by the Versailles
+Treaty the heads of Carl Zeiss were more than glad to work
+out, in 1921, a secret agreement with Bausch and Lomb. To
+summarize this agreement, Zeiss placed its know-how at the disposal
+of Bausch and Lomb. The latter agreed to pay Zeiss a
+royalty starting at 7% and gradually diminishing for 25 years
+on all its military optical business except field glasses. As indicated
+quite plainly by the third paragraph of the agreement, the
+<span class="pagenum" id="Page_146">[Pg 146]</span>two companies divided up the world insofar as the sale of military
+optical goods was concerned:</p>
+
+<p>“B. &amp; L. obligate themselves not to sell, directly or indirectly,
+Military instruments to countries outside of the United States of
+America, and vice versa Carl Zeiss obligate themselves not to
+sell such instruments, directly or indirectly to the United States
+unless the parties have come to an agreement regarding the conditions
+of sale and the respective territories of distribution.”</p>
+
+<p>In the fourth paragraph, Zeiss was given the power to pass
+upon who should become the heads of the Bausch and Lomb
+“Military Department.”</p>
+
+<p>“In furtherance of the aims of this agreement B. &amp; L. in
+Rochester will create a new Department solely responsible to
+the Board of Directors, which is charged with the independent
+development of all scientific and technical tasks within the Military
+scope and the maintenance of connections with Jena. The
+parties will come to an agreement as regards the heads to be
+placed in charge of this department.”</p>
+
+<p>In non-military fields the parties, while competing, were to
+give due regard to each other’s interests. In the military field
+they agreed to full exchange of know-how and to rights under
+inventions acquired by them. The eighth paragraph anticipated
+the possibility of a conflict between the obligations to each other
+under the agreement and those owing to the nation: “The mutual
+obligation regarding the exchange of Military designs shall
+be void whenever the highest home Government of one party
+expressly demands that they be kept in confidence in the interest
+of the nation.”</p>
+
+<p>As will be shown, Zeiss subsequently demonstrated a very
+keen awareness of the privilege thus accorded it to obey Hitler’s
+edicts and to keep its know-how in Germany. Bausch and Lomb
+on the other hand on more than one occasion weighed the demand
+<span class="pagenum" id="Page_147">[Pg 147]</span>for secrecy by our Army and Navy against the obligation
+to keep Zeiss informed and decided in favor of the latter. Both
+parties were fully aware of the fact that such an agreement had
+to be kept secret. It was intended to give Zeiss a new lease on
+life and actually made it possible for that concern to continue
+its existence in spite of the disarming of Germany and its war
+partners. The contract bluntly stated: “The contracting parties
+agree to keep the foregoing agreement in strict confidence as regards
+a third party and to guard silence concerning this agreement
+also with their own employees as far as this may be practical
+under the circumstances.”</p>
+
+<p>In contending that the contract was not secret, Bausch and
+Lomb states: “The original contract was shown to the <abbr title="United States">U. S.</abbr>
+Naval Observer in Berlin within a month of its execution, and
+through him the Bureau of Naval Intelligence and the Bureau
+of Ordnance were informed.” As a matter of fact it seems
+clear that what was shown to our Naval representative in Berlin
+was not the “original contract” but only a portion of it with a
+certain other part withheld. The explanation for withholding
+part was that it related to matters which did not concern the
+Navy. The Navy representative was told that the Bausch and
+Lomb connection with Zeiss must be kept strictly confidential
+to protect Zeiss. The latter was not permitted under the terms
+of the Versailles Peace Treaty to continue the manufacture of
+military optical goods. In this connection a letter from George
+N. Saegmuller to Bausch and Lomb, sent from Jena on May 6,
+1921, is of interest (Saegmuller was the vice-president of the
+firm who had gone to Germany to execute the agreement with
+Zeiss):</p>
+
+<p>“I hope you <abbr title="received">rec’d</abbr> our cable via Frankfurt in regard to the
+signing of the agreement Apr <abbr>29th</abbr> and also my letter of even
+date in which I entered into the subject more fully. In that letter
+<span class="pagenum" id="Page_148">[Pg 148]</span>I stated that <abbr title="Captain">Capt.</abbr> Bechler, Naval representative of the <abbr>Am.</abbr>
+Commission, telephoned for me to come to Berlin. This I intended
+to do but upon reflection I thought it best for him to
+come here as the various instruments in which they are interested
+are here. He assented to this and was to come yesterday
+but was taken sick so in place sent his aid, <abbr title="Lieutenant">Lieut.</abbr> Culbert, <abbr title="United States Navy">U.
+S. N.</abbr>, who was also accompanied by the Military <abbr title="representative">represt.</abbr> of the
+<abbr>Am.</abbr> Commission. What the Navy wants at once are: [enumerating
+range-finders, periscopes, sights and other similar
+instruments].</p>
+
+<p>“For these instruments they are in a hurry and most probably
+we will have to import the optics from here as it would
+be impossible for us to produce them in time even with Zeiss
+opticians. I thought it best to go with Fred to Berlin to see
+<abbr title="Commander">Comdr.</abbr> Bechler &amp; impress upon him the importance of finding
+out how many of the various instruments are wanted, so as to
+receive the optics in time.</p>
+
+<p>“<em>The Navy Department wants to obtain a copy of the agreement
+as a kind of a guarantee that if they order from us they
+will really receive Zeiss instruments or rather Zeiss quality. I
+told <abbr title="Lieutenant">Lieut.</abbr> Culbert that in my opinion there would be no difficulty
+in giving them a copy of the agreement which relates to
+military instruments. An entire copy we could not give as it
+relates to matters which does not concern the Navy; I wrote
+out what I thought and gave it to <abbr>Dr.</abbr> Fischer who will consult
+with the others; I don’t think there will be any trouble on that
+score. I told both officers that our connection with Zeiss must
+be kept strictly confidential, chiefly on <abbr title="account">acc’t</abbr> of Zeiss; this they
+understand.</em>”</p>
+
+<p>The reason it was necessary to keep the agreement secret is
+quite obvious but it need not be left to inference. On <abbr title="December">Dec.</abbr> 27,
+1930, Bausch and Lomb wrote to Interflash Signal Corporation
+<span class="pagenum" id="Page_149">[Pg 149]</span>of New York in reply to an inquiry concerning a range finder
+for the Grecian Navy Department. The letter contains this language:</p>
+
+<p>“Our activities in the military line of instruments in general
+are concentrated in supplying the requirements of our own
+Government. While we have occasionally supplied foreign
+Governments with a few of these instruments, this has only been
+by chance as far as our facilities have permitted. We appreciate
+very much the offer of Admiral Dedes to become our special
+representative, but under the circumstances above stated we are
+unfortunately not in a position to accept this offer. We would
+suggest that he communicate with our friends, the Nederlandsche
+Instrumenten Compagnie, Den Haag, Holland, who
+manufacture the military line of optical instruments formerly
+made by <abbr title="Misters">Messrs.</abbr> Carl Zeiss of Jena, Germany, <em>the latter not
+being permitted under the terms of the Peace Treaty to continue
+the manufacture of these products</em>....”</p>
+
+<p>On October 20, 1926, Bausch and Lomb wrote a letter to
+one of its representatives in the New York City office. J. A.
+Scheick of that office had quoted a price on two range finders to
+a New York firm which intended to ship them to Laredo,
+Texas for the ultimate use of the War Department of Mexico.
+The letter states:</p>
+
+<p>“We have, on previous occasions, explained to <abbr>Mr.</abbr> Scheick
+that we must know the customer for whom this Military equipment
+is ultimately intended and we have also withdrawn our
+previous quotations stating that by reason of the limited supply
+of instruments on hand, it would be best to refer all such inquiries
+first to us, to find out whether or not we can take care
+of such an order. <em>The real reason, as you are aware, is our
+agreement with Zeiss, which, of course, we cannot explain to
+<abbr>Mr.</abbr> Scheick, as we are not only required to keep the nature of
+<span class="pagenum" id="Page_150">[Pg 150]</span>the agreement confidential, but the very existence of such an
+agreement.</em> As you are probably aware, this prevents us from
+making sales in the Military line, directly or indirectly, outside
+of the United States, unless by previous agreement with Zeiss
+on the price question; the price agreed to by Zeiss will be
+higher than their direct quotation. Obviously, we cannot accept
+the inclosed order intended for the War Department of
+Mexico.”</p>
+
+<p>The 1921 agreement was to run for 20 years with Bausch
+and Lomb obligated to continue to pay royalties for 25 years
+on all its military business whether based on Zeiss patents or not.</p>
+
+<p>To carry out its agreement with Bausch and Lomb, Zeiss used
+the device of a corporation organized in Holland called N. V.
+Nederlandsche Instrumenten Compagnie—or Nedinsco, for
+short. It is a wholly owned subsidiary of Zeiss with its principal
+office at The Hague and its plant at Venlo, a town on the
+German border. Thus, in the years which passed before Hitler
+came into power in the face of the disarmament provisions of
+the Versailles Treaty, Carl Zeiss was enabled to continue in the
+production of military optical equipment by merely moving its
+plant across the border. It was assured of and received royalties
+from all sales of such equipment in the United States by Bausch
+and Lomb, and assured of and received for Nedinsco freedom
+from competition in all the rest of the world so far as Bausch
+and Lomb was concerned. The survival of Carl Zeiss and its
+ability to provide at Jena one of the most important cogs in
+the Hitler war machine is clearly understandable and is in
+large part the result of the secret agreement of 1921.</p>
+
+<p>The following paragraphs from a letter from Bausch and
+Lomb to Zeiss dated February 10, 1939, substantiates this statement:</p>
+
+<p>“We are uncertain whether your reference to the more distant
+<span class="pagenum" id="Page_151">[Pg 151]</span>past is intended to cover the period between 1907 and 1915,
+during which time we freely admit that you were of assistance
+to us in the establishment of our military department, or to
+the period following the resumption of our cooperative endeavor
+after the World War.</p>
+
+<p>“On the assumption that you are referring to the earlier
+period, we believe that you were completely compensated by
+the dividends which you received on the stock held in our
+company and by the appreciation in the value of this stock which
+you realized at the time of its sale.</p>
+
+<p>“If, on the other hand, you are referring to the later period,
+<em>we believe that inasmuch as the arrangement made accomplished
+the primary objective of keeping your scientific staff
+intact at a time when you could not manufacture war materials,
+you were adequately compensated, particularly in view of the
+fact that, as you then knew, our Government was at that time
+very little interested in the development of, and made but very
+small appropriations for, fire control apparatus. In other words,
+we believe that the development work which you did during
+this period was primarily for your own benefit and not of great
+value to us here.</em>”</p>
+
+<p>Here we see quite clearly how an American company aided
+a German company avoid both the spirit and the letter of the
+Versailles Treaty. Although Germany was prohibited from
+manufacturing and exporting military equipment, Bausch and
+Lomb “accomplished the primary objective of keeping your
+scientific staff intact at a time when you [Zeiss] could not manufacture
+war materials.” In response to the letter just quoted,
+Zeiss replied on July 22, 1939:</p>
+
+<p>“<i>In reference to 2.</i> In the reference to our letter of January
+3, 1939, page 2, to a more remote time, that is, the time further
+back than 5 years, we have had reference to the first decade of
+<span class="pagenum" id="Page_152">[Pg 152]</span>the operation of the agreement as it now exists. Your assumption
+that during that time the development work done for you
+was above all to our advantage and had served the purpose of
+maintaining our design force is absolutely misjudged. <em>We had
+at no time the intention to allow our experience and knowledge
+of the military business to rest but have, as you know, established
+the Nedinsco branch for the express purpose so as to keep
+our place in the world market.</em> If the Nedinsco was a successful
+competitor where high grade equipment of our sphere of activities
+was in demand, this success is due to the work and
+efforts of our scientific staff and technicians who building on
+experiences before and during the war have explored all kinds
+of military spheres for our designs. The fruits of this successful,
+constructive labor has of course been reaped in general by
+Nedinsco. Surely we could not have continued the development
+work of even a small part of these activities from the small
+royalties received from you. From this follows definitely that
+you were the one who profited, without merit of your own, from
+the advantages of our complex and expensive development
+work, and that you unfortunately, notwithstanding repeated
+urging on our part, did not sufficiently make use of the given
+possibilities, a fact with which we found fault repeatedly verbally
+and in writing.”</p>
+
+<p>The sentence which I have italicized is a positive statement
+by Zeiss of its utter disregard of the conditions imposed by the
+Peace Treaty.</p>
+
+<p>On June 27, 1925 a supplemental agreement was made
+which slightly changed the royalty provisions of the 1921 agreement.
+The division of world territory remained as before, except
+that the parties undertook to protect each other in bidding
+on government contracts by overbidding.</p>
+
+<p>Subsequently on October 28, 1925, a further supplemental
+<span class="pagenum" id="Page_153">[Pg 153]</span>agreement was signed by Zeiss at Jena and on December 11 by
+Bausch and Lomb at Rochester. After repeating the provisions
+of the supplemental agreement of June 27, 1925, it added:</p>
+
+<p>“In case the inquiries referred to in paragraph 2 and 3 should
+not come to Bausch &amp; Lomb from a Government, but exceptionally
+from a commercial house of a country outside of the United
+States, the firm of Bausch &amp; Lomb is to communicate immediately
+with the firm of Nedinsco, and, depending on the situation
+at Nedinsco, either to make the protective offer named to
+her by the latter firm, or to decline the inquiry under pretense.
+The information in question will be given to the firm of Bausch
+&amp; Lomb by the firm of Nedinsco.”</p>
+
+<p>The second supplemental agreement also contained the following
+provision:</p>
+
+<p>“If the firm of Bausch &amp; Lomb is furnishing to American
+shipyards, optical instruments as equipment for a ship of a
+country outside of the United States, all instruments in which
+the ideas of construction of the firm of Carl Zeiss have been
+used, shall, besides the trade name of Bausch &amp; Lomb, be engraved
+with the designation, “System Nedinsco-Zeiss.” Instruments
+according to the construction of Bausch &amp; Lomb shall
+bear only their name. On instruments furnished by Nedinsco
+the name of Nedinsco will appear next to the name of Bausch
+&amp; Lomb.”</p>
+
+<p>Thus, as early as 1925 there is evidence of the determination
+to place the Zeiss name back in the consciousness of the world.
+One more step was thereby taken to nullify the effect of the
+Versailles Treaty and to reestablish Germany in her place in
+the sun.</p>
+
+<p>In 1926 Bausch and Lomb caused the 1921 agreement and
+its supplements to be modified because its counsel declared them
+to be wholly invalid as violating the antitrust laws. In place
+<span class="pagenum" id="Page_154">[Pg 154]</span>of the division of territory provision in the third paragraph, as
+quoted previously, the following language was inserted: “The
+license hereby granted is exclusive, the firm of Carl Zeiss agrees
+that it will grant no license to another American manufacturer.”</p>
+
+<p>This was a change in the language of the agreement to give
+an appearance of legality. Actually, after 1926, as well as before,
+the parties maintained a definite and illegal division of
+territory. The following sentences from a memorandum of
+Edward Bausch, dated January 27, 1927, show that no change
+in the actual relationship took place in the previous year: “It is
+my understanding, in accordance with the opinion of Carl Lomb,
+that we are not to bid on any military instruments for use anywhere
+outside of the <abbr title="United States">U. S.</abbr> The agreement is that if such inquiries
+come to us we are to refer them to Zeiss.”</p>
+
+<p>Paragraph 9 of the 1921 agreement, quoted above, providing
+for strict secrecy as to the agreement was dropped out as being
+(in 1926) unwise and unnecessary. In its place was inserted
+an innocuous provision that neither party has any claims against
+the other arising from previous agreements. This agreement of
+1926, along with the early agreements which it purported to
+supersede was declared in <span id="TN9">violation of the antitrust laws</span> by
+the decree entered by the court on July 9, 1940.</p>
+
+<p>The 1921 agreement and also those which were subsequently
+executed contemplated an exchange of information and experience
+between the parties. This included the right of each party
+to send confidential representatives to the workshops of the
+other. Bausch and Lomb was more than anxious to have Zeiss
+employees visit its plant and its only complaint in connection
+with the visit of one such employee was that he had not been
+of great help to Bausch and Lomb while in this country. When
+Hitler came into power the American company found the door
+to the Zeiss designing rooms closed to it.</p>
+
+<p><span class="pagenum" id="Page_155">[Pg 155]</span></p>
+
+<p>In a memorandum of April 19, 1938 Carl L. Bausch, Vice
+President of Bausch and Lomb, quoted paragraph <abbr title="7">VII</abbr> of the
+contract providing for exchange of experience and access to the
+workshop and then stated: “In 1934, although they allowed
+me to go through their plant at Venlo, I could see none of the
+work that was being done at Jena, although all the design, part
+work and optical work was being done there at that time.” In
+the same memorandum <abbr>Mr.</abbr> Bausch stated:</p>
+
+<p>“My contention is that over the past five years we have paid
+out $139,000 without receiving any benefit from it except for
+the fact that our contract might have kept Zeiss out of this
+market. I doubt very much whether our government would
+have purchased any Zeiss range finders, even if Zeiss was allowed
+to solicit business.”</p>
+
+<p>In a letter from Carl Zeiss to Bausch and Lomb dated January
+3, 1939 referring to the period of the past five years, <abbr>i.e.</abbr>,
+since Hitler came into power, Zeiss said: “It certainly cannot
+be denied that we have been restricted in many respects in the
+execution of the agreement out of national interests particularly
+as far as visiting our plant is concerned.”</p>
+
+<p>In the matter of knowing what Zeiss was building for Hitler,
+of course, there was no passing of information to Bausch and
+Lomb. On the other hand, Zeiss was kept informed at least
+until well into the Hitler regime as to what was being ordered
+by our military departments. This was done not by sending the
+information directly to Zeiss but through Bausch and Lomb’s
+German representative. August Lomb of Bausch and Lomb
+<abbr class="spell">G.m.b.H.</abbr> Frankfurt-on-the-Main acted as the conduit for the
+information. On July 9, 1929 Bausch and Lomb wrote to August
+Lomb as follows:</p>
+
+<p>“We are appending our report which will bring the Military
+transactions up to date.</p>
+
+<p><span class="pagenum" id="Page_156">[Pg 156]</span></p>
+
+<p>“We have nothing further to say at this time than what has
+already been stated in our report as regards the confidential
+nature of this information. Heretofore, the Government has
+merely been insistent that none of the details as regards the design
+of these instruments be made public, but lately it seems as
+if the quantities, prices, <abbr>etc.</abbr>, and the amount of equipment purchased,
+<abbr>etc.</abbr>, are also considered secret. <em>Obviously, our agreement
+with <abbr title="Misters">Messrs.</abbr> Carl Zeiss cannot work satisfactorily unless,
+at least the latter information, becomes common knowledge to
+both parties, but some arrangement must be made whereby we
+are assured this information will be kept in strictest confidence.</em>”</p>
+
+<p>The accompanying report is headed “Statement of Military
+Department to <abbr>Mr.</abbr> August Lomb, For the Months of April,
+May and June 1929.” It gave the number of antiaircraft range
+finders, <abbr title="26 and a half">26½</abbr> <abbr title="foot">ft.</abbr> range finders, periscopes, telescopes, and bombsights
+which it had delivered and discussed the items for which
+other bidders had been successful. Near the end of the report
+was this paragraph:</p>
+
+<p>“It will be noted from the foregoing statements that not
+much information can be further obtained regarding competitive
+prices. While these bids are supposed to be public, it has
+lately become the practice to withhold the information from
+the public. Every letter and envelope from the Government
+is marked ‘Confidential’ and we are held accountable that the
+information will not become public, and that it will be treated
+in strictest confidence.”</p>
+
+<p>On December 20, 1932, Bausch and Lomb sent August
+Lomb a letter marked Military Department 8430 and enclosed
+a pamphlet dealing with submarine periscopes which he was to
+give to Zeiss and make sure that it was returned to him and
+by him to Bausch and Lomb. On the following day Bausch and
+Lomb wrote Zeiss this letter:</p>
+
+<p><span class="pagenum" id="Page_157">[Pg 157]</span></p>
+
+<p>“We confirm having written you the letter stated in the
+above reference. The pamphlet referred to in it has been sent
+to <abbr>Mr.</abbr> August Lomb, via registered mail.</p>
+
+<p>“It occurs to us that we were not sufficiently specific regarding
+the caution that must be exercised for our protection in
+keeping the loan of this pamphlet a secret, and particularly as
+regards the inspector. If any question should arise with regard
+to the pamphlet which you are preparing, <em>please do not admit
+to any one that this has been prepared analogous to our copy</em>.</p>
+
+<p>“<em>By reason of the great importance which we attach to the
+secrecy of this question, the copy has been sent via our Frankfurt
+office, and please make sure that after it has served its purpose
+it is again safely returned to our <abbr>Mr.</abbr> August Lomb.</em>”</p>
+
+<p>The year 1933—the year Hitler became Chancellor—brought
+a greatly enlivened interest on the part of Zeiss in the
+military secrets of our country. The following is a translation
+of a letter from Nedinsco to Bausch and Lomb dated April 7,
+1933:</p>
+
+<p>“Your last monthly report has given cause to the consideration
+that we surely would be better in a position to assist you
+<em>if you would report to us what kinds of instruments are under
+trial and in use by your military service</em>. There must be a great
+many questions regarding instruments for <em>airplanes, tanks, and
+ships</em> which demand special optical instruments.</p>
+
+<p>“We would ask that you intensively <em>find out at the proper
+places and that you communicate to us the different problems</em>,
+so that we are placed in a position to name you the necessary
+instruments which we also make new to <span id="TN10">satisfy the actual demands</span>.</p>
+
+<p>“We believe that thereby the business could be enlivened
+and also work could be created for you as well as us.”</p>
+
+<p><span class="pagenum" id="Page_158">[Pg 158]</span></p>
+
+<p>A month later on May 11, 1933 Nedinsco again wrote to
+Bausch and Lomb as follows:</p>
+
+<p>“We find, much to our regret, that the agreement during the
+course of the last few years has materialized exclusively in
+Rangefinders and Periscopes for the Navy and that also in this
+respect it has lost more and more in intensity, whereas all other
+instruments for Army and Navy have completely ceased.</p>
+
+<p>“<em>It may be assumed with great probability that the many
+other kinds of military instruments would find interest in the
+United States and that there would be a demand for these so
+that also for these there should be certain business chances.</em></p>
+
+<p>“Notwithstanding that we transmitted to you information regarding
+many of our products, you have recently made a demand
+upon us for our constructive help only to a very limited
+extent.</p>
+
+<p>“Business possibilities for foreign countries have never been
+mentioned which may result from American credits to foreign
+countries or from building contracts of American shipyards,
+gun factories, <abbr>etc.</abbr>, and for which you might be considered as
+subcontractors. <em>Such business would according to Paragraph 3
+of the agreement need a special understanding between us but
+is not excluded.</em> In view of the extremely serious economic situation
+in the world it would seem most urgent in our mutual interest
+that we endeavor to bring about a more intensive cooperation
+between us in the frame of our agreement and we
+therefore ask that you make known your position and make
+proposals as to how far and in what manner these relations
+could be furthered and the possibilities of business could be
+more rationally exploited.</p>
+
+<p>“<em>We would also be thankful for a comprehensive economic
+report which would enable us to judge conditions.</em>”</p>
+
+<p>It can hardly be mere coincidence that these repeated requests
+<span class="pagenum" id="Page_159">[Pg 159]</span>for military information came so soon after Hitler’s accession
+to power.</p>
+
+<p>On December 14, 1933 Bausch and Lomb wrote to August
+Lomb as follows:</p>
+
+<p>“We are sending you herewith our report which unfortunately
+had to be delayed by reason of the pressure of work
+which had to be taken care of in this department, due to the
+sudden activity brought about by the N. R. A.</p>
+
+<p>“<em>By reason of special secrecy clauses of late attached to each
+bid and contract, these reports, as harmless as they are considering
+that they have a commercial purpose only, are contrary
+to these clauses. We cannot very well eliminate them under
+the existing agreement with Carl Zeiss; however the regulations
+are so stringent that particular care must be exercised to keep
+these reports in strictest confidence and they should be kept
+in a separate file under lock and key.</em></p>
+
+<p>“We would ask that you be governed accordingly and that
+you bring these facts to the attention of <abbr title="Misters">Messrs.</abbr> Carl Zeiss.”</p>
+
+<p>August Lomb answered this letter on December 29, 1933.
+The first three paragraphs of his reply were as follows:</p>
+
+<p>“Since writing you December <abbr>5th</abbr>, your letter <abbr title="Number">Nr.</abbr> 8909 of
+December <abbr>14th</abbr> was received. It just arrived before the writer
+went to Jena and could therefore be discussed there.</p>
+
+<p>“<i>Monthly report.</i> That enclosed in your letter <abbr title="Number">Nr.</abbr> 8909 was
+therefore transmitted personally, impressing again the <em>necessity
+of considering this information strictly confidential and secret</em>.
+This is fully understood by the management as well as their
+<abbr>Mil.</abbr> Department and we <em>were again assured that these reports
+are locked up and only accessible to a few people who are fully
+responsible so that you can depend on your instructions being
+carried out</em>.</p>
+
+<p>“The contents of this report were very pleasing so far as the
+<span class="pagenum" id="Page_160">[Pg 160]</span>important orders are concerned which you were able to secure.
+It is to be regretted that the thirty-four 11 <abbr title="foot">ft.</abbr> <abbr class="spell">R.F.</abbr> were lost,
+but evidently other firms also have to expect part of the business.”</p>
+
+<p>It would no doubt have been very reassuring to our War and
+Navy Departments to know that these reports were “only accessible
+to a few people” in Hitler’s Germany.</p>
+
+<p>On October 16, 1934 Bausch and Lomb wrote to August
+Lomb as follows:</p>
+
+<p>“We are very sorry to find that we neglected to send you
+our report for a considerable length of time. <em>As you know,
+we are not free to give you these reports.</em> This is about the best
+excuse that we can offer; <em>the less reports we make the less the
+chance of any going astray</em>.</p>
+
+<p>“<em>We shall try to keep you informed more regularly having
+your assurance that these matters will be treated by you and
+Carl Zeiss in strictest confidence.</em>”</p>
+
+<p>The report of October 16, 1934 entitled “Statement of Military
+Department to <abbr>Mr.</abbr> August H. Lomb” lists the number
+and kinds of range finders delivered each month and also the
+total number of various types of instruments, orders for which
+Bausch and Lomb has booked since their last report. There is
+also the remark that they lost an order for four <abbr title="13 and a half">13½</abbr> <abbr title="foot">ft.</abbr> height
+finders awarded to Keuffel and Esser (another American firm).
+This report contains the following remarkable statement in
+connection with designs for submarine periscopes:</p>
+
+<p>“Our design force now consists of thirteen men all occupied
+on present contracts so that it cannot be assumed that we want
+to throw the burden of the design work on Carl Zeiss. <em>As a
+matter of fact we could not do this under the secrecy clauses
+of the ‘Recovery Act,’ but surely we ought to be able to rely
+on Carl Zeiss for support when and where it is most important.</em>
+<span class="pagenum" id="Page_161">[Pg 161]</span>We are hopeful that the promise made in letter of October 5
+to give us this design by next spring can be considerably improved,
+in fact that every effort will be made to bring the solution
+of this problem to a point which will enable us to enter into
+competition in the next bid.”</p>
+
+<p>On October 20, 1936 Bausch and Lomb wrote the following
+letter to Carl Zeiss:</p>
+
+<p>“With your letter in reference we received from you a new
+optical layout in the form of your drawing A 33 08 65/Opt. L.
+<abbr title="Number">No.</abbr> 2 for the altiperiscopes of 34 foot optical length.</p>
+
+<p>“<em>We recently learned that our Government is now contemplating
+the use of 40 foot submarine periscopes and that bids
+for these will soon be submitted for consideration. These periscopes
+will be built according to the identical specifications as
+those you have in your possession with the exception that, as
+already stated, the optical length has been increased from 34
+feet to 40 feet and the reduced section has been increased in
+length as shown on our drawing <abbr>Mil.</abbr> 458 sent herewith.</em> Moreover,
+the inner diameter of the main body tube now measures
+6,500 inches diameter for a distance of 11 feet from the eye-piece
+and while its remaining length has an inner diameter of
+6.375 inches as shown on our drawing <abbr>Mil.</abbr> 458.</p>
+
+<p>“We would ask that you kindly prepare for us immediately
+a new optical layout conforming to these changes and that you
+give us this information at the earliest possible date. As stated
+this question will soon need our consideration and unless we
+have the data available by that time we shall have to forego bidding
+on this new proposition.”</p>
+
+<p>August Lomb realized the situation in which Bausch and
+Lomb was placed in sending written reports of secret military
+information to Germany. In a letter of July 9, 1937 to Bausch
+and Lomb he made this very helpful suggestion:</p>
+
+<p><span class="pagenum" id="Page_162">[Pg 162]</span></p>
+
+<p>“Prior to the years 1935 and 1936 Zeiss have always received
+a list of numbers, kinds and prices of the instruments furnished
+during one year when the commission statement for the respective
+year was rendered. <em>Since 1935 such a statement was
+not received, probably because you did not want to furnish any
+such data in accordance with your letter <abbr title="Number">Nr.</abbr> 9383 of October
+<abbr>16th</abbr>, 1934. Zeiss, however, would be satisfied with very brief
+and condensed information, for instance Range Finders abbreviated
+to <abbr class="spell">R.F.</abbr> <abbr>etc.</abbr>, if possible.</em></p>
+
+<p>“Of course you will have to consider this with the Executive
+Office and may let us know occasionally whether feasible or
+not.”</p>
+
+<p>In a letter of March 24, 1939—the week after Hitler invaded
+Czechoslovakia—Carl Zeiss made this demand upon
+Bausch and Lomb:</p>
+
+<p>“For this purpose it is <em>absolutely necessary</em>, and that is why
+we ask you for it, <em>that you supply us</em>, before we arrive at our
+final decision, with a <em>precise statement of those patents of ours
+which you use in your manufacturing processes, designating at
+the same time those instruments in whose manufacture these
+patents are used, also indicating the turnover you have had in
+these instruments during the last two business years, and the
+volume of orders which you have at present on hand for such
+instruments</em>.</p>
+
+<p>“We take it for granted that your Administrative Division
+can make up such a statement without trouble and loss of time
+so that we <em>may expect it within a month at the latest</em>.”</p>
+
+<p>Instead of the detailed reports which had formerly been sent,
+Bausch and Lomb complied with this demand by giving a
+statement of the aggregate amount of sales of instruments covered
+by Zeiss patents in 1937 and in 1938, designating the
+patents. They stated they had orders for future delivery of
+<span class="pagenum" id="Page_163">[Pg 163]</span>instruments covered by Zeiss patents totaling approximately
+$1,000,000 and giving the patent numbers.</p>
+
+<p>From the foregoing quotations it seems rather clear that
+Bausch and Lomb put their own interpretation—and a strange
+one—upon their obligation to keep military information secret
+and confidential.</p>
+
+<p>The supplemental agreement of June 27, 1925 contained
+the following provision:</p>
+
+<p>“In the case of inquiries, received by Bausch &amp; Lomb from
+authorities outside of the United States of America, by Carl
+Zeiss from the authorities of the United States, one party informs
+the other of the inquiry and is <em>obligated to make the protective
+offer named by the other party. The increase of the
+protective offer over the normal price for the corresponding
+quantity of instruments in question shall not be higher than
+20%.</em> Both parties are obligated to treat such inquiries as
+promptly as possible. <em>If the party, that has made the protective
+offer should, nevertheless, receive the order, it is obligated to
+cede in full to the other firm the excess price representing the
+protection.</em> The firm of Bausch &amp; Lomb besides, has to pay to
+the firm of Zeiss the royalty on the normal price according to
+paragraph 2, in case Bausch &amp; Lomb is awarded the order.”</p>
+
+<p>This arrangement served the purpose of making a governmental
+authority—United States or some other—believe that
+bona fide bids were being made in response to requests. Such
+collusive bidding is a fraud upon the government and while a
+similar provision was included in the supplemental agreement
+of October 28, 1925, it was omitted from the agreement of
+1926. And yet in 1932 there is evidence of willingness on
+the part of Bausch and Lomb to be less than forthright in dealing
+with the Navy Department. The following excerpt is
+<span class="pagenum" id="Page_164">[Pg 164]</span>from a letter from Bausch and Lomb to Carl Zeiss dated February
+24, 1932:</p>
+
+<p>“From the copy of the above contract which we have sent
+you with our other letter of today, <abbr>Mil.</abbr> <abbr title="Department">Dept.</abbr> 8077, you will
+take notice that the contract provides that customs entry will
+be taken care of by the Government. <em>In view of this, and in
+order not to divulge to the Navy Department that we earn a
+commission of 10% on this transaction, it will be necessary that
+the consular invoices and export declarations which you will
+have to make out be higher in this particular case than your net
+invoice prices to us. Your shipping papers, consular invoices,
+and export declarations, <abbr>etc.</abbr>, accordingly should state the following
+prices</em>, <abbr class="spell">f.o.b.</abbr> Venlo:</p>
+
+<table class="autotable p2">
+
+<tr>
+<th class="tdl" colspan="2"><i>Item</i></th>
+<th><i>Unit</i></th>
+<th><i>Total</i></th>
+</tr>
+
+<tr>
+<td class="tdl tdt">1</td>
+<td class="tdl tdt">
+The unit price to be declared by
+you will be
+</td>
+<td class="tdr tdb">$7,400</td>
+<td class="tdr tdb">$14,800.00</td>
+</tr>
+
+<tr>
+<td class="tdl tdt">1a</td>
+<td class="tdl tdt">
+The unit price to be declared by
+you will be
+</td>
+<td class="tdr tdb">470</td>
+<td class="tdr tdb">470.00</td>
+</tr>
+
+<tr>
+<td class="tdl tdt">2</td>
+<td class="tdl tdt">
+The unit price to be declared by
+you will be
+</td>
+<td class="tdr tdb">6,780</td>
+<td class="tdr tdb">20,340.00</td>
+</tr>
+
+<tr>
+<td></td>
+<td>
+(Note: The repeater motor is
+here included)
+</td>
+<td></td>
+<td></td>
+</tr>
+
+<tr>
+<td class="tdl tdt">2a</td>
+<td class="tdl tdt">
+The unit price to be declared by
+you will be
+</td>
+<td class="tdr tdb">470</td>
+<td class="tdr tdb">940.00</td>
+</tr>
+
+</table>
+
+<p class="p2">“The difference between the above prices and those stipulated
+in the official contract are satisfactorily explained by shipping
+expenses, <abbr>etc.</abbr></p>
+
+<p>“It goes without saying that you will bill us for these periscopes
+in accordance with your letter of December 29, 1931
+(N XIII/6661), less 10% commission.”</p>
+
+<p>The provisions of the 1921 and 1925 agreements prevented
+<span class="pagenum" id="Page_165">[Pg 165]</span>Bausch and Lomb from selling to any purchaser outside the
+United States unless such sale was approved by Zeiss. That the
+omission of this provision from the agreement of 1926 did not
+mean a change in policy is clearly shown by the following
+memoranda exchanged by two Bausch and Lomb officials:</p>
+
+<p style="float:left">
+  “From: <abbr>Mr.</abbr> M. H. Eisenhart
+</p>
+<p style="float:right">
+  Date: <abbr title="January">Jan.</abbr> 11, 1927.
+</p>
+
+<p style="clear:both">“To: <abbr>Mr.</abbr> <abbr title="Edward">Edw.</abbr> Bausch.</p>
+
+<p>“I have read the following paragraph in August Lomb’s letter
+of December 20, 1926:</p>
+
+<p>“‘We note that you have decided to give up all military
+work in connection with foreign countries, thus doing away
+with the supplementary agreement of October <abbr>28th</abbr>, 1925. Its
+second paragraph on page 2 treats of instruments which you
+might be called to supply for foreign vessels built or equipped
+on American ship yards, as was the case for Argentine. We
+understand that, as this entire agreement is now canceled, you
+will renounce to bidding for such instruments hereafter.’</p>
+
+<p>“Is it your understanding from this that in the future we
+will not bid on any military instruments for use anywhere outside
+of the United States? As this is a change over our present
+procedure, I think we want to be sure of the definite understanding.”</p>
+
+<hr class="tb">
+
+<p style="float:left">
+  “From: <abbr>Mr.</abbr> E. Bausch
+</p>
+<p style="float:left;margin-left:1.3em">
+Reply
+</p>
+<p style="float:right">
+  Date: <abbr title="January">Jan.</abbr> 27, 1927.
+</p>
+
+<p style="clear:both">“To: <abbr>Mr.</abbr> M. H. Eisenhart</p>
+
+<p>“It is my understanding, in accordance with the opinion of
+Carl Lomb, that we are not to bid on any military instruments
+for use anywhere outside of the <abbr title="United States">U. S.</abbr> The agreement is that
+if such inquiries come to us we are to refer them to Zeiss. If,
+on the other hand, any inquiries come to them which belong to
+this territory, they are to be referred by them to us. A condition
+may arise, as has been the case before, where a foreign
+<span class="pagenum" id="Page_166">[Pg 166]</span>government might want to place an order with us, this to be
+under supervision of Army and Navy officers and the inspection
+as well. The procedure then would be—I should think—that
+we defer giving any definite answer until we had submitted the
+matter, according to agreement, to Zeiss, and await their disposition
+of it.”</p>
+
+<p>The Edward Bausch who wrote the latter memorandum is
+the same gentleman who was quoted in the <cite>Literary Digest</cite> of
+December 12, 1936 in the following item:</p>
+
+<p>“Millions of dollars of foreign Government orders for military
+optical instruments have been rejected by the Bausch &amp;
+Lomb <abbr title="Company">Co.</abbr>, of Rochester, New York, because they might conceivably
+be used against the United States or its interests in
+another War.</p>
+
+<p>“Proudly last week, vigorous, eighty-two-year-old <abbr>Dr.</abbr> Edward
+Bausch, founder and chairman, declared that to be his
+company’s settled policy, developed ‘through a close understanding
+with the Departments of the Army and the Navy
+of our Government.’...</p>
+
+<p>“Chiefly, Bausch &amp; Lomb’s rejected orders have been offered
+by England and France, have been for range-finders, periscopes,
+gun-sights, binoculars, artillery fire-control instruments. Business
+from those two Governments would have exceeded $1,500,000.
+Various smaller nations have also sought to make contracts
+and have been refused. Self-sufficient Germany, however,
+has shown no needs.</p>
+
+<p>“<i>War-Time Seller</i>—During the World War, encouraged by
+Washington, Bausch &amp; Lomb made large sales to the Allies,
+built up an extensive business with Great Britain. Promptly
+with the reappearance of European war-scares several years
+ago, however, the policy of no supplies to potential combatants
+abroad was adopted. ‘They are not prepared for war over
+<span class="pagenum" id="Page_167">[Pg 167]</span>there,’ a company officer gravely explained last week, ‘and if
+we refuse to help them prepare, it puts it off just that much.’”</p>
+
+<p>In the documents taken from Bausch and Lomb’s files there
+are dozens of letters in which inquiries from foreign buyers of
+military optical instruments were answered by Bausch and Lomb
+with an expression of disinterest and a reference to Nedinsco.
+On March 30, 1938 Bausch and Lomb wrote the British Military
+Attache in Washington as follows:</p>
+
+<p>“In reply to your letter of March 24, 1938 we wish to inform
+you that the instruments that we manufacture for the
+<abbr title="United States">U. S.</abbr> War Department are 4 meter Stereo Height Finders.</p>
+
+<p>“Unfortunately we have to inform you that we are not in
+a position to take British Government orders at the present
+time.”</p>
+
+<p>On June 20, 1938 the International Standard Electric Corporation
+of New York wrote Bausch and Lomb with regard
+to procuring manufacturing equipment for its English associate,
+Standard Telephone and Cables, <abbr title="Limited">Ltd.</abbr>, to manufacture certain
+lenses and optical systems from British optical glass. After some
+conferences and consideration, Bausch and Lomb wrote to International
+Standard Electric Corporation on July 1, 1938 as
+follows:</p>
+
+<p>“One of the first steps I took in giving consideration to your
+proposition which we discussed yesterday was to look into the
+contractual arrangements to which we are already obligated
+which I spoke to you about in my conversation.</p>
+
+<p>“<em>Our attorneys tell us that we are absolutely tied up in a
+way that will prevent our giving you the type of assistance you
+need to get into the manufacture of optical fire control instruments.</em>
+My thought was that events over the last few years had
+changed our foreign relationship in a way that might allow
+us to work with you, but I am definitely satisfied now that
+<span class="pagenum" id="Page_168">[Pg 168]</span>such is not the case. Because of this situation, there is no need
+for us to delay you any further in your plan.</p>
+
+<p>“I enjoyed very much your visit here and perhaps at some
+future occasion I may have the opportunity of meeting you
+again.”</p>
+
+<p>In the October 1940 number of <cite>Fortune Magazine</cite> which
+contained an article about Bausch and Lomb there was a
+two-page spread devoted to “The Critical Geography of Industries
+Essential to <abbr title="United States">U. S.</abbr> Rearmament.” With reference to
+optical goods, this statement appeared: “After aircraft engines,
+armor plate, and machine tools this little industry (range finders,
+aircraft height finders) stands fourth among defense bottlenecks.”</p>
+
+<p>There are undoubtedly many factors which contributed to
+defense bottlenecks. It seems quite certain that the Zeiss-Bausch
+and Lomb restrictive arrangement has had a substantial part in
+bringing about this condition. There is no way of ascertaining
+how many times competitors were intimidated by threats from
+the combination of the two companies which were the largest
+in the world. The following quotation is taken from a letter
+from Bausch and Lomb to Carl Zeiss dated June 12, 1932 and
+referring to a new order for Height Finders for which the
+Frankford Arsenal was contemplating asking bids:</p>
+
+<p>“Bids for this new prospective order have not yet been received
+by us. It is at present our intention after the bids have
+been received to <em>wait until a few days before the opening of
+the bids</em> and then call the attention of the Keuffel &amp; Esser
+Company to the fact that we are controlling patent <abbr title="Number">No.</abbr> 1638190
+which prohibits their furnishing the Height Finder in question.
+<em>In this manner we hope to be able to make them afraid of
+touching this business.</em> You will understand, therefore, how
+anxious we are to receive your opinion that the arrangement of
+<span class="pagenum" id="Page_169">[Pg 169]</span>four compensator wedges on one side of the Range [sic] Finder
+infringes your patent.”</p>
+
+<p>The foregoing quotation indicates one of the reasons for the
+arrangement by which all Zeiss inventions were to be patented
+in the United States by Bausch and Lomb. There can be little
+doubt that American patentees of competing military optical instruments
+would have much more to fear in infringement litigation
+initiated by the American firm of Bausch and Lomb than
+would be the case if the real owner of the patents, the German
+firm of Carl Zeiss, were the patentee. The other reason for
+this arrangement was the fear that Zeiss-owned patents would
+again be confiscated by the United States Government as had
+been done in the first World War. For the two reasons and
+possibly others it was clearly understood that all Zeiss inventions
+patented in the United States should result in patents
+issuing to Bausch and Lomb. What was just as clearly understood
+was that at the expiration of their contract all these
+patents were to be reassigned to Zeiss. This was stated in many
+documents one of which, a letter from Bausch and Lomb to
+Zeiss, dated January 17, 1936, should suffice to substantiate the
+point.</p>
+
+<p>“We have given consideration to the suggestions which you
+have made for further clarification of the interpretations of the
+existing contract which was the subject of our letter of October
+14, 1935. We are, therefore, restating the points covered in
+that letter, as follows:</p>
+
+<p>[<abbr>Par.</abbr> 1 and 2 deals with termination of the contract]</p>
+
+<p>“3. You are to assign to us all unexpired United States
+patents and all pending applications for United States patents
+in the military field now standing in your name or the name
+of any company controlled by you through stock ownership or
+otherwise, or in the name of any individual in the employ of
+<span class="pagenum" id="Page_170">[Pg 170]</span>your company or any company so controlled by you. You are
+also to assign to us all applications for patents in the military
+field which are filed prior to October 31, 1940, on inventions
+made by any individual or individuals employed by you or any
+company so controlled by you. You are to file and prosecute
+such applications and pay all expenses and fees therefor. With
+respect to such pending and future applications we suggest that
+you execute the proper assignment and send it to us as soon as
+you receive the notice of allowance in an application. We will
+promptly record the assignment in the United States Patent
+Office and notify you so that you may pay the final fee in due
+time so as to have the patent issued in our name as assignee. <em>We
+shall assign to you or your nominee all your United States
+patents or pending applications which have been taken out in
+our name, or caused to be assigned to us under the provisions
+of said agreement prior to April 30, 1941, reserving to ourselves
+only the license to manufacture thereunder upon the
+payment to you of the royalty as agreed under 2 hereinabove.</em>”</p>
+
+<p>Field glasses or binoculars were expressly excepted from the
+cartel arrangement between Zeiss and Bausch and Lomb. In
+1931 Bausch and Lomb bid $39.50 each on a United States
+Navy request for bids on 600 binoculars. Zeiss bid $26, and
+this angered Bausch and Lomb to the extent that they brought
+about a greatly increased tariff rate on imported binoculars.
+The correspondence between the two firms over a period of
+years refers to this episode. Edward Bausch of Bausch and
+Lomb wrote to August H. Lomb in Frankfurt on November
+18, 1932. The last two paragraphs of his letter are as follows:</p>
+
+<p>“In all other departments we find the Zeiss competition
+keen and aggressive. Zeiss have established themselves in this
+country and have been for years making more and more intensive
+efforts to get business. As an instance of their efforts we
+<span class="pagenum" id="Page_171">[Pg 171]</span>will cite the circumstance of their having put in a bid for Field
+Glasses to the government at such ridiculously low prices that
+we cannot understand how there can be any profit in it for them,
+but leaves us with a feeling that they are aiming to put us out
+of competition and acquire the business for themselves.</p>
+
+<p>“Such efforts as they are making in this territory will surely
+lead to more aggressive action on our part and will certainly
+lead to anything but friendly feeling, and ultimately, to a more
+serious situation.”</p>
+
+<p>On February 6, 1934, Zeiss wrote Edward Bausch as follows:</p>
+
+<p>“I received your letter of January 25, and at the same time,
+a report from our <abbr>Dr.</abbr> Bauer about his interview with you and
+your associates on January 15, 1934 in Rochester. First of all,
+I wish to thank you for having gone to the trouble to write
+down the sequence of events, which brought about the change
+in duty calculation on our prism binoculars, with the result that
+the duty, which will actually have to be paid, comes very close
+to doubling the present rate. I expressed myself to <abbr>Mr.</abbr> Lomb
+in a very general way, and had pointed out merely the effect
+of the change of duty, which was probably caused by your
+initiative, and I used the expression that the sixty per cent rate
+had, in reality, been doubled.</p>
+
+<p>“The essential consequence is that quality binoculars—and
+only those of more than <abbr title="5 times">5×</abbr> magnification, and of foreign net
+value of more than $12—have been affected by this measure.
+In reality, only Zeiss Binoculars fall under this arrangement,
+whereas all the cheap French prism binoculars, which are not
+negligible in quantity, are exempt.</p>
+
+<p>“From your letter, I have noted that the steps taken by you
+were prompted by our offer and that of Carl Zeiss, New York,
+of six hundred 6 <abbr title="times">×</abbr> 30 prism binoculars at $26 each, which we
+made in 1931 to the Navy. I believe that I do not have to
+<span class="pagenum" id="Page_172">[Pg 172]</span>add anything to the explanations which our <abbr>Dr.</abbr> Bauer has given
+you concerning this matter. The thought occurs to me, however,
+whether it would not have been appropriate, in view of
+the friendly and long relations between our respective houses,
+if one of your gentlemen had communicated with our <abbr>Dr.</abbr>
+Bauer and had pointed out the low prices to him in order to
+bring about a satisfactory solution of the question for the future,
+and this by means of a friendly understanding. Such an understanding
+would have been readily possible at the time, for we
+have always been ready to recognize justified wishes or requests
+of other houses, especially of those friendly to us.</p>
+
+<p>“I would consider it to our mutual interests if this duty
+arrangement, which, as I admit frankly, has caused great bitterness
+on our part, would disappear again. As you know from
+several negotiations on other matters here and there, we and
+<abbr>Dr.</abbr> Bauer are always ready for a price agreement, which protects
+your just interests.”</p>
+
+<p>On February 28, 1935, Bausch and Lomb wrote to <abbr>Dr.</abbr>
+Bauer of Carl Zeiss, <abbr title="Incorporated">Inc.</abbr>, New York. The first paragraph of
+his letter is as follows:</p>
+
+<p>“Although I enjoyed my visit with you last Saturday morning
+very much, I have not been able to get out of my mind
+your statement that you have not confidence in the younger
+generation here in Rochester. Since this is predicated, I believe,
+entirely upon the binocular situation, I just want to repeat
+again what I told you in New York, that I believe whatever
+action we took in regard to the tariff on binoculars was
+prompted entirely by the fact that you bid a figure on a Navy
+contract for binoculars which was absolutely out of reason and
+made it look to us as if you were going to get this binocular
+business from the United States Navy at any price. When we
+saw there was no possibility of getting business from our own
+<span class="pagenum" id="Page_173">[Pg 173]</span>Navy at a reasonable figure, we took the only step that was open
+to us and made a complaint to one of our senators that started
+a Senate Investigation and finally culminated in an executive
+order that resulted in changing the method of figuring tariff
+to the basis of American valuation.”</p>
+
+<p>On March 8, 1935, K. A. Bauer of Carl Zeiss, <abbr title="Incorporated">Inc.</abbr>, wrote
+Bausch and Lomb. The first three paragraphs of his letter are
+as follows:</p>
+
+<p>“I thank you for your letter of February 28, referring to
+our conversation of February <abbr>23rd</abbr>. I wish to correct your impression
+of my having made the general statement ‘that I
+have no confidence in the younger generation in Rochester.’ I
+said: ‘How can we have confidence, that an agreement regarding
+Contact glasses—if possible at all—will turn out satisfactorily,
+after the experience we had in the binocular matter?’
+I also said that under the management of the older generation,
+such a thing, as this binocular case turned out to be, would not
+have been possible. But I do not wish these words to be
+generalized to the above blunt statement, and I am sorry, if I
+may not have expressed myself clearly enough.</p>
+
+<p>“Now turning to the binocular matter, you know that I have
+had conversations with your firm in which I found a certain
+degree of understanding for the untenability of the present
+tariff situation and a willingness not to resist a reasonable
+solution. Due to the political constellation and to tariff negotiations
+pending in Washington with other countries, the flexible
+tariff clause is at present petrified and nobody can say, when
+this may change. In the meantime, importation of highgrade
+binoculars continues to be impossible. As long as this condition
+lasts, we shall naturally feel irritated and we cannot but resent
+the fact that it was brought about by methods which we must
+condemn. The nature of the tariff action was camouflaged by
+<span class="pagenum" id="Page_174">[Pg 174]</span>the wording of the Senate Resolution, in order to deceive the
+importers of prism binoculars. We ourselves as well as other
+importers were deprived of what little right we had under the
+tariff law to state our side. If you personally have any doubt
+as to who engineered this whole affair, I suggest that you read
+the stenographic report of the so-called ‘Public Hearing’
+which took place in Washington on October 18, 1932.</p>
+
+<p>“You say that we quoted on 600 binoculars 6 <abbr title="times">×</abbr> 30 such a
+low price that it was ‘out of reason.’ Admitted that our price
+of $26—was low. Your quotation of $39.50, however, seems
+to be exorbitant. It is also true that the quality specified by
+the Navy was of a higher grade than that of commercial binoculars.
+But this fact is more than compensated by the large number
+of 600 glasses involved, which were to be manufactured,
+shipped and delivered at one time to one party, whose credit is
+beyond doubt. The large number called for a special low price.
+Instead you quoted to the <abbr title="United States">U. S.</abbr> Navy—your best single customer—considerably
+more than what you asked from a dealer
+for one single glass. At that time you sold your 6 <abbr title="times">×</abbr> 30 model
+(with central focusing device) at $66 list, and at $35.18 and
+even at $33 net to the trade; a few months later at even lower
+prices. If you deduct from these prices an adequate amount for
+the central focusing device, which the Navy did not require,
+your net trade price for one single 6 <abbr title="times">×</abbr> 30 binocular with individual
+focusing would have come rather close to our price of
+$26. What difference remained might have been cut down
+further by the quantity factor as explained above. Had your
+firm quoted as one should have expected, considering all that
+has been said above, we would have had no chance whatever to
+get the order under the Budget Law even at a lower price. In
+our opinion you bid too high, expecting that under the Budget
+Law you would have the monopoly anyhow.”</p>
+
+<p><span class="pagenum" id="Page_175">[Pg 175]</span></p>
+
+<p>One recalls the urgent plea which was made about the time
+of Pearl Harbor for all private citizens to make gifts of their
+binoculars for use by the armed service. To the extent that a
+shortage of such material can be traced to the squabbles among
+cartelists it is a condition which should certainly never be
+allowed to recur.</p>
+
+<p>One of the most serious problems which will confront our
+government and the United Nations in connection with the
+termination of the war with Germany is that of eliminating for
+the future the German war machine. The relations of Carl
+Zeiss and Bausch and Lomb show what may be expected when
+private business concerns are permitted to handle such a problem
+as though it were a matter of private concern. Surely it is
+to be hoped that the policy of our government as expressed in
+the peace which will be made with Germany will not be rendered
+ineffectual because of the private international policy of
+certain business concerns. The decree of July 9, 1940, enjoined
+Bausch and Lomb from further carrying out any of the provisions
+of its agreements with Carl Zeiss. This alone is not
+sufficient to insure that the public policy expressed by government
+action shall not be thwarted by the machinations of private
+cartels.</p>
+
+
+<hr class="chap x-ebookmaker-drop">
+<div class="chapter">
+
+<p><span class="pagenum" id="Page_176">[Pg 176]</span></p>
+
+
+  <h2 class="nobreak" id="11">
+    11
+    <br>
+    <i>Miscellaneous Products</i>
+  </h2>
+</div>
+
+
+<p>Three recent cases illustrate some interesting characteristics
+of the cartel problem. These cases—involving cartelization of
+pharmaceutical products, chemicals, firearms and ammunition,
+and matches—include industrial concerns and individuals in
+Germany, England, Canada, Sweden, Chile, the Argentine, and
+Brazil. They are significant not only because of their inherent
+character, but also because the war has not materially affected
+their operation. True, the war forced certain changes upon
+them, but these were modifications, not cessations.</p>
+
+<p>Since the cases in question had not been legally adjudicated
+at the time this was written, it is well for the reader to remember
+that the statements which follow are allegations which were
+a matter for litigation between the government and the various
+defendants.</p>
+
+<p>On October 28, 1943, the Department of Justice filed a complaint
+charging Merck &amp; <abbr title="Company">Co.</abbr>, <abbr title="Incorporated">Inc.</abbr>, of Rahway, <abbr title="New Jersey">N. J.</abbr>, the largest
+producer of pharmaceutical chemicals in the United States, and
+E. Merck Chemical Works, of Darmstadt, Germany, with
+maintaining a cartel agreement in violation of the antitrust
+laws.</p>
+
+<p><span class="pagenum" id="Page_177">[Pg 177]</span></p>
+
+<p>Named as defendants in the suit were Merck &amp; <abbr title="Company">Co.</abbr>; George
+W. Merck, President of the firm; and Powers-Weightman-Rosengarten
+<abbr title="Corporation">Corp.</abbr>, a Merck subsidiary. The complaint charged
+that:</p>
+
+<p>(1) The Rahway firm and its subsidiary conspired with the
+Darmstadt concern to divide world territory into non-competitive
+areas by means of what they themselves describe as a
+“Treaty,” dated November, 1932.</p>
+
+<p>(2) Under the terms of this “Treaty,” the Rahway firm was
+assigned the United States and Canada as exclusive territory,
+while the Darmstadt organization was assigned almost all the
+rest of the world. The “Treaty” also provided that Cuba, the
+West Indies and the Philippines were joint territory in which
+conditions of sale and prices were fixed by agreement.</p>
+
+<p>(3) Since the British blockade after outbreak of the war in
+1939 prevented the Darmstadt firm from exporting to many
+foreign countries, particularly to Latin America, it was agreed
+that the American company would supply Darmstadt’s agents
+in South America but that the territorial provisions of the 1932
+“Treaty” remained in effect, with Latin American markets returned
+to Merck of Darmstadt as exclusive territory after the
+war.</p>
+
+<p>(4) To carry out this agreement Merck of Rahway revived
+a dormant subsidiary, Powers-Weightman-Rosengarten Corporation,
+to engage during the war in export business in territory
+assigned exclusively to Merck-Darmstadt. The purpose of
+using this dormant subsidiary was to enable Merck of Rahway
+more easily to abandon its export business in Darmstadt’s territory
+after the war.</p>
+
+<p>(5) Merck of Rahway not only intends to abandon all its
+export business in Darmstadt’s territory after the war but to
+<span class="pagenum" id="Page_178">[Pg 178]</span>continue the territorial division provided in the 1932 “Treaty”
+until 1982.</p>
+
+<p>(6) The agreement covers approximately 400 pharmaceuticals
+and chemicals, including quinines, sulfa drugs, vitamines,
+narcotics and mercurials.</p>
+
+<p>The government charges specifically that prior to the last
+war there were close ties between Merck of Rahway and Merck-Darmstadt
+which were dissolved in 1919 by the Alien Property
+Custodian. During the last war the American Merck company
+gained a large export business in chemicals and pharmaceuticals
+in Central and South America only to relinquish this business
+and allow it to be recaptured by Merck-Darmstadt after
+the war.</p>
+
+<p>In 1932, the two companies entered into understandings and
+agreements to divide world markets into exclusive areas, and as
+a device to conceal these arrangements they entered into a so-called
+“Treaty Agreement” on November 17, 1932, for a period
+of 50 years. The German and American Merck companies,
+it is charged, divided the use of the “Merck” trade name and
+the sales of their products throughout the world. Under this
+arrangement, the right to sell exclusively in the United States
+and Canada was assigned to Merck of Rahway, which was also
+permitted to sell jointly with Merck-Darmstadt in Cuba, the
+West Indies and the Philippines. The rest of the world became
+the exclusive sales territory of the German company.</p>
+
+<p>In making the above charges, the Government asked the
+Court to dissolve the 1932 “Treaty Agreement”; to cancel the
+exclusivity of licenses to use certain patents of the German firm;
+to enjoin Merck of Rahway from refusing to fill orders from
+established chemical and pharmaceutical dealers in foreign
+countries; and to enjoin the American firm from vesting any
+patent rights in the German company at any future time without
+<span class="pagenum" id="Page_179">[Pg 179]</span>first notifying the Attorney General of its intention to make
+such patent transfer; and to prevent the parties from entering
+any similar agreements or arrangements.</p>
+
+<hr class="tb">
+
+<p>On January 6, 1944, the Department of Justice filed a complaint
+charging two American companies, a British company,
+the American agent of the British company, and five of their
+officers, with maintaining an international cartel agreement to
+restrain trade in the manufacture of chemical products, firearms,
+and ammunition, in violation of the Sherman Antitrust Act.</p>
+
+<p>Named as defendants in the suit were: E. I. du Pont de
+Nemours and Company, <abbr title="Incorporated">Inc.</abbr>, Wilmington, Delaware, including
+Lammot du Pont, Chairman of the Board, Walter Samuel
+Carpenter, <abbr title="Junior">Jr.</abbr>, President; Remington Arms Company, <abbr title="Incorporated">Inc.</abbr>,
+Bridgeport, Connecticut, including Charles Krum Davis, President
+and General Manager; Imperial Chemical Industries,
+<abbr title="Limited">Ltd.</abbr>, London, England, including Harry Duncan McGowan,
+Chairman of the Board, and Henry Mond, Deputy Chairman;
+and Imperial Chemical Industries (New York), <abbr title="Limited">Ltd.</abbr>, New
+York City, American agent of <abbr class="spell">ICI</abbr>.</p>
+
+<p>The government charged that beginning sometime prior to
+1920 du Pont, <abbr class="spell">ICI</abbr> and, from 1933, Remington, had been engaged
+in a conspiracy and combination in restraint of trade and
+commerce in chemical products, arms, including war materials,
+and ammunition in the United States and with foreign nations,
+and were parties to contracts and agreements in violation of the
+Sherman Antitrust Act.</p>
+
+<p>The alleged conspiracy consisted of an agreement, the terms
+of which were:</p>
+
+<p>(1) That du Pont and <abbr class="spell">ICI</abbr> not compete with each other.</p>
+
+<p>(2) That du Pont, Remington and <abbr class="spell">ICI</abbr> cooperate to eliminate
+competition between Remington and <abbr class="spell">ICI</abbr>.</p>
+
+<p><span class="pagenum" id="Page_180">[Pg 180]</span></p>
+
+<p>(3) That du Pont and <abbr class="spell">ICI</abbr> each be assigned certain marketing
+areas as exclusive territory.</p>
+
+<p>(4) That the defendants agree to eliminate competition between
+themselves in non-exclusive territory by various arrangements,
+including the formation of joint companies, to sell their
+products in accordance with agreed quotas and prices.</p>
+
+<p>(5) That du Pont and <abbr class="spell">ICI</abbr> exchange exclusive licenses under
+all patents and processes for the exclusive territories allocated
+to each, and non-exclusive licenses for the remainder of the
+world.</p>
+
+<p>(6) That du Pont and <abbr class="spell">ICI</abbr> attempt to obtain for each other
+the benefit of agreements and understanding arrived at with
+third parties for allocation of world markets or the acquisition
+of technological developments.</p>
+
+<p>(7) That du Pont and <abbr class="spell">ICI</abbr> cooperate to eliminate the competition
+of other companies throughout the world.</p>
+
+<p>The agreement was estimated to affect thousands of products,
+ranging from explosives to paints and varnishes. Du Pont is the
+largest manufacturer of chemical products in the United States,
+with total assets approximately one billion dollars, including the
+ownership of approximately 23 per cent of the stock of General
+Motors Corporation. Remington is described as the largest
+manufacturer of sporting arms and ammunition in the United
+States, and since 1933 has been controlled by du Pont.</p>
+
+<p>Imperial Chemical Industries, which has a virtual monopoly
+of the chemical industry in Great Britain, was formed as the
+result of a merger of four major British companies, and it was
+contended that <abbr class="spell">ICI</abbr>’s founders intended not only to gain a
+monopoly of the chemical industry in the United Kingdom but
+to join with the other major manufacturers of chemicals
+throughout the world, including I. G. Farbenindustrie of Germany
+<span class="pagenum" id="Page_181">[Pg 181]</span>and du Pont, to safeguard such monopoly position. This
+policy was explained by <abbr class="spell">ICI</abbr> to du Pont as follows:</p>
+
+<p>“Sir Harry explained that the formation of <abbr class="spell">I.C.I.</abbr> is only the
+first step in a comprehensive scheme which he has in mind to
+rationalize chemical manufacture in the world. The details of
+such a scheme are not worked out, not even in Sir Harry’s own
+mind, but the broad picture includes working arrangements between
+three groups—the I. G. in Germany, Imperial Chemical
+Industries in the British Empire, and du Pont and the Allied
+Chemical &amp; Dye in America. The next step in the scheme is an
+arrangement of some sort between the Germans and the British.”</p>
+
+<p>Imperial Chemical Industries (New York) conducts no independent
+business operations of its own but acts solely as agent
+for <abbr class="spell">ICI</abbr> for the transaction of business in the United States. The
+complaint stated that in 1935 the then president of <abbr class="spell">ICI</abbr> (New
+York) described the corporation as the “private commercial
+legation” of <abbr class="spell">ICI</abbr>.</p>
+
+<p>Sometime prior to 1920 du Pont and <abbr class="spell">ICI</abbr> came to an understanding
+with each other for the elimination of competition in
+the sale of explosives in all parts of the world. By this understanding
+du Pont was allocated the United States and Central
+America as its exclusive sales territory, and <abbr class="spell">ICI</abbr> was allocated
+the balance of the world, with the exception of Canada, Newfoundland
+and South America. Both companies were to refrain
+from manufacture in or export to each other’s exclusive markets,
+while Canada, Newfoundland and South America were to be
+shared by both companies on a non-competitive basis.</p>
+
+<p>It was further agreed that profits from the sale of commercial
+explosives in South America would be divided equally; and that
+in Canada the firm of Canadian Industries, <abbr title="Limited">Ltd.</abbr>, jointly owned
+by both, would be utilized to eliminate competition between
+<span class="pagenum" id="Page_182">[Pg 182]</span>them. Moreover, it was agreed that du Pont and <abbr class="spell">ICI</abbr> would exchange
+exclusive licenses under all their present and future
+patents, processes and inventions for use in the exclusive territory
+of each, and that non-exclusive licenses would be exchanged
+for the territories shared by both companies.</p>
+
+<p>By 1925, however, Dynamit Aktiengesellschaft (known as
+<abbr class="spell">DAG</abbr>), a German corporation, had begun to offer serious competition
+to du Pont and <abbr class="spell">ICI</abbr> in all important world markets,
+and in that year the two companies reached an agreement with
+<abbr class="spell">DAG</abbr> to eliminate competition in commercial explosives. By
+this understanding, <abbr class="spell">DAG</abbr> agreed to abstain from doing business
+in certain markets and to adhere to quota arrangements in other
+markets including South America. For this agreement, <abbr class="spell">DAG</abbr>
+was awarded as its exclusive market in commercial explosives
+Germany, Holland, Poland, Austria, Denmark and Bulgaria.
+Du Pont and <abbr class="spell">ICI</abbr> also subsequently acquired a stock interest in
+<abbr class="spell">DAG</abbr>.</p>
+
+<p>In order to carry out the understanding, it was charged, du
+Pont, <abbr class="spell">ICI</abbr> and <abbr class="spell">DAG</abbr> about 1925, organized Explosives Industries,
+<abbr title="Limited">Ltd.</abbr>, incorporated under the laws of the United Kingdom.
+Du Pont and <abbr class="spell">ICI</abbr> were each allocated <abbr title="37 and a half">37½</abbr> per cent of its shares,
+and <abbr class="spell">DAG</abbr> 25 per cent; and the parties agreed to conduct all
+their exports in explosives to South America through this corporation.
+Exports to Chile and Bolivia were not included, however,
+as du Pont and <abbr class="spell">ICI</abbr> had earlier organized a jointly-owned
+company, <span id="TN11">Compania Sud-Americana de Explosivos</span>, to import
+and manufacture explosives in Bolivia and Chile.</p>
+
+<p>At the time du Pont and <abbr class="spell">ICI</abbr> entered into the conspiracy, it
+was asserted, they were primarily explosives manufacturers, but
+both continually increased the number of products manufactured
+until explosives became but one of many items. The growth of
+the combination paralleled the grow of the two companies; as
+<span class="pagenum" id="Page_183">[Pg 183]</span>each company made new products, they were brought into the
+conspiracy.</p>
+
+<p>The complaint cited as an example of the functioning of the
+conspiracy that during the period 1920–29, du Pont tried to
+protect <abbr class="spell">ICI</abbr> from the competition of American cartridge companies
+by withdrawing from these companies discounts and rebates
+in connection with the sale of powder so that they might
+not disrupt <abbr class="spell">ICI</abbr>’s markets by cutting prices.</p>
+
+<p>By 1929 the conspiracy had incorporated substantially all of
+the products then made by du Pont and <abbr class="spell">ICI</abbr>, and the complaint
+alleged that in 1929 a further agreement was entered into
+whereby all products other than explosives would be handled in
+the British Empire by <abbr class="spell">ICI</abbr> and in the United States and Central
+America by du Pont. It was further agreed that as to the balance
+of the world, the two companies would enter into special
+arrangements to eliminate competition and would explore the
+desirability of utilizing joint companies. Later, two joint companies
+were founded to handle products in Argentina and Brazil—Industrias
+Quimicas Argentinas “Duperial,” S. A., and Industrias
+Chimicas Brazeileiras “Duperial,” S. A.</p>
+
+<p>Military explosives had been omitted from the 1929 agreement,
+as the two companies continued to make certain special
+arrangements to eliminate competition between them. After
+1933, when Remington joined the conspiracy, the complaint
+states that further contracts and agreements were entered into
+to eliminate competition between <abbr class="spell">ICI</abbr> and Remington in the
+manufacture and sale of ammunition and sporting arms.</p>
+
+<p>The parties clearly understood that they would continue the
+relationship between them irrespective of governmental action
+which might affect the concerns. In July, 1933, Lord McGowan
+wrote to Lammot du Pont as follows:</p>
+
+<p>“I have warned my people that no fiscal alterations in the
+<span class="pagenum" id="Page_184">[Pg 184]</span><abbr title="United States of America">U. S. A.</abbr> must be allowed to affect the interpretation to be
+placed on our Patents and Processes Agreement, and the working
+out of the co-operation for which the Agreement provides....
+I find it is a good thing to issue such warnings ... so that
+everything possible is done to ensure that no prospective political
+or legislative action on the part of Governments is permitted
+to influence relations between du Pont and <abbr class="spell">ICI</abbr>.”</p>
+
+<p>To this letter, <abbr>Mr.</abbr> du Pont replied in part: “I feel the same;
+... If any legislation or international agreements are brought
+about which affect these <abbr class="spell">ICI</abbr>-du Pont relations, I am sure we
+will be able to adjust ourselves so as to get the continued benefit
+of our Agreement.”</p>
+
+<p>The agreement of 1929 was to expire in June, 1939, and at
+that time <abbr class="spell">ICI</abbr> and du Pont entered into another agreement for
+10 years and indefinitely thereafter. The territorial provisions
+were continued, and in addition to the patents and products covered
+by the 1929 agreement, numerous other products were
+added, including cellulose compounds, alkali metals and their
+products, fertilizers, dyestuffs, synthetic resins and plastics, perfumes,
+flavoring compounds, pharmaceutical chemicals, and new
+synthetic products, including rubber, nylon and neoprene.</p>
+
+<p>The Government charged that competition was restrained
+successfully by means of the joint companies in Canada, Argentina
+and Brazil, pointing out that because I. G. Farben was
+encroaching on the field in Argentina, certain arrangements
+were made for a further joint company to be partly controlled
+by Farben. However, because of the war this procedure was
+not carried out, although du Pont’s Foreign Relations Department
+stated in February, 1940, that “the du Pont Company
+informed I. G. that they intended to use their good offices after
+the war to have the I. G. participation restored.”</p>
+
+<p>The purpose of the Government’s suit was to bring about the
+<span class="pagenum" id="Page_185">[Pg 185]</span>abrogation of the illegal contracts, to secure a perpetual injunction
+against <abbr class="spell">ICI</abbr> from violating the American Antitrust Acts,
+and to require du Pont and <abbr class="spell">ICI</abbr> to take further steps to prevent
+future use of joint companies.</p>
+
+<hr class="tb">
+
+<p>On May 1, 1944, the Department of Justice filed a complaint
+charging the maintenance of an international cartel in
+the manufacture and distribution of matches, in violation of the
+Sherman Antitrust Act, by six American companies, two British
+companies, a Canadian company, a Swedish company, two
+American agents of the Swedish company, and six of their officers.</p>
+
+<p>Named as defendants in the suit were: Diamond Match Company,
+New York City (including William A. Fairburn, President,
+and Howard F. Holman, Vice-President); Berst-Forster-Dixfield
+Company, New York City (including Robert G. Fairburn,
+President); William Gordon Corporation, New York
+City; Universal Match Corporation, <abbr title="Saint">St.</abbr> Louis, Missouri; Ohio
+Match Company, New York City; Lion Match Company, <abbr title="Incorporated">Inc.</abbr>,
+New York City; British Match Corporation, Limited, London,
+England (including Sir Clarence Bartholomew, Managing Director);
+Bryant &amp; May, Limited, London, England; Eddy
+Match Company, Limited, Pembroke, Ontario, Canada; Svenska
+Tändsticks Aktiebolaget (Swedish Match Company), Jönköpings,
+Sweden; Transamerican Match Corporation, New
+York City (including Fritz Otterberg, President); New York
+Match <abbr title="Company">Co.</abbr>, <abbr title="Incorporated">Inc.</abbr>, New York City, American agents of Swedish
+Match Company (including Paul Bertil Lind, President).</p>
+
+<p>The Government’s complaint made the following charges:</p>
+
+<p>(1) A cartel comprising American, Swedish, British, and Canadian
+match producers eliminated competition throughout the
+<span class="pagenum" id="Page_186">[Pg 186]</span>world in the manufacture and distribution of matches. This
+cartel has been in existence since 1901.</p>
+
+<p>(2) The defendants divided world territories into non-competing
+areas, established production and sales quotas, and restricted
+the production of matches in the major markets of the
+world.</p>
+
+<p>(3) The defendants suppressed inventions and improvements
+in the match art. By the acquisition of patents controlling the
+“repeating” or “everlasting” match, the defendants have been
+able virtually to suppress its production and use.</p>
+
+<p>(4) Defendants controlled patents, raw materials, chemicals,
+machinery, and processes in order to maintain their grip on the
+industry and prevent competitive capital from entering the
+market.</p>
+
+<p>(5) The defendants acquired competing match producers and
+distributors wherever and whenever competition threatened.</p>
+
+<p>(6) The amounts of matches imported into the United States
+from Sweden, Russia, and Japan have been curtailed and prices
+have been fixed by agreement with the Diamond Match Company
+with the approval of the other American defendants. Imports
+into the United States from Canada, the British Empire,
+and other markets of the world have been virtually eliminated.</p>
+
+<p>(7) As part of the conspiracy, match factories in the United
+States have been withdrawn from production and scrapped.</p>
+
+<p>(8) As the result of agreements between the Diamond Match
+Company and I. G. Farbenindustrie, American production of
+chlorate of potash, essential to match production and certain
+types of ammunition, was virtually halted during the period between
+the first World War and the second World War. This
+conspiracy resulted in a grave shortage of chlorate of potash for
+military purposes and match production.</p>
+
+<p>(9) Post-war plans have already been made by the defendants
+<span class="pagenum" id="Page_187">[Pg 187]</span>to resume the conspiracy in full as soon as the difficulties
+created by the war disappear.</p>
+
+<p>The conspiracy in the world match industry against which the
+complaint was directed was reinforced by an agreement entered
+into in 1920 by Ivar Kreuger, the late so-called “match king,”
+and William Fairburn on behalf of their respective companies,
+the Swedish Match Company and the Diamond Match Company.</p>
+
+<p>These two companies are the major factors in the match
+industry of the world. The Swedish Match Company is the
+world’s largest match producer and exporter. The Diamond
+Match Company is the largest American match producer. Diamond,
+through its President, William A. Fairburn, and his
+personal holding company, the William Gordon Corporation,
+dominates and controls the policies of Diamond’s partly-owned
+and affiliated company, Berst-Forster-Dixfield Company, and
+the Universal Match Corporation, Ohio Match Company, and
+Lion Match Company, <abbr title="Incorporated">Inc.</abbr>; these companies together with
+Diamond, produce approximately 83 per cent of American
+matches. The annual sales of matches in the United States are
+in excess of $40,000,000.</p>
+
+<p>Prior to the first World War, Diamond was the exclusive
+agent for Swedish Match for the sale in the United States, Canada,
+Cuba, and Puerto Rico of safety matches, the type most
+widely used by the armed forces. When Swedish imports to the
+United States were cut off during the first World War, Diamond,
+in 1917, erected a large safety match factory at Savannah,
+Georgia, to supply the urgent needs of the armed forces
+of the United States and its allies and civilian requirements for
+this kind of match.</p>
+
+<p>After the first World War, Kreuger threatened vigorous
+competition with Diamond in the United States. Faced with
+<span class="pagenum" id="Page_188">[Pg 188]</span>this threat, Diamond and Swedish Match entered into an arrangement
+in 1920 described by Diamond’s President, William
+A. Fairburn, as the “peace treaty with the Swedes.” Under the
+“peace treaty” Swedish Match appointed Diamond its exclusive
+agent in the United States for the sale of Swedish safety matches
+and agreed to discontinue all other selling agencies and establishments
+in the United States. In order to assure Swedish
+Match of its share of the American match market, it is charged,
+Kreuger and Fairburn entered into a secret agreement which
+required Diamond to destroy virtually its entire safety match
+business, including the scrapping of its largest plant at Savannah,
+Georgia. Swedish Match agreed that it would not otherwise
+make or sell matches on the North American Continent;
+Diamond, in turn, agreed not to make or sell matches in countries
+supplied by Swedish Match.</p>
+
+<p>The understandings reached in 1920 between Diamond and
+Swedish Match are still in effect, although the limitation of
+production feature has been temporarily suspended. Upon the
+outbreak of the present war a match shortage, particularly of
+the safety match type, resulted in the United States and in certain
+South and most Central American countries. In accordance
+with the agreement between the parties the South and Central
+American markets were Swedish territory. But war conditions
+have made it impossible for Swedish Match to supply this market.
+Instead of selling directly in these markets, however, Diamond,
+through its controlled affiliate, Berst-Forster-Dixfield,
+supplied Swedish Match with matches for South and Central
+American countries. The condition for Diamond’s policy in
+thus helping out was expressed to Swedish Match as follows:</p>
+
+<p>“We help you now. You stay out of the United States market
+after the war.”</p>
+
+<p>By 1927 Kreuger became dissatisfied with the share of Swedish
+<span class="pagenum" id="Page_189">[Pg 189]</span>Match and its affiliated company, International Match, in
+the American match market. In violation of the “peace treaty,”
+he planned to erect new match factories and acquire existing
+concerns in the United States. William A. Fairburn, on behalf
+of Diamond, successfully appeased Kreuger for the time being
+by acquiring Ohio Match, then the second largest domestic
+match producer, and selling Kreuger a half interest in the company.
+By 1931 Kreuger, through an arrangement with Fairburn,
+acquired a one-third interest in Diamond itself. At the
+same time, Fairburn induced Kreuger to scrap a partly-constructed
+match factory at Natchez, Mississippi.</p>
+
+<p>In 1901, the complaint charges, Diamond and Bryant &amp; May,
+virtually the sole match producer in Great Britain, came to an
+understanding for the elimination of competition between them.
+Thereafter Bryant &amp; May refrained from producing and selling
+matches in the United States and Diamond in the British Empire.
+It is also charged that the Berst-Forster-Dixfield, Universal,
+Ohio, and Lion companies have followed Diamond’s
+policies with regard to non-competitive relations with Swedish
+Match, Bryant &amp; May, and the other corporate defendants.</p>
+
+<p>About 1927 Bryant &amp; May and Swedish Match eliminated
+competition in the British home market (the United Kingdom
+and Ireland) and the remainder of the British Empire. Fifty-five
+per cent of the match consumption of the United Kingdom
+and Ireland was allotted by Bryant &amp; May’s domestic production;
+the remaining 45 per cent was allotted to Swedish Match’s
+imports. India was allocated to Swedish Match and the remainder
+of the British Empire to Bryant &amp; May. To effectuate
+the division of markets, British Match Corporation was formed
+in 1927 as a holding company, and acquired all of the stock of
+Bryant &amp; May. Swedish Match obtained 30 per cent of the
+stock of British Match.</p>
+
+<p><span class="pagenum" id="Page_190">[Pg 190]</span></p>
+
+<p>In 1927, it is asserted, Diamond, Bryant &amp; May, and Swedish
+Match eliminated competition in Canada by the formation of
+Eddy Match, which acquired virtually all of the match factories
+in that country.</p>
+
+<p>In 1935, after consultation with and approval by Diamond,
+Swedish Match, by agreement with the Japanese producers and
+the Soviet Match Monopoly, fixed the price of and limited
+match imports into the United States from Japan and Soviet
+Russia. In about 1937 Diamond became the exclusive agent
+for all Russian and Japanese matches sold in the United States.</p>
+
+<p>The complaint alleges that about 1922 Diamond’s wholly-owned
+subsidiary, Uniform Chemical Products, became exclusive
+agent in the United States for the sale of I. G. Farbenindustrie’s
+German-made chlorate of potash. Chlorate of potash
+is a chemical not only essential in match manufacture, but also
+in the production of ammunition, flares, and railway emergency
+warning signals. In return for Uniform’s exclusive agency, I. G.
+Farbenindustrie required Diamond virtually to cease the manufacture
+of chlorate of potash in the United States. As a result
+of the scrapping of American plants, this country had practically
+no plant capacity for the production of chlorate of potash at the
+outbreak of the war. Emergency plant construction has not yet
+overcome the shortage of this essential chemical.</p>
+
+<p>The complaint recites the heretofore undisclosed history of
+the so-called “everlasting” match, which has long been a matter
+of considerable rumor and speculation. About 1932, it is
+charged, Kreuger obtained control of the patents on this match,
+and subsequently Bryant &amp; May obtained an interest in them.
+Diamond later was offered a participation in Swedish Match’s
+patents and also negotiated with the inventor of certain improvements.
+Although it was commercially successful in Holland
+and Switzerland, the everlasting match has never been
+<span class="pagenum" id="Page_191">[Pg 191]</span>manufactured commercially by Diamond or any other American
+manufacturer. Diamond’s decision not to acquire the patents
+and manufacture the everlasting match was expressed as follows
+in a document found in their files: “The patents have not
+so long to run and if it becomes a marketable commodity by our
+pushing it, once the patents are out—as in the case of book-matches—it
+would be a fertile field for the rottenest kind of
+competition. <span id="TN12">It is to be hoped that</span> if the item is not put out and
+pushed by a strong manufacturer, no one else will take it up
+even if the patents expire.”</p>
+
+<p>The Government sought, among other things, the abrogation
+of the illegal contracts and agreements and a perpetual injunction
+against the defendants, prohibiting them from violating
+the Sherman Antitrust Act. The Government also asked that
+Diamond, Berst-Forster-Dixfield, and the William Gordon
+Corporation be required to divest themselves of holdings in
+any other match producer, including the foreign corporate defendants.</p>
+
+
+<hr class="chap x-ebookmaker-drop">
+<div class="chapter">
+
+<p><span class="pagenum" id="Page_192">[Pg 192]</span></p>
+
+
+  <h2 class="nobreak" id="12">
+    12
+    <br>
+    <i>The Webb Act</i>
+  </h2>
+</div>
+
+
+<p>An expanding foreign trade is one of our chief economic objectives.
+Both Government and business should desire and promote
+policies that will open up new markets to American enterprise,
+encourage sound foreign investment and facilitate the
+flow of goods between this and other countries. There can be no
+issue, surely, over this basic purpose. Nor is there room for
+disagreement on the proposition that a crucial, if not indeed the
+ultimate, test of our economic policy should be its efficacy in
+promoting free enterprise as opposed to a controlled economy.
+Differences, if any, relate only to methods.</p>
+
+<p>However, anyone who has been under the impression that
+the Webb Act provides an easy backdoor entrance for American
+firms to join forces with cartels seeking domination and control
+of world markets is in for sad disillusionment. The Webb Act
+was intended to strengthen American competition against foreign
+cartels. It was enacted by Congress in the belief that it
+would provide a means of assistance to American business in
+combatting the power of foreign cartels dominating world markets.
+The Act was not passed to permit American firms to take
+part in cartel restrictions on American trade—such restrictions
+are directly contrary to Congressional purpose.</p>
+
+<p><span class="pagenum" id="Page_193">[Pg 193]</span></p>
+
+<p>It should be emphasized that associations organized under
+the Webb Act cannot legally enter into international agreements
+which restrict production and distribution, divide territories and
+fields of operation, fix prices or other wise regiment industry
+throughout the world. Neither can they legally enter into
+agreements which restrain trade within the United States, restrain
+the export trade of any domestic competitor or association,
+or which enhance or depress prices or substantially lessen
+competition within the United States.</p>
+
+<p>We have instituted a suit against the United States Alkali
+Export Association, the California Alkali Export Association
+and others, charging them with maintaining international cartel
+agreements to restrain trade in the manufacture and distribution
+of alkalis in violation of the Sherman Act. In this case we have
+charged that activities by the defendants were not authorized by
+the Webb Act. I shall refer later to this case in more detail.
+It is sufficient to say at this point that other associations are under
+investigation for similar activity, and that new antitrust
+suits will be instituted whenever evidence discloses illegal activity
+by export associations or others.</p>
+
+<p>The alkali suit may very well have prompted the resolution
+of the <span id="TN13">Board of Directors of the Commerce and Industry
+Association</span> of New York to declare that Congress should restudy
+the Webb Act and by proper amendments bring it up to
+date so that there can be achieved under it all of the objectives
+that President Wilson sought to attain when he procured the
+enactment of this Act in 1918. The resolution recited that the
+Department of Justice program for enforcement of the Sherman
+Act seemed to be seeking to impose the competitive system and
+the antitrust philosophy, as interpreted by the United States
+Supreme Court, on other countries, and implied that antitrust
+enforcement was frustrating the purposes of the Webb Act.
+<span class="pagenum" id="Page_194">[Pg 194]</span>And in other quarters it has been suggested that perhaps the
+Webb Act provides a vehicle for attaining cartel objectives
+without incurring the penalties of the Sherman Act.</p>
+
+<p>These suggestions that the enforcement of the Sherman Act
+in the field of foreign trade somehow constitutes a betrayal of
+the Congressional policy embodied in the Webb Act, and that
+the Webb Act legalizes restrictive cartel practices, are based
+upon a misconception of the meaning and purpose of the Act.
+The Webb Act was enacted to help American business compete
+with foreign cartels. It was not passed to provide a conduit for
+joining them. It was designed to stimulate the position of
+American concerns as competitors for world trade and to stimulate
+the growth of our export trade. The Act created only a
+very limited exemption from the Sherman Act which I shall
+presently discuss.</p>
+
+<p>But, before taking up the Act itself, let us look at the conditions
+which brought about its enactment. The background of
+the Act is set forth extensively in a report by the Federal Trade
+Commission, dated June 30, 1916, on cooperation in American
+export trade. This report set forth that other nations had certain
+advantages in foreign trade because of superior facilities and
+more effective organizations; it pointed out that doubt and fear
+as to legal restrictions prevented Americans from developing
+effective organizations for engaging in international trade, and
+that as a result the smaller concerns suffered because of their
+lack of organization and facilities. It emphasized that in seeking
+business abroad, American manufacturers and producers had
+to meet aggressive competition from powerful foreign combinations
+often international in character. It recited that in some
+industries the smaller manufacturers had to compete abroad
+with great American companies having much more efficient
+worldwide selling organizations. In order to assist these smaller
+<span class="pagenum" id="Page_195">[Pg 195]</span>businesses to acquire proper facilities for doing an international
+business, and to enable them to meet the competition in prices
+and services of major American concerns and all foreign competitors,
+the report recommended that small American producers
+and manufacturers should be permitted to unite their
+efforts for purposes of conducting foreign trade. By combining
+their efforts it was thought that these small firms would be
+better able to advertise, maintain an adequate selling force, and
+create markets abroad.</p>
+
+<p>But, while recognizing the desirability of a certain degree of
+cooperation in seeking international markets, the Federal Trade
+Commission in its 1916 report was fully cognizant of the possibility
+of misuse of export associations and of the necessity to
+prevent their misuse by legislative safeguards and antitrust
+enforcement. Thus the Commission said:</p>
+
+<p>“Two chief dangers from cooperation 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.</p>
+
+<p>“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.”</p>
+
+<p>And the Commission further declared that “This recommendation
+is made subject to the condition that the legislation shall
+be carefully safeguarded and shall make absolutely clear that
+the combinations for export business are subject to all of the
+rigors of the Sherman law if they are used to restrain trade in
+the United States.”</p>
+
+<p>Bills were then introduced in Congress by Senator Pomerene
+<span class="pagenum" id="Page_196">[Pg 196]</span>and Congressman Webb, and were considered by Congressional
+committees and debated from 1916 to 1918, when the law was
+enacted. The Webb Act as finally passed provides that nothing
+in the Sherman Act shall be construed as declaring to be illegal
+an export association or any agreement made or act done in the
+course of export trade by such association, provided that such
+association, agreement or act does not: (a) restrain trade within
+the United States; or (b) restrain the export trade of any domestic
+competitor or association; or (c) enhance or depress
+prices within the United States, substantially lessen competition
+within the United States, or otherwise restrain trade therein.</p>
+
+<p>Since the Webb Act is a statute creating an exception to the
+Sherman Act’s general application, the principle of interpretation
+governing all statutes which create such exceptions must be
+applied here; that is, the Webb Act must be strictly construed.
+It must not be taken to cover any more ground than appears to
+have been intended by the language of the Act itself read in the
+light of the legislative history.</p>
+
+<p>The legislative history leaves no doubt whatever as to what
+Congress intended. In its report of May 11, 1917, the House
+Judiciary Committee stated:</p>
+
+<p>“The bill is drawn so as to leave in full force our antitrust
+laws as applied to our own markets and as affecting different
+American exporters in their dealings with each other.... The
+bill does not authorize any violation of the present antitrust
+laws.... The bill prohibits the slightest violation of our antitrust
+laws within the United States.”</p>
+
+<p>The Senate Committee report contained a similar declaration.</p>
+
+<p>The House and Senate debates abound with declarations by
+the sponsors of the bill that it did not in any way interfere with
+the application of the Sherman Act to the domestic commerce
+of the United States and to agreements to restrain the export
+<span class="pagenum" id="Page_197">[Pg 197]</span>trade of competitors of the associations. In referring to antitrust
+jurisdiction over proposed export associations, Representative
+Webb stated: “If the combination for export trade affects
+unduly or artificially the prices in the United States then they
+come within the Sherman Antitrust Law.”</p>
+
+<p>Senator Pomerene made the following significant arguments
+during debate on the bill:</p>
+
+<p>“The position was taken in substance that this bill was a repeal
+of the Sherman Antitrust Law, and if it became the law of
+the land and these associations were authorized they would at
+once seek to control the foreign market and probably enter into
+a combination with foreign companies and cartels engaged in the
+same line of business and thus reenforced and worldwide in their
+control of products they would reduce the prices of food animals,
+of grain, and of other products and raise the prices to the
+consumer when it suited their purposes.”</p>
+
+<p>“If the Senator when making this argument had recited facts
+instead of fancies, there might have been some force in his utterances
+but he was giving free reign to his imagination. The
+Senator overlooked the fact that this bill does not repeal the
+Sherman Law. He had in mind one paragraph only and lost
+sight of all the restrictions and qualifications it contains. I submit
+that when this bill is construed judicially it will be analyzed
+as a whole and not one part separate from the other.</p>
+
+<p>“The Senator forgets that neither the associations, nor their
+agreements, nor their actions can be in restraint of trade within
+the United States, nor in restraint of the foreign trade of any
+domestic competitor and they cannot by any agreement, conspiracy,
+or act artificially or intentionally and unduly either
+enhance prices or reduce prices domestically, and if they do they
+violate the law of the land.”</p>
+
+<p>During the debates some members of Congress, foreseeing
+<span class="pagenum" id="Page_198">[Pg 198]</span>the possibility that export associations might join in a combination
+with foreign companies, questioned the sponsors of the bill
+as to the effect of the bill upon such practices. In the House
+debates, <abbr>Mr.</abbr> Moore of Pennsylvania asked: “Suppose a combination
+in which Americans join with foreigners had been
+formed?” To this query Congressman Webb replied: “Then
+you violate the antitrust law and it has been so held by the
+court.” Later, in the Senate debates, Senator Pomerene stated:
+“There is nothing in this bill authorizing the division of territory
+abroad.”</p>
+
+<p>Attempts to amend the Act between 1921 and 1928 failed.
+Amendments proposed in 1928 would have extended the Act
+to include combinations for importation of crude rubber, potash,
+sisal and other raw materials not made, produced, or grown in
+substantial quantities within the United States. The bill proposed
+that year was stated by the House Judiciary Committee
+to be designed “to meet an acute situation affecting the import
+trade of the country” by reason of the fact that certain foreign
+governments controlled and operated monopolies dealing in
+rubber, potash and sisal for which this country depended materially
+upon importations. Because of the operation of these foreign
+monopolies the price to American importers had been
+greatly increased. The Committee thought that the best way
+of meeting “these alien government combinations” was to allow
+American buyers of the monopolized products to combine for
+the purpose of importing them. During debates on the bill it
+was attacked, among other things, on the ground that if it were
+passed, import associations would be permitted to join with
+foreign producers in worldwide agreements arranging world
+markets and fixing world prices. The bill failed to pass, Congress
+thus indicating its unwillingness to extend further the application
+of the Webb Act.</p>
+
+<p><span class="pagenum" id="Page_199">[Pg 199]</span></p>
+
+<p>Thus it is clear that from the very beginning of the agitation
+for the Act it was understood that the activities of export associations
+would have to be strictly limited to the promotion of
+foreign export trade, and that any agreements or activities
+which restrain domestic competitors either in domestic or foreign
+commerce would still be illegal under the Sherman Act.
+This, it seems to me, is what has been overlooked by those who
+now question the application of the Sherman Act to activities of
+export associations which restrain domestic competition and the
+export trade of competitors.</p>
+
+<p>The Department of Justice is not seeking any novel interpretation
+of the Sherman Act or of the Webb Act. We have thus
+far instituted one suit involving associations formed under the
+Webb Act and it requires no novel interpretation of the Act to
+sustain the allegations involved.</p>
+
+<p>In that suit, filed on March 16, 1944, we charged two American
+export associations, 13 American manufacturers, and a British
+corporation and its American agent, with maintaining international
+cartel agreements to restrain trade in the manufacture
+and marketing of <i>alkalis</i>, in violation of the Sherman Antitrust
+Act. Our complaint asserted that the 17 defendants and four
+co-conspirators—two American corporations, one German, and
+one Belgian—had conspired to allocate and maintain exclusive
+marketing areas and export quotas throughout the world, eliminating
+competition and restraining exports in alkalis by means
+of illegal contracts, agreements and understandings still in effect!</p>
+
+<p>The following were named as defendants in the complaint:
+United States Alkali Export Association, <abbr title="Incorporated">Inc.</abbr> (“Alkasso”), a
+Delaware corporation with principal offices in New York City;
+California Alkali Export Association (“Calkex”), a California
+corporation with principal offices in Los Angeles; Imperial
+<span class="pagenum" id="Page_200">[Pg 200]</span>Chemical Industries <abbr title="Limited">Ltd.</abbr> (“<abbr class="spell">ICI</abbr>”), a British corporation with
+principal offices in London, England; Imperial Chemical Industries
+(New York) <abbr title="Limited">Ltd.</abbr>, a New York corporation wholly owned
+and controlled by <abbr class="spell">ICI</abbr>, London; Pittsburgh Plate Glass Company,
+<abbr title="Incorporated">Inc.</abbr>, a Pennsylvania corporation with principal offices in
+New York City; Church &amp; Dwight Company, <abbr title="Incorporated">Inc.</abbr>, a Delaware
+corporation with principal offices in New York City; Diamond
+Alkali Company, <abbr title="Incorporated">Inc.</abbr>, a Delaware corporation with principal
+offices in Pittsburgh, <abbr title="Pennsylvania">Pa.</abbr>; Dow Chemical Company, <abbr title="Incorporated">Inc.</abbr>,
+a Michigan corporation with principal offices in Midland,
+<abbr title="Michigan">Mich.</abbr>; Hooker Electrochemical Company, <abbr title="Incorporated">Inc.</abbr>, a New York
+corporation with principal offices in Niagara Falls, <abbr title="New York">N. Y.</abbr>; The
+Mathieson Alkali Works, <abbr title="Incorporated">Inc.</abbr>, a Virginia corporation with principal
+offices in New York City; Niagara Alkali Company, a
+New York corporation with principal offices in New York City;
+Pennsylvania Salt Manufacturing Company, a Pennsylvania
+corporation with principal offices in Philadelphia; Southern Alkali
+Corporation, a Delaware corporation with principal offices
+in New York City; Westvaco Chlorine Products Corporation,
+a Delaware corporation with principal offices in New York City;
+Wyandotte Chemicals Corporation, a Michigan corporation
+with principal offices in Detroit; West End Chemical Company,
+<abbr title="Incorporated">Inc.</abbr>, a California corporation with principal offices in
+Oakland; and Pacific Alkali Company, <abbr title="Incorporated">Inc.</abbr>, a limited partnership
+organized and registered in California with principal offices
+in Los Angeles. Named as co-conspirators were: American Potash
+&amp; Chemical Corporation, a Delaware corporation with principal
+offices in New York City, substantially all of whose capital
+stock beneficially owned by the German potash trust, was seized
+by the Alien Property Custodian in 1942; Solvay Process Company,
+a New York corporation with principal offices in New
+York City; Solvay et Cie. (“Belgian Solvay”), a Belgian corporation
+<span class="pagenum" id="Page_201">[Pg 201]</span>with principal offices formerly in Brussels but now in
+London, England; and I. G. Farbenindustrie Aktiengesellschaft,
+a German corporation with headquarters in Frankfort-am-Main,
+Germany.</p>
+
+<p>This suit is of major importance in the drive to eliminate the
+effect of cartels on American commerce. It is the first suit
+which the Antitrust Division has filed involving the activities
+of associations organized under the Webb Export Trade Act.
+It should serve as a warning of our determination to prevent
+cartel groups from carrying out their illegal plans by use of the
+Webb Act.</p>
+
+<p>“Alkalis,” it should be explained, include soda ash (sodium
+carbonate), caustic soda (sodium hydroxide) and bicarbonate
+of soda. Soda ash is used in the manufacture of glass, textiles
+and chemicals. Caustic soda is used in the manufacture of soap,
+textiles, rayon and paper and in the refining of petroleum products.
+Sodium bicarbonate is used for many industrial, chemical
+and drug purposes and, purified, as baking soda. In 1939, there
+were produced in the United States approximately 2,900,000
+tons of soda ash, worth more than $50,000,000; approximately
+1,000,000 tons of caustic soda, worth more than $40,000,000;
+and approximately 140,000 tons of refined bicarbonate of soda,
+worth more than $5,000,000.</p>
+
+<p>All the domestic defendants in the suit, with the exception of
+Alkasso, Calkex and <abbr class="spell">ICI</abbr> (<abbr title="New York">N. Y.</abbr>), were engaged in the manufacture
+and sale of alkalis in the United States and conduct substantially
+all of their export trade in alkalis through Alkasso
+and Calkex. Alkasso was organized in 1919 and filed a verified
+statement with the Federal Trade Commission to obtain benefits
+and immunities provided by the Webb Export Trade Act.
+Alkasso’s members, who control and manage all its activities,
+include defendants Pennsylvania Salt, Pittsburgh Plate Glass,
+<span class="pagenum" id="Page_202">[Pg 202]</span>Hooker Electrochemical, Diamond, Mathieson, Westvaco,
+Church &amp; Dwight, Dow, Niagara and Southern. Alkasso obtains
+alkalis from its members, transporting from warehouses
+maintained at Hoboken, <abbr title="New Jersey">N. J.</abbr>, and New Orleans, <abbr title="Louisiana">La.</abbr>, to markets
+throughout the world. Calkex was organized similarly in
+1936 by American Potash &amp; Chemical, West End Chemical and
+Pacific Alkali, who control and manage its activities. It obtains
+alkalis from member companies and ships from Pacific Coast
+ports to various world markets. Prior to 1940, Alkasso and
+Calkex together exported 95% of the alkalis exported from the
+United States. Since then, because of war conditions and the
+resignation of Solvay from Alkasso in 1941, the alkalis exported
+by the two associations have amounted to 75% of the total alkali
+exports from the <abbr title="United States">U. S.</abbr></p>
+
+<p>It is charged that beginning in 1924 and continuing to the
+present day the defendants have engaged in an unlawful combination
+and conspiracy in restraint of trade and commerce in
+alkalis and that they have been and are parties to contracts,
+agreements and understandings in violation of the Sherman
+Act. This continuing agreement, it is alleged, provides:</p>
+
+<p>(1) That Alkasso, Calkex, their respective members, <abbr class="spell">ICI</abbr>,
+I. G. Farben, and Belgian Solvay not compete with each other
+in the sale of alkalis in any market of the world outside of the
+United States, and that <abbr class="spell">ICI</abbr>, I. G. Farben and Belgian Solvay
+refrain from importing alkalis into the United States;</p>
+
+<p>(2) That Alkasso, Calkex and their respective members be
+assigned certain marketing areas as their exclusive territory (including
+the <abbr title="United States">U. S.</abbr>) and that <abbr class="spell">ICI</abbr>, I. G. Farben and Belgian Solvay
+refrain from exporting alkalis to such territory and prevent
+other European manufacturers from doing so;</p>
+
+<p>(3) That exclusive market areas be assigned to <abbr class="spell">ICI</abbr> (the
+<span class="pagenum" id="Page_203">[Pg 203]</span>British Empire exclusive of Canada), I. G. Farben (Scandinavia),
+and Belgian Solvay (Continental Europe exclusive of
+the Scandinavian countries), and that Alkasso and Calkex and
+their respective members refrain from exporting alkalis to such
+territories and prevent other American manufacturers from
+doing so.</p>
+
+<p>(4) That the rest of the world markets be shared jointly by
+Alkasso, Calkex, their respective members, and <abbr class="spell">ICI</abbr>, with competition
+therein eliminated by allocating quotas to British and
+American companies and limiting their exports to certain fixed
+percentages of the total sold in such areas and by agreeing
+among themselves on the prices at which alkalis are sold in such
+markets;</p>
+
+<p>(5) That Alkasso, Calkex and their respective members prevent
+other American manufacturers and dealers from exporting
+to joint territory except in compliance with quota and price
+agreements fixed for such markets.</p>
+
+<p>(6) That Alkasso, Calkex, and their respective members
+conduct their export trade and utilize the aforesaid arrangements
+and their practices thereunder in such manner as to enhance,
+stabilize and maintain at uniform and non-competitive
+levels the prices at which caustic soda is sold in the United
+States.</p>
+
+<p>It is alleged that the results of this conspiracy have been:</p>
+
+<p>(1) To eliminate competition by Alkasso, Calkex and their
+members with <abbr class="spell">ICI</abbr> and European producers of alkalis in the
+manufacture and marketing of alkalis throughout the world;</p>
+
+<p>(2) To eliminate exports of alkalis by <abbr class="spell">ICI</abbr>, Belgian Solvay
+and I. G. Farben to the United States;</p>
+
+<p>(3) To eliminate exports of alkalis by Alkasso, Calkex and
+other American manufacturers to many markets of the world;
+<span class="pagenum" id="Page_204">[Pg 204]</span>and to restrict and curtail by quota arrangements the export of
+alkalis from the United States to many world markets;</p>
+
+<p>(4) To eliminate competition by Alkasso and its members
+with Calkex and its members in exports of alkalis from the
+United States;</p>
+
+<p>(5) To curtail and limit the production of alkalis within the
+United States;</p>
+
+<p>(6) To prevent competition between manufacturers of alkalis
+in the United States (who are not members of Alkasso and Calkex)
+and Alkasso, Calkex, <abbr class="spell">ICI</abbr>, Belgian Solvay and I. G. Farben
+in world markets;</p>
+
+<p>(7) To prevent independent exporters of alkalis in the
+United States from engaging in the export of such commodities;
+and</p>
+
+<p>(8) To enhance, stabilize and maintain at arbitrary price
+levels the prices at which caustic soda is sold in the United
+States.</p>
+
+<p>The Department of Justice sought the abrogation of the illegal
+contracts and agreements and a permanent injunction against
+the defendants restraining them from violating the Sherman
+Act. The Government also asked that the defendants be enjoined
+from entering into any future contract, agreement or
+understanding with any foreign company in any manner restricting
+their exports of alkalis from the United States by division
+of export markets, allocation of territories, fixing of prices
+in export sales, or fixing or observing any export quotas. The
+Government further asked that the domestic defendants be enjoined
+from selling alkalis exported from the United States in
+any foreign markets through <abbr class="spell">ICI</abbr> (<abbr title="New York">N. Y.</abbr>) or through any agent
+or dealer selling alkalis for or on behalf of <abbr class="spell">ICI</abbr> or <abbr class="spell">ICI</abbr> (<abbr title="New York">N. Y.</abbr>).</p>
+
+<p>Thus, in this case, we allege a conspiracy to restrain the exports
+of American competitors; to restrict imports to the United
+<span class="pagenum" id="Page_205">[Pg 205]</span>States and thereby restrain trade within the United States; to
+curtail and limit production in the United States, and to enhance,
+stabilize and maintain price levels within the United
+States. These allegations clearly charge a violation of the Sherman
+Act. The Webb Act, I am confident, does not protect activities
+of this type.</p>
+
+<p>The allegations in this single instance against a Webb Export
+Association raise serious questions of law violation which
+cannot be ignored. The suggestion that we are stretching the
+Sherman Act by novel interpretation simply does not stand up.
+Associations organized under the Webb Act should take warning
+that the Alkali case represents the view of the Department
+of Justice as to the application of the Sherman Act to the activities
+of such associations. The position of the Department is in
+accord with the purpose, history and language of the Webb Act.</p>
+
+<p>It is the policy of the Department of Justice to enforce the
+Sherman Act as vigorously as possible whenever evidence establishes
+probable violation. The Sherman Act represents a
+Congressional policy of more than fifty years’ standing. The
+Department of Justice did not create the Act although it has the
+responsibility of making it effective. The Department of Justice
+does not interpret the Act. That is the task of the courts.
+It is true, however, that the attitude of the Department of Justice
+toward antitrust law enforcement is predicated, frankly, not
+on a passive interest in the matter—a grudging willingness to
+perform an unwelcome duty—but on a deep conviction that
+Congress is right, and that the public economic policy <span id="TN14">embodied
+in the Sherman Act</span> is basically sound.</p>
+
+<p>So long as the conditions which gave rise to the Webb Act
+still exist, the Act, if properly employed, may be useful in promoting
+trade within the special and limited domain to which the
+Act applies. To meet centralized buying by centralized selling,
+<span class="pagenum" id="Page_206">[Pg 206]</span>and to stand up against the exclusionary tactics and monopolistic
+practices of well-established foreign cartels is sometimes necessary.
+Joint action by American exporters may serve to secure an
+equal footing in foreign trade in markets where combination is
+permitted or even encouraged. No doubt such retaliatory measures
+are wasteful as ways of organizing world trade, and no
+doubt we and other nations would be better advised to join
+hands in getting rid of international trade restraints, theirs and
+our alike. Meanwhile, however, the Webb Act has a use in defending
+American interests in markets which are too often cartelized.</p>
+
+<p>If export associations are to be economically useful in the
+postwar world, approved by public policy and serving the purpose
+for which they were created, they must be the spearhead of
+American industry as it enters into competition with foreign industry
+for a fair share of world markets, rather than the tool of
+international monopolists to draw American industries into restrictive
+cartel agreements which contain provisions in conflict
+with the Sherman Act.</p>
+
+<p>I have given some thought to the question whether the
+Webb Act should be tightened—whether additional legislation
+should be enacted to assure that possible abuses shall be eradicated.
+Some of those who have suggested such legislation apparently
+feel that export associations, operating under the cloak
+of the Webb Act, may be used to carry American industries into
+private international cartels which operate contrary to our public
+policy, and that serious consideration should be given now to
+legislation that <span id="TN15">would make such abuses impossible</span>.</p>
+
+<p>But at present, I am not ready to believe that additional legislation
+is necessary. Vigilant enforcement of the Sherman Act
+against those who misuse the Webb Act together with the understanding
+and cooperation of industry will make additional
+<span class="pagenum" id="Page_207">[Pg 207]</span>legislation unnecessary and prove adequate to prevent export
+associations from becoming screens for illegal cartel activity.
+The appreciation by industry itself of the advantage of avoiding
+restrictive agreements is an important factor in our future policy.
+But if antitrust enforcement should prove ineffectual, and
+if the postwar period should be characterized by widespread
+misuse of export associations operating under the cloak of the
+Webb Act, then, of course, serious consideration will have to be
+given to legislation which will end the abuses.</p>
+
+
+<hr class="chap x-ebookmaker-drop">
+<div class="chapter">
+
+<p><span class="pagenum" id="Page_208">[Pg 208]</span></p>
+
+
+  <h2 class="nobreak" id="13">
+    13
+    <br>
+    <i>Private Governments</i>
+  </h2>
+</div>
+
+
+<p>One of the foremost problems facing our government today
+is the formulation of an economic policy for the future. The
+development of this policy is the concern of every American and
+will affect vitally (1) the domestic prosperity of this country,
+(2) our role in world affairs, (3) our national security. I should
+like to point out in this connection certain important considerations
+which must be taken into account if errors of the past are
+to be avoided and progress in the future guaranteed.</p>
+
+<p>No economic policy adopted by the government can be effective
+if the industrial policies of the country in the international
+field are determined, controlled, and executed by private agreements
+of which the government has no knowledge. The formulation
+and conduct of the foreign policy of the United States is
+provided for in the Constitution: “[The President] shall have
+Power, by and with the Advice and Consent of the Senate, to
+make Treaties, provided two thirds of the Senators present
+concur.”</p>
+
+<p>Past history demonstrates clearly that our economic foreign
+policy has in many instances been rendered ineffectual by the
+operation of secret agreements conceived and ratified by cartels.
+<span class="pagenum" id="Page_209">[Pg 209]</span>These agreements admit of no sovereignty other than their own,
+and serve no interests other than the shortsighted aims of monopoly.
+This has only too often resulted in situations which
+have endangered our national security, injured our position in
+the world economy, and denied us opportunity for the fullest
+use of our resources and labor. Domestically, businessmen have
+had to yield to the dictates of large aggregates of power vested
+in international cartels. What and how much they might produce,
+and to whom and at what price they might sell, have been
+decided for them. If they did not yield, they risked elimination.</p>
+
+<p>Internationally, our foreign policy has in many respects been
+frustrated. The Good Neighbor policy governing our relations
+with Latin America, the reciprocal trade treaties, our alien property
+policy, and other basic principles of America’s conduct of
+foreign affairs have in many instances been seriously weakened
+by the interference of cartel activities. Indeed, it is difficult to
+see how our future policies—for example the Atlantic Charter—can
+be executed successfully, if the dispositions made by cartels
+continue into the postwar world.</p>
+
+<p>Cartels will find it difficult to operate if the agreements
+upon which they are based are open to public scrutiny and examination.
+Any law requiring the filing of international agreements
+should operate like the Foreign Agents’ Registration Act.
+It should not give immunity to cartels, but should let the government
+and the public know of their existence, their identity,
+and their scope.</p>
+
+<p>The cost of secrecy is illustrated by the following examples.
+Two very basic raw materials necessary to any industrial community
+are petroleum and rubber. The crucial nature of these
+materials to our industrial economy and military operations is
+clearly apparent. Without them, practically all industrial activity
+<span class="pagenum" id="Page_210">[Pg 210]</span>would cease. Yet our oil and rubber supplies have been
+dependent upon policies arrived at secretly, operated clandestinely,
+and run in a manner contrary to the fundamental foreign
+policy of our country. The public had no voice in making
+these private policies, yet today it bears the burden of their
+effects.</p>
+
+<p>The very nature of modern warfare and industrial life is such
+that both petroleum and rubber have political and military, as
+well as economic, aspects. Not all countries have petroleum
+within their borders and, prior to the present war, only Britain,
+for practical purposes, had rubber. Access to these raw materials
+is a prime military requisite to any nation desirous of maintaining
+a strong international position. Without them, no nation
+could hope to wage a war, maintain a healthy industrial economy,
+or impose a treaty of Munich.</p>
+
+<p>Among Germany’s raw material deficiencies, oil and rubber
+have been the two greatest. Within her own borders there is
+little, if any, oil, and no rubber. This fact has certainly been a
+consideration in the basis of our own as well as the French and
+British foreign policy. Hence, the discovery in 1926 that petroleum
+could be made from Germany’s plentiful coal was a political
+event of the first magnitude. That synthetic rubber became
+a reality in Germany shortly afterward served to magnify the
+shock.</p>
+
+<p>The petroleum industry, dominated in this country by Standard
+Oil <abbr title="Company">Co.</abbr> (New Jersey), was shaken at its very foundation.
+A Standard Oil official, Frank Howard, wrote at the time from
+Mannheim, Germany, on March 28, 1926, to Walter Teagle,
+president of Standard Oil, the following:</p>
+
+<p>“Based upon my observations and discussion today, I think
+that this matter is the most important <span id="TN16">which has ever faced
+the company</span> since the dissolution.</p>
+
+<p><span class="pagenum" id="Page_211">[Pg 211]</span></p>
+
+<p>“The Badische can make high grade motor fuel from lignite
+and other low quality coals in amounts up to half the weight
+of the coal. This means absolutely the independence of Europe
+on the matter of gasoline supply. Straight price competition is
+all that is left....</p>
+
+<p>“They can make up to 100% by weight from any liquid
+hydrocarbon, tar, fuel oil, or crude oil. This means that refining
+of oil will have as a competitive industry in America and elsewhere,
+catalytic conversion of the crude into motor fuel.</p>
+
+<hr class="tb">
+
+<p>“I shall not attempt to cover any details, but I think this
+will be evidence of my state of mind.”</p>
+
+<p>Standard Oil was worried about its monopoly position. The
+discovery threatened competition and Standard Oil met the
+threat.</p>
+
+<p>The process of making oil from coal was controlled by I. G.
+Farbenindustrie, the German chemical trust. In 1926 a meeting
+between Standard Oil and I. G. Farben was arranged. The
+result was a series of treaties. The agreements preserved the
+position of the parties in the fields which they respectively dominated.
+As stated by a Standard Oil official: “The I. G. are
+going to stay out of the oil business proposition and we are going
+to stay out of the chemical business insofar as that has no bearing
+on the oil business.”</p>
+
+<p>Competition between I. G. Farben and Standard Oil was
+eliminated, and the technology of chemistry and <span id="TN17">petroleum was
+made part of</span> their feudal preserve. The economic effect
+was the maintenance of monopoly.</p>
+
+<p>Stated in a more detailed way, Standard Oil was given the
+world right on the oil process and I. G. Farben was given the
+chemical business of the world. But there was one exception.
+<span class="pagenum" id="Page_212">[Pg 212]</span>While I. G. was given the right to engage in the oil business in
+Germany, Standard Oil was permitted to engage in the chemical
+business in the United States only as a junior partner to I. G.
+The staggering implications of this are clear. Germany could
+not afford, considering her aims, to permit any outsider to control
+within her own borders as important a development to her
+national life as the production of oil from coal.</p>
+
+<p>But when Standard Oil gave up its rights in the chemical
+field, including those in the United States, the repercussions
+were to seriously affect our wartime efforts.</p>
+
+<p>Included in the chemical field was the synthetic rubber, buna.
+Under the agreements, therefore, it was a German-controlled
+monopoly. When the war broke out in September 1939, the
+Germans had not permitted buna to be manufactured in the
+United States. We had no experience, information, or know-how,
+and we had not obtained permission from Germany to
+produce synthetic rubber. Of equal importance is the fact that
+the United States Government had no knowledge of these facts.
+The terms of the Standard Oil-I. G. Farben treaty were secret.</p>
+
+<p>When corporations outside the I. G.-Standard Oil orbit attempted
+to manufacture buna rubber, they were confronted with
+the combined strength, wealth and power of the private coalition.
+Goodrich and Goodyear attempted such production, but
+the former was sued for patent infringement and the latter formally
+threatened with suit by the Standard Oil Company under
+the I. G. patents. This took place in October 1941, a few weeks
+before Pearl Harbor. Thus, not only did Standard Oil agree
+with I. G. Farben that the latter should control the exploitation
+of synthetic rubber, but cooperated in preventing anyone
+else from producing. In fact, on April 20, 1938, a Standard Oil
+official wrote as follows:</p>
+
+<p>“Until we have this permission, however, there is absolutely
+<span class="pagenum" id="Page_213">[Pg 213]</span>nothing we can do and we must be especially careful not to
+make any move whatever even on a purely informal, personal
+or friendly basis, without the consent of our friends. We know
+some of the difficulties they have, both from business complications
+and interrelations with the rubber and chemical trades in
+the United States, and from a national standpoint in Germany,
+but we do not know the whole situation—and since under the
+agreement they have full control over the exploitation of this
+process, the only thing we can do is to continue to press for authority
+to act, but in the meantime loyally preserve the restrictions
+they have put on us.”</p>
+
+<p>On its own, Standard Oil received little, if any, information
+on synthetic rubber from I. G. The following quotations from
+Standard Oil letters and documents are clear:</p>
+
+<p>“Our people have never made buna ... the I. G. has not
+furnished anyone technical information.”</p>
+
+<p>“The only information our people have is derived from published
+patents.”</p>
+
+<p>“Information ... about the technical aspects of this development
+has not been forthcoming as a result of the German Government’s
+refusal because of military expediency to permit I. G.
+to reveal such information to anyone outside Germany.”</p>
+
+<p>The ambiguous position in which Standard found itself arises
+from the fact that Standard never considered that it was making
+foreign policy, or took into account the political implications of
+its acts. We neither expect nor require this of our businessmen.
+After all, they are not supposed to have such responsibility.
+Nevertheless, neither Standard Oil nor the country could escape
+the consequences of these agreements. It would seem, in the
+light of this experience, that the least the Government can do is
+to provide a mechanism for acquainting itself with the existence
+and terms of such agreements. The Government, on the other
+<span class="pagenum" id="Page_214">[Pg 214]</span>hand, is unable to make proper judgments if it does not have
+complete information.</p>
+
+<p>The Monroe Doctrine and the Good Neighbor policy are
+both pillars of our foreign relations. Nevertheless, many cartel
+agreements ran directly counter to these policies. The causes
+of conflict are not difficult to understand. In a large number of
+cartel agreements, world territory is divided into exclusive, non-competitive
+domains. In the drug, magnesium, optical glass,
+dyestuffs, plastics and a host of fields, the United States was the
+exclusive territory of American cartel members. The rest of the
+world was allocated to Germany. This included Latin America.
+As a result, the Germans were able to set up economic colonies
+in Latin America and elsewhere free from American competition.
+The large members of Nazis in South America were a
+partial consequence of the character of these agreements.</p>
+
+<p>When the Nazis came to power in Germany, they immediately
+utilized the cartel system as a device for political, as well
+as economic, infiltration in countries outside of Germany, particularly
+in the Western Hemisphere. A bold assertion of this
+policy is set forth in a communication, written in 1933, from a
+director of Robert Bosch, A. G., of Germany, to the president
+of the United American Bosch Corporation, which states:</p>
+
+<p>“With regard to the political situation ... only one thing is
+very evident, namely, that all forces of administrative and economic
+endeavour such as the different cartels, <abbr>etc.</abbr>, are to be
+brought into one definite line of endeavour coinciding, of course,
+with the policy of the ruling [Nazi] party and that individual
+opinions and utterances will be submitted to a similar rule.”</p>
+
+<p>When the present war broke out, Germany, because of the sea
+blockade, was unable to supply goods to Latin America. Cartels
+made full provision for the contingency of war. The South
+American market was preserved for the German firms by cartel
+<span class="pagenum" id="Page_215">[Pg 215]</span>members of other countries, notably the United States. Not
+only did American cartel members supply products to the German
+agents in South America, in many cases they used German
+labels. What is most important, they agreed to withdraw at the
+end of the war and once again give Germany a free hand in
+Latin America. In some cases, realizing that the blacklist
+might make this kind of arrangement difficult, dummy firms
+in South America stood ready to replace those blacklisted.
+Many instances of efforts by cartels to maintain their usual relations,
+and to preserve the restrictions by which German dominance
+in South American markets was achieved, are available.
+A characteristic attitude is indicated in the statement made by
+the head of the Chemical Marketing <abbr title="Company">Co.</abbr>, an American firm,
+which had relations with the Deutsche Gold-und-Silber Scheideanstalt
+of Germany. In the early period of the war, this
+officer of the American company wrote:</p>
+
+<p>“We insure thereby that the German trade up to the present
+with our South and Central American friends can be held firmly
+in our hands and, should export from Germany become impossible—as
+you yourself can well visualize—the loss would be
+much less if for the duration of the war American chemicals
+can be delivered, rather than complete loss of business for many,
+many years, if we place our clients in such a position that they
+can continue to serve their customers.”</p>
+
+<p>The dyestuffs industry ranks among the most strategic
+branches of production. During the first World War, the United
+States and the Allies experienced severe and crippling shortages
+of dyestuffs, medicines and related products which were
+controlled by the German dyestuffs cartel. In the years between
+the Armistice in 1919 and the outbreak of the present
+war in 1939, the United States endeavored to build up a strong
+dyestuffs industry because of its peacetime as well as its wartime
+<span class="pagenum" id="Page_216">[Pg 216]</span>importance. The German dye trust, however, succeeded
+in re-establishing a substantial and significant degree of control
+in this industry through a series of cartel agreements. In addition,
+I. G. Farben, through its American subsidiary, General
+Aniline &amp; Film, was able to exert direct influence on the dyestuffs
+market in the United States. In the many agreements
+made between American, British and German dyestuffs producers,
+the American companies were generally restricted to the
+domestic markets.</p>
+
+<p>Upon the outbreak of war, when the British blockade threatened
+to cut off the exports of I. G., it nevertheless attempted to
+insure the maintenance of its control over various markets. The
+boldness of I. G.’s tactics is indicated in a cable addressed to
+General Aniline &amp; Film on September 19, 1939, which released
+that firm from export restrictions for the purpose of supplying
+I. G.’s customers and agents in the British Empire. This communication
+stated:</p>
+
+<p>“In addition to Canada we release you from export restriction
+in regard to the following countries: Great Britain, British India,
+Australia, New Zealand but only for duration of present
+state of war and as far as supplies to following firms are concerned.”
+[A list of distributing agents within the British Empire
+is included.]</p>
+
+<p>This cable was modified on September 21, 1939, when I. G.
+communicated further with General Aniline &amp; Film, stating:
+“Replace in first telegram ‘for duration of present state of war’
+by ‘until further notice’ and act accordingly.” Similar arrangements
+were made regarding I. G.’s distributing agencies in
+South America. This effort on I. G.’s part to circumvent the
+British blockade is further illustration of the implications which
+inhere in such cartel arrangements.</p>
+
+<p>The same type of practice was no less significant in other
+<span class="pagenum" id="Page_217">[Pg 217]</span>parts of the world. In the winter of 1941, while Congress was
+debating the Lend-Lease Act, cartel agreements had already decreed
+that certain critical types of products could not be sold to
+Great Britain. For example, when Great Britain attempted to
+place an order for tetrazene-primed ammunition, a cartel agreement
+between du Pont and I. G. Farben forbade their sale, and
+it was not made.</p>
+
+<p>In this case the patent attorney for the Remington Arms
+Company, a subsidiary of du Pont, wrote a memorandum dated
+January 23, 1941, stating:</p>
+
+<p>“The further sale of Tetrazene Primed Ammunition to the
+British Purchasing Commission or to the Government of the
+Union of South Africa or to the Government of Canada is most
+undesirable by reason of our Tetrazene contract with R. W. S.
+[Rheinische Westfalische Sprengstoff, a wholly-owned subsidiary
+of I. G. Farben].</p>
+
+<p>“Article <abbr title="3">III</abbr>, Paragraph D of the original contract of November
+14, 1929, reads as follows: ‘Remington shall not sell
+military ammunition containing any Tetrazene in Germany and
+in any or all of the countries in the British Empire.’</p>
+
+<hr class="tb">
+
+<p>“There can be little if any question that pistol and revolver
+ammunition sold at this time to his Majesty’s Government in
+the United Kingdom is military ammunition ... or that such
+sale is a sale in a country of the British Empire within the intent
+of Article <abbr title="3">III</abbr> D of the contract.</p>
+
+<p>“We understand that the Process Division have recommended
+the use of Tetrazene priming in certain ammunition to be
+sold to the British Purchasing Commission. It appears obvious
+that this should not be done.”</p>
+
+<p>Similar situations existed in aviation precision equipment,
+<span class="pagenum" id="Page_218">[Pg 218]</span>drugs, and chemicals. Thus, I. G. Farben sought to obtain assurances
+from du Pont that information on certain industrial
+processes would not be transmitted to the British. On October
+4, 1939, I. G. wrote to du Pont, stating:</p>
+
+<p>“You advise us that for the duration of the war, you will not
+pass the experiences and applications which you receive from
+one licensee on to another. We thank you for having quickly
+taken the necessary steps for meeting the altered conditions.”</p>
+
+<p>A significant and clear-cut example of the way in which cartel
+agreements enabled the German Government to influence the
+policies of American cartel partners of German industry is provided
+in the case of aviation instruments. In this instance Siemens-Halske,
+the great German electrical equipment producer,
+wrote to Bendix Aviation Company on October 25, 1939, as
+follows:</p>
+
+<p>“Under our agreement your geographical contract territory
+includes the United States, its territories and Canada. A state
+of war exists at the present time between Canada and ourselves.</p>
+
+<p>“Notwithstanding the war we are of course willing to live up
+to the agreement as far as possible. However, we would appreciate
+receiving your assurance that the records which you will
+receive from us within the scope of our agreement will not be
+given to Canada for the duration of the war and that you will
+supply no instruments, built under a license, if you know that
+they are destined for our enemies.”</p>
+
+<p>An official of Bendix answered:</p>
+
+<p>“As regards the drawings sent over you may rest assured.
+As regards fabrication ... we will arrange to the best of our
+ability to keep within the orbit of domestic use.”</p>
+
+<p>One of the most necessary economic measures of war is the
+seizure of enemy property. Although we have a policy concerning
+enemy property, the Antitrust Division of the Department
+<span class="pagenum" id="Page_219">[Pg 219]</span>of Justice has come across frequent attempts to nullify this
+policy by private agreement.</p>
+
+<p>In one case, I. G. Farben transferred over 2,000 patents to
+the Standard Oil Company. While there may be some dispute
+as to the purpose of the assignment, the fact is clear. The Alien
+Property Custodian, even though he has vested this property,
+found himself in litigation as to whether the patents were in fact
+transferred in a bona fide manner. Taken together with the provision
+in the Standard Oil-I. G. Farben contract, this instance
+presents the result of a carefully-conceived and well-developed
+policy of not only considering the war as an unfortunate interlude,
+but as a method of defeating public policy. The clause
+in question provides that even if the agreement should be interfered
+with by the government of the United States or if, in
+effect, war should take place between the countries of the respective
+parties, then at the conclusion of such interruption the
+parties shall come to a new agreement “in the spirit of the old.”</p>
+
+<p>Another phase of the relationships between Standard Oil and
+I. G. Farben with respect to the eventuality of war between
+the United States and Germany is indicated in a letter written
+by the Assistant Comptroller of Standard Oil to one of the
+directors of the company, on September 8, 1939. The body of
+this letter deals with the Standard-I. G. Corporation, a joint
+subsidiary in which Standard Oil owned 80% and I. G. 20%,
+which had been formed to carry out the purposes of the Standard
+Oil-I. G. agreements. Standard Oil was considering the
+purchase of I. G.’s holdings in this subsidiary company. One
+paragraph in the letter indicates clearly the objective which
+Standard Oil sought. This paragraph states:</p>
+
+<p>“Of course what we have in mind is protecting this minority
+interest in the event of war between ourselves and Germany as
+it would certainly be very undesirable to have this 20% interest
+<span class="pagenum" id="Page_220">[Pg 220]</span>in Standard-I. G. passed to an Alien Property Custodian who
+might sell to an unfriendly interest.”</p>
+
+<p>Another case shows how devious and complex cartel schemes
+can be. Briefly, the Siemens-Halske Company of Germany and
+the Beryllium Corporation of America entered into an agreement
+concerning the production and distribution of beryllium
+alloys which had all the usual characteristics of a cartel, such
+as the division of world territory, <abbr>etc.</abbr></p>
+
+<p>Before this highly interesting agreement was entered into,
+however, Siemens-Halske attempted to protect its position by
+assigning its patents in this field to the Metal &amp; Thermit Company
+of New York. Actually these patents were held by Metal
+&amp; Thermit in escrow for the Siemens-Halske Company. For
+this service, the Metal &amp; Thermit Company received $10,000.</p>
+
+<p>Without such a bill as is now contemplated, no Alien
+Property Custodian could have known that the above patents
+were really property of an enemy national. They would have
+remained concealed in this instance if it had not been for the
+fortuitous action of an investigation by the Department of Justice.</p>
+
+<p>The titanium and optical goods cases previously related are
+other examples of this practice.</p>
+
+<p>The development of the magnesium industry in the United
+States provides further illustration of the political effects of
+cartels in addition to the corrosive effects of monopoly upon
+industrial expansion. From an international standpoint the cartelization
+of the magnesium industry prior to the outbreak of
+the present war had equally serious effects. As a consequence of
+both monopoly and international cartel arrangements in the industry,
+Germany obtained an initial lead in the production of
+magnesium while at the same time Germany’s potential opponents
+were restricting magnesium output. According to estimates
+<span class="pagenum" id="Page_221">[Pg 221]</span>made by the <abbr title="United States">U. S.</abbr> Bureau of Mines, Germany produced
+61% of the world’s total output of magnesium in 1937. The
+United States produced 10%. In 1940 Germany was still producing
+one-half of the world’s output while the United States
+was producing about 14%.</p>
+
+<p>The importance of magnesium is indicated by the uses for
+which it is employed. In general, its principal consumer is the
+aircraft industry. Magnesium is used in the construction of
+aircraft engines, the frames of airplanes, various interior parts,
+wheels, and other similar portions of aircraft. Magnesium is
+also employed in the manufacture of incendiary bombs, tracer
+bullets, and flares.</p>
+
+<p>The two principal producers in this country during the years
+1919 to 1927 were the Dow Chemical Company and the American
+Magnesium Company, a subsidiary of the Aluminum Company
+of America. In 1927, the American Magnesium Company
+ceased production, and the Dow Chemical Company thereafter
+enjoyed a monopoly in the production of magnesium in the
+United States. The American Magnesium Company by agreement
+purchased all of its requirements from Dow and constituted
+Dow’s largest customer. In tracing the relationship between
+Dow, the sole producer of magnesium, and Alcoa, the
+sole producer of aluminum, during the period in question, it is
+essential to bear in mind that magnesium is the principal technological
+rival to aluminum. Nearly all of the functions for
+which aluminum is employed can also be fulfilled by magnesium
+with greater efficiency, in many instances, because magnesium is
+not only one-third lighter than aluminum, but is more readily
+machined and, when properly alloyed, has greater tensile
+strength.</p>
+
+<p>In the year 1931, I. G. Farbenindustrie, the principal producer
+of magnesium in Germany, entered into an agreement
+<span class="pagenum" id="Page_222">[Pg 222]</span>with the Aluminum Company of America known as the Alig
+Agreement. According to the terms of this contract, a joint
+corporation, the Magnesium Development Company, was
+formed in which Alcoa and I. G. each held 50% control. The
+Magnesium Development Company was primarily a patent-holding
+corporation to which I. G. transferred some patents
+for the fabrication of magnesium and to which Alcoa contributed
+process patents. In addition to participating in the Magnesium
+Development Company, I. G. also obtained a 50% interest in
+Alcoa’s own subsidiary, the American Magnesium Company.</p>
+
+<p>The significance of the arrangements between Alcoa and I. G.
+was twofold: Alcoa was interested in obtaining a secure foothold
+in the magnesium industry in order to protect its primary interest
+in aluminum; I. G. was endeavoring by its usual tactics
+to extend the sphere of its influence. It is especially significant
+to note that in the Alig Agreement it was stipulated that any
+licenses issued by the jointly-owned Magnesium Development
+Company were to be restricted to the United States. It was
+also provided that:</p>
+
+<p>“As long as magnesium is produced by any ... producing
+company under a license or licenses granted ... the holders
+of the I. G. shares in Alig ... shall have the right to limit
+the increases in production capacity of every such producing
+company after the initial contemplated production capacity shall
+have been reached. The initial contemplated production capacity
+shall in no case be more than 4,000 tons per annum.”</p>
+
+<p>Dow Chemical Company was not a party to the 1931 agreement
+between Alcoa and I. G. During the period immediately
+following the Alig Agreement, every effort was made to bring
+Dow into the cartel picture, with the consequence that, on January
+1, 1934, Dow entered into a patent-holding agreement with
+Magnesium Development Company. In 1933 also Dow and
+<span class="pagenum" id="Page_223">[Pg 223]</span>American Magnesium Company had entered into a five-year
+purchase contract by which the American Magnesium Company
+was guaranteed a position as a preferred customer of Dow. In
+return, Dow’s position as the sole producer of magnesium was
+protected.</p>
+
+<p>In 1934 also Dow entered into a sales contract with I. G.
+Farben. This contract stated:</p>
+
+<p>“Dow agrees to confine its sales in Europe solely to the I. G.,
+with the exception that it reserves the right to sell the British
+Maxium or its successors not more than 300,000 pounds (150
+tons) per annum at a price not lower than the price quoted to
+I. G. for the same quantities, plus an extra charge of not less
+than 4¢ per pound for I. G.’s larger consumption. Dow further
+promises to use its best endeavor to keep British Maxium or its
+successors from reselling magnesium in ingot form and will try
+to limit its purchases to its own use in fabricating.”</p>
+
+<p>During 1934 and 1935 Dow delivered to I. G. (which was,
+of course, the principal producer of magnesium in the world)
+more than 3,800,000 pounds of magnesium out of Dow’s total
+production of little more than 4,000,000 pounds. This magnesium
+was sold to I. G. at a price approximately 30% below
+the price to Dow’s other customers, with the exception of American
+Magnesium Corporation, which also enjoyed a preferential
+position. It is interesting to note that, during this same period,
+the sales manager of Dow Chemical travelled to England and
+wrote to his home office as follows:</p>
+
+<p>“They [British Maxium] are very much in need of additional
+magnesium for the balance of 1935, but they understand
+our position perfectly well and do not blame us at all because
+we are not in a position to furnish them the metal they want.
+They were at fault in not getting in touch with us sooner regarding
+their increased demands. They advised me that they
+<span class="pagenum" id="Page_224">[Pg 224]</span>had exported 20 tons of ingot to Europe but I later obtained
+definite proof from <abbr>Mr.</abbr> Ziegler of the I. G. that they had exported
+60 tons in Europe. If they had kept this metal in England
+they would have had sufficient supplies for this year.”</p>
+
+<p>It may be remarked that, in consequence of these arrangements
+between Dow and I. G., I. G.’s position in the European
+magnesium market was enormously strengthened. One particularly
+significant result of I. G.’s dominance was that Great
+Britain was rendered primarily dependent upon Germany for
+its magnesium imports. As late as 1938, 87.9% of the magnesium
+imported into Great Britain was obtained from Germany.
+When war broke out, Great Britain was at once cut off
+from a large part of its magnesium supply.</p>
+
+<p>From the standpoint of the development of the industry in
+the United States, it is clear that the total effect of the arrangements
+among Alcoa, I. G., and Dow was to restrict magnesium
+production. The extent of the disparity in the magnesium output
+of Germany and the United States is clearly evident in the
+production figures for the years 1937 to 1940. In 1940, the
+year in which France fell, the United States produced 5,680
+tons, while Germany produced more than 19,000 tons. Strenuous
+efforts on the part of the government and industry have
+been necessary to expand magnesium production sufficiently to
+meet our minimum wartime needs. The large plant construction
+undertaken by the government in cooperation with various
+magnesium producers has achieved initial success. It is clearly
+evident, however, that the magnesium program had to be inaugurated
+and carried out under the tremendous handicap of
+the monopoly situation which existed in the industry prior to
+the war.</p>
+
+<p>It is equally clear that, from a political standpoint, the government
+began its operations completely in the dark. It is
+<span class="pagenum" id="Page_225">[Pg 225]</span>scarcely credible that, had the arrangements between Alcoa and
+I. G. and between Dow and I. G. been known to the government
+at the time at which they were made, the risks inherent
+in the private treating making of this type would have been permitted
+to stand.</p>
+
+<p>It is characteristic of many cartel agreements which are
+arrived at secretly and maintained in silence that concealment of
+their provisions is motivated by the desire to avoid scrutiny of
+their operations by public authority. In some instances, the
+illegal nature of the terms of cartel agreements explains the
+cloak of secrecy which is cast over their provisions. Moreover,
+it is often stipulated in cartel agreements that, in any eventuality
+of action taken by government, the parties to the agreements
+shall cooperate in order to maintain their relationships despite
+anything that government may do.</p>
+
+<p>There are numerous examples among the many agreements
+which have been investigated by the Department of Justice
+which clearly reveal the intent as well as the necessity for secrecy
+from the point of view of the cartels. Thus, in a letter from
+Canadian Industries, Limited, to the du Pont Company, the
+writer states:</p>
+
+<p>“In the course of recent meetings in connection with the new
+Patents and Processes Agreement, I understand a suggestion
+has been made by the du Pont legal representatives which will
+involve the new agreement making specific reference to the
+respective territorial rights of du Pont and <abbr class="spell">ICI</abbr>. I cannot help
+feeling that on broad grounds this is undesirable both from the
+viewpoint of <abbr class="spell">C-I-L</abbr> and of the major stockholders. For instance,
+should any investigation take place in Canada which will require
+the production of this agreement, the clause in question would
+automatically necessitate the production in its term of the <abbr class="spell">ICI</abbr>
+and du Pont agreements: at least that is the way we would read
+<span class="pagenum" id="Page_226">[Pg 226]</span>it, and this would be bound to lead to publicity of a very undesirable
+nature in regard to the division of world territories.
+My practical suggestion is that, as the detailed prior commitments
+are now to be dealt with in the form of a letter separate
+from the agreement (this at the suggestion of the du Pont legal
+representatives) it might be possible to include the point in
+question in that separate letter also.”</p>
+
+<p>The attitude of cartels toward the relation between their own
+policies and the policies of government are epitomized in the
+exchange of correspondence between Sir Harry McGowan,
+Chairman of the Board of Imperial Chemical Industries, and
+Lammot du Pont in May 1933. Sir Harry wrote:</p>
+
+<p>“With a large organization such as we have I find it is a
+good thing to issue such warnings from time to time—one went
+out at the time of the Ottawa Conference—so that everything
+possible is done to ensure that no prospective political or legislative
+action on the part of governments is permitted to influence
+relations between du Pont and <abbr class="spell">I.C.I.</abbr>”</p>
+
+<p>On June 17, 1933, Lammot du Pont replied as follows:</p>
+
+<p>“I am much interested in what you say and have heartily
+approved your attitude toward our Patents and Processes Agreement
+and the relations between the two companies. I feel the
+same; namely that our relations have been so happy and have
+produced such satisfactory results that we should let nothing in
+the way of international agreements interfere in any way with
+the progress we have made or may make in the future. If any
+legislation or international agreements are brought about which
+affect these <abbr class="spell">I.C.I.</abbr>-du Pont relations I am sure we will be able
+to adjust ourselves so as to get the continued benefit of our
+agreement.”</p>
+
+<p>A striking and instructive illustration of the role of secrecy
+in cartel agreements is provided in the terms of an arrangement
+<span class="pagenum" id="Page_227">[Pg 227]</span>concerning the pharmaceutical industry, between the Schering
+Corporation of Bloomfield, New Jersey, and the Schering, A.
+G., of Germany. One clause in this agreement, which was made
+in 1938, stated that “the existence, the content, and the details
+of operation of this agreement have to be kept secret by both
+parties notwithstanding the possible obligation of disclosing it
+to public officials.”</p>
+
+<p>In connection with an agreement concerning the plastics industry,
+the consideration taken into account by the Rohm &amp;
+Haas Company and du Pont are indicated in a memorandum
+written by the latter company in 1936, in which it is stated:</p>
+
+<p>“We discussed the whole situation again. They repeated over
+and over again that there is not the slightest possibility of the
+<abbr class="spell">I.C.I.</abbr>’s coming into the American market, but du Ponts are
+afraid to write a letter to this effect because in the case of an
+investigation of their firm by politicians, the politicians might
+make capital of such a statement, <abbr>i.e.</abbr>, they might attempt to
+point out that the world was divided up between <abbr class="spell">I.C.I.</abbr> and
+du Ponts.</p>
+
+<p>“I told <abbr>Mr.</abbr> Wardenburg that I had implicit faith in all the
+assurances which they had made to me, but that for my own
+protection I had to have a letter from du Ponts, in which they
+can assure us, in one way or another, that the <abbr class="spell">I.C.I.</abbr> will not
+take the opportunity to come into this market. After a lengthy
+discussion of the different ways to accomplish this purpose, it
+was agreed that <abbr>Mr.</abbr> Wardenburg will write a letter saying that
+while it is true that the <abbr class="spell">I.C.I.</abbr> under their contract have a right
+to come into the American market, they [du Ponts] happen to
+know that the <abbr class="spell">I.C.I.</abbr>’s development in the methacrylic ester
+field has taken a direction which is quite different from the one
+that is being taken by du Ponts and ourselves, so that it will be
+highly improbable that the <abbr class="spell">I.C.I.</abbr> will attempt to come into the
+<span class="pagenum" id="Page_228">[Pg 228]</span><abbr title="United States">U. S.</abbr> market. I told him that such a letter will be satisfactory.”</p>
+
+<p>It is clear that cartel interests fear that the revelation of the
+provisions of their agreements might impede the functioning of
+the agreements or perhaps draw down upon them action by
+public authority. Very often cartel agreements endeavor to
+discount this possibility in advance. In the case of the agreements
+between Standard Oil and I. G. Farbenindustrie it is
+provided that:</p>
+
+<p>“It is our understanding ... that each party proposes to hold
+itself willing to take care of any future eventualities in a spirit
+of mutual helpfulness particularly along the following lines:
+In the event the performance of these agreements ... by either
+party should be hereafter restrained or prevented by operation
+of any existing or future law, or the beneficial interests of either
+party be alienated to substantial degree by operation of law or
+governmental authority, both parties should enter into new
+negotiations in the spirit of the present agreements and endeavor
+to adapt their relations to the changed conditions which
+have arisen.”</p>
+
+<p>Because most cartel agreements provide for their resumption
+at the end of the present war, efforts to rehabilitate world trade
+may be insuperably handicapped unless prompt and effective
+action is taken by the government with full knowledge of the
+existence and character of such cartel agreements. Regardless
+of the particular form or direction of this nation’s trade policies
+after the war they could not become effective if secret agreements
+among the large industrial groups of the world contain
+arrangements which clash with the government’s program.</p>
+
+<p>It is well to recall that the provisions of the Versailles Treaty
+at the end of the first World War which prohibited the manufacture
+of certain strategic products in Germany were rendered
+ineffective in many instances. Through foreign subsidiaries and
+<span class="pagenum" id="Page_229">[Pg 229]</span>under the cloak of cartel agreements with concerns in the United
+States and other countries, German producers of military equipment
+were able to nullify the application of the conditions imposed
+by the Treaty.</p>
+
+<p><span id="TN18">Public authority must not be left</span> in the position of having
+to work in ignorance. Only by compelling the official acknowledgement
+and registration of the existence and provisions of
+agreements which affect our foreign and domestic commerce can
+government acquaint itself with the arrangements which have
+been made and which affect so vitally <span id="TN19">national security and national
+welfare</span>.</p>
+
+<p>During the present war one of the most serious problems
+with which the fighting services have had to contend on the
+battle fronts is the frequency of malaria, one of the most widespread
+diseases in the world. There are two standard remedies
+for malaria: one is quinine, a natural product obtained from the
+cinchona trees of Java; the other is atabrine, a synthetic coal-tar
+product. Because the production and distribution of quinine
+were controlled by one of the most closely-knit cartels in existence,
+a shortage developed almost immediately when the
+Japanese seized Java. The dwindling stockpile of quinine in
+the United States compelled the government to call upon druggists
+and housewives alike to turn over whatever small quantities
+were on hand in order to keep the fighting front supplied.</p>
+
+<p>In the case of atabrine, only one company in the United States
+had a license to manufacture the drug under the I. G. Farben
+patents. It required the concerted effort of manufacturers and
+government to institute expanded production in order to
+make up for the deficiencies of quinine. Fortunately, these efforts
+have met with some success. With regard to the future,
+however, it must be borne in mind that cartels which are able
+to control and restrict the output of medical products, in particular
+<span class="pagenum" id="Page_230">[Pg 230]</span>those which are so widely needed, as quinine and atabrine,
+exert a direct influence on the military position of the United
+States and other countries, as well as upon the general health
+of the population. The opportunities for abuse which are present
+in monopolistic control of medical products are obvious. It
+is equally obvious that this government cannot afford to tolerate
+them. It would seem a minimum precaution to require that
+where cartels control the supply, the price, and the distribution
+of medical products, they should be compelled to record the
+terms on which control is based, in order that government might
+in its turn develop adequate safeguards for the general welfare.</p>
+
+<p>I believe it has been clearly demonstrated that certain fundamental
+decisions affecting our relations with the rest of the
+world have been formulated and put into effect by private
+groups without the sanction or knowledge of government. These
+decisions concerning our strategic materials, industries and trade,
+our Good Neighbor and our European policies, our disposition
+of enemy property, considerations of espionage, secrecy and the
+evasion of our laws, have all been accomplished without the
+knowledge of our government or its acquiescence.</p>
+
+<p>If cartels are permitted to continue to enter into their secret
+agreements, then it will be impossible for the peoples of the
+world to develop mutual understanding or to share industrial
+experience and progress. Cartels have been a focus of conspiracy
+and distrust among nations in the past. It is not too much to
+say that they will form a nucleus of future distrust and intrigue.
+A world partitioned by cartels breeds economic friction and disunity.
+We must face the fact that a cartelized postwar world
+would inevitably be a world of suspicion and of clandestine international
+intrigue. Full reciprocity in respect of trade and
+technology can only be founded on mutual confidence and good
+faith.</p>
+
+<p><span class="pagenum" id="Page_231">[Pg 231]</span></p>
+
+<p>There is current a school of thought which believes we must
+differentiate between good cartels and bad cartels. Do these
+people still propose to leave the conduct of our foreign economic
+policy in the hands of private monopolists, with the one
+caveat that these people be good monopolists and not bad monopolists?
+With all the best intentions in the world, it is neither
+the role nor the responsibility of businessmen to determine political
+questions which can only be resolved by constituted government.
+This is a responsibility which I believe businessmen
+should not undertake, and one which I believe that they do not
+wish to undertake. Even those businessmen who have <span id="TN20">engaged
+in these practices</span> would be shocked to realize the implications
+of their acts. At the time they were operating in this manner
+they never thought in political terms, but rather in terms of
+the local market. Once operating in the international market,
+however, these businessmen found themselves in ambiguous
+positions where they were forced to make choices which they
+never contemplated. What would they do when confronted
+with the problem of choosing between national policy as it
+should be and their own private interests? It would seem, from
+the standpoint of public interest, that when questions of national
+concern arise they should be handled by properly constituted
+government authority.</p>
+
+<p>American businessmen have not realized the significance of
+the relationship between their foreign cartel partners and the
+foreign governments involved. I doubt that they knew, for
+example, that the following statement was made by <abbr>Mr.</abbr> Meinhardt
+of Osram, a member of the international lamp cartel: “An
+international cartel has no right of existence and a German businessman
+has no right to become a member of such a cartel if
+this cartel is acting against the common interests of Germany.”</p>
+
+<p>The attitude of American businessmen is typified in the following
+<span class="pagenum" id="Page_232">[Pg 232]</span>statement by an executive of the General Motors Company:
+“an international business operating throughout the
+world, should conduct its operations in strictly business terms,
+without regard to the political beliefs of its management, or
+the political beliefs of the country in which it is operating.”</p>
+
+<p>All American businessmen and the Congress particularly
+should weigh with care the type of thinking which results from
+a cartelized economy such as Germany’s. Carl Duisberg, formerly
+chairman of the board of I. G. Farbenindustrie, expressed
+succinctly the philosophy of Germany’s cartel system when he
+said, in 1932: “The narrowness of the national economic territory
+must be overcome by trans-national economic territories....
+For a final settlement of the problem of Europe ... a
+close economic combine must be formed from Bordeaux to
+Odessa as the backbone of Europe.” The ultimate consequences
+of such cartel aims have been reckoned across the council tables
+of Munich and the battlefields of Europe and Asia.</p>
+
+
+<hr class="chap x-ebookmaker-drop">
+<div class="chapter">
+
+<p><span class="pagenum" id="Page_233">[Pg 233]</span></p>
+
+
+  <h2 class="nobreak" id="14">
+    14
+    <br>
+    <i>Freedom or Control?</i>
+  </h2>
+</div>
+
+
+<p>All of us want our country to be strong and prosperous after
+this war is won. In attaining strength and prosperity, foreign
+trade will play an important part. Manufactured goods will
+leave the shores of this country and will find their way through
+the miracle of new forms of transportation, as well as on the
+tramp steamer, to the four corners of the world. Raw materials,
+and finished products as well, will come from these same four
+corners into the hands of the American consumer. The foreign
+trade of this country will be measured in billions of dollars.
+And our nation will take its place and play its part in what
+we believe can be a healthy world economy.</p>
+
+<p>I do not think that there is any basic difference of opinion in
+this country as to the importance of our foreign trade. There
+appears to be some difference of views, however, as to how our
+foreign trade shall be conducted in the post-war world. It is
+argued that since Europe has a cartel system, if we wish to
+carry on trade on commerce with Europe or in the world, we
+must permit our foreign businesses to become cartelized. We
+are told, in short, that we must join hands with the cartels if
+we are to engage in foreign trade. Most of the people who
+<span class="pagenum" id="Page_234">[Pg 234]</span>make this argument do so regretfully. They know that the
+Sherman Antitrust Act, which prohibits restraints on both domestic
+and foreign trade or commerce, has reflected the free
+enterprise spirit of this country for more than fifty years. They
+know that the people of this country are unalterably opposed to
+a cartel system under which either the government or one’s
+competitors can determine what may be manufactured, how
+much can be made, and what price may be charged. They know
+that you cannot have a democratic system if enterprise is to be
+subjected either to government bureaucracy or to the rule of
+private trade councils. Nevertheless, these people, seeing a cartelized
+world around us, believe that much as we may dislike
+it, we cannot conduct foreign trade unless we join hands with
+the cartels.</p>
+
+<p>There is a small minority in this country, of course, which
+has always opposed our own free enterprise system. If these
+people could manage it, they would have the economy of this
+country run by enlightened and benevolent monopolists. These
+people make the argument, not at all regretfully, that we must
+join hands with foreign cartels. They know that once we have
+joined hands with foreign cartels, we will have opened the door
+to monopoly at home, and that is what they want.</p>
+
+<p>Let me venture a prediction. This country will engage in
+foreign trade and commerce on a scale never before imagined,
+and we are not going to join hands with any foreign cartels.
+There will be a drive to get us into the foreign cartels; that
+drive in fact is now going on. It will fail. It will fail for two
+good reasons. The first of these is that our foreign trade would
+not be helped in the least if we joined with the cartels. The second
+and even more important reason is that this country is in
+no mood to give up an American way of life because Europe
+believes in cartels.</p>
+
+<p><span class="pagenum" id="Page_235">[Pg 235]</span></p>
+
+<p>We have been willing to subject ourselves to all kinds of
+governmental controls over American business in order to win
+this war. When the war is over, these controls must go, and as
+soon as possible. We are not going to keep these controls either
+in the hands of the government or in the hands of a few private
+individuals. We are not going to imitate the very foreign economic
+system which we have defeated.</p>
+
+<p>The monopolist tells us that European industry is cartelized
+and that it will remain so after this war is over. What kind of
+wishful thinking makes the monopolist so sure of that? I do
+not believe that the French or the Belgians will wish to embrace
+an economic system after this war is over which took their basic
+industries and put them into the hands of an international set
+of cartelists dominated by the Germans. I do not believe that
+the British will wish to encourage a system which in March
+1939 gave birth to the announcement between the Federation
+of British Industries and the German Reichsgruppe Industrie
+that the two groups would eliminate competition between British
+and German industries, would fix prices, and would seek
+the aid of their governments against the industry of any third
+country, clearly meaning the United States, which did not join
+in this limitation of production plan. Great Britain needed its
+own full production in those days, and American production
+as well. I do not believe, for that matter, that the British will
+wish to have an economic system which has made the British
+consumer pay high prices and has restricted production in both
+Great Britain and the Dominions.</p>
+
+<p>It is clear, of course, that in each country of the world, there
+are a few monopolists who will benefit from the cartel system.
+We have them in our country also. But we are not going to
+let these few determine our own economic life, and we should
+not let them control our attitude or actions in Europe. Certainly
+<span class="pagenum" id="Page_236">[Pg 236]</span>it is too early to predict that Europe will remain cartelized after
+this war. I think it is not unlikely that the consumers of Europe
+will decide they have had enough of that system and will demand
+a change.</p>
+
+<p>But no matter what Europe does, our foreign trade will not
+be helped in the least by our joining foreign cartels. The very
+reverse is true. The way to kill American foreign trade is to
+have American producers enter into international cartels. One
+reason for the current drive to get American firms into foreign
+cartels is precisely that. There are a few monopolists who do
+not look with favor upon sales by American firms in the rest of
+the world. They are terrified that our mass production methods
+may benefit consumers in the rest of the world. They will not
+be able to maintain their own prices if this should occur. Their
+invitation for us to join them in cartel agreements is not an
+invitation to engage in trade or commerce; it is an invitation
+to discover upon what terms and conditions we will keep our
+trade at home.</p>
+
+<p>The record is very clear. A small number of powerful
+American firms entered into illegal cartel agreements before
+the war, particularly in the halcyon days of the twenties. These
+were agreements to restrict American exports. Typically, the
+American firms agreed not only not to export themselves but
+wherever possible to keep other American firms from exporting.
+These agreements occurred in synthetic nitrogen, aluminum,
+magnesium, optical glass, electric lamps, pharmaceuticals,
+plastics, chemicals and a host of other items. It is quixotic to
+think of these agreements as having promoted foreign trade;
+their whole purpose was to prevent it. Where was our foreign
+trade when these firms agreed to turn over the Latin American
+market in pharmaceuticals to the Germans? What foreign trade
+was being promoted when we agreed not to export to Great
+<span class="pagenum" id="Page_237">[Pg 237]</span>Britain more than a limited quantity of magnesium? The underlying
+philosophy of these agreements was that if the foreign
+firms would stay out of the American market, we would stay
+out of the foreign market.</p>
+
+<p>There is no mystery about this. The monopolists know it
+very well as do the other American companies, large and small,
+who were not permitted to export because if they did so, they
+would interfere with the arrangements to keep trade and commerce
+from flowing in either direction across the borders of this
+country. The reasoning is clearly set forth by an official of an
+American company in explaining why his company cannot
+export:</p>
+
+<p>“... you spoke of a possible license from the <abbr class="spell">G.E.</abbr> to export
+lamps to certain countries. I don’t know whether I explained
+the situation to you, but the fact is that in the world at large,
+the more important electrical interests, such as the <abbr class="spell">G.E.</abbr>, Siemens
+of Germany, Phillips of Holland, <abbr>etc.</abbr>, are closely bound
+together in a cartel with the result that they have entered into
+binding agreements, apportioning world markets between the
+respective companies. Accordingly you can see that if the <abbr class="spell">G.E.</abbr>
+broke their agreement and allowed us to export into a foreign
+country which was assigned under the cartel agreement to a
+European manufacturer, that European manufacturer would
+have a claim to enter the American market in competition with
+us and probably could not be restrained from doing so. This
+is something which would probably not be to our advantage.”</p>
+
+<p>One might as well urge that a railway wreck promotes transportation
+as to urge that a cartel agreement promotes trade.</p>
+
+<p>The cartelist lives in a land of make-believe. I do not suppose
+that we can object to anyone having his own private fairy
+tale, but this kind of fairy tale can be dangerous to the future
+peace and security of this country. It is a self-perpetuating fairy
+<span class="pagenum" id="Page_238">[Pg 238]</span>tale. It is founded on economic maladjustments and it tends
+to prolong these maladjustments by collecting a hidden tax
+from consumers and by donating the proceeds to monopolists
+who have no incentive to change their ways. The consequences
+can be disastrous in both the military and the political sphere.
+As for our own economic life, international cartels breed domestic
+monopolies. Their final result is complete government
+control and management of business.</p>
+
+<p>The cartelist appears to believe that the way to engage in
+foreign trade is to have a conference—a kind of Alice in Wonderland
+mad tea party. At this conference the world is divided
+up; markets are allocated; and, if he is fortunate, an American
+enterpriser will be given some business. At the end of the
+conference he can telephone his office and say “Men, we have
+been given the Shangri-La market; it’s all ours.” Sometimes
+the cartelist sounds as though he were too lazy to attend the
+conference himself. He wants his Government to go for him.
+He wants the Government to tell him what to do, what markets
+he can have, and what he can sell. One gets the impression that
+foreign trade is conducted in an armchair, that it is better if
+you can get the Government to do it for you, and that it does
+not make much difference what you have to sell.</p>
+
+<p>This kind of thinking is dangerous. It is a denial of the principle
+of private property with the profit reward for private
+initiative and risk taking. Foreign trade presents special problems,
+but it is none the less true in foreign as well as in domestic
+trade that if you want to sell you have to make a product the
+consumer wants to buy. In the development of the foreign
+market there is no panacea, no easy substitute for ingenuity and
+efficiency. We cannot expect the foreign consumer to adjust his
+desires to whatever it is we want to sell. We have to make the
+kind of a product he wants to buy. The truth of the matter is
+<span class="pagenum" id="Page_239">[Pg 239]</span>that many of the large concerns that have made cartel agreements
+have not been particularly anxious to sell in the foreign
+market. They have been more anxious to keep independent
+enterprise in this country from gaining access to foreign markets
+than they were to sell themselves. As a consequence we must
+frankly admit that in many industries, American enterprise has
+not shown the competitive alertness it has at home. If it does
+not show competitive alertness, it does not deserve the business.
+And you cannot find a substitute for competitive alertness in an
+armchair cartel conference or even in an intergovernmental
+cartel conference.</p>
+
+<p>The cartel conference is a kind of legislature, imposing hidden
+taxes on consumers and bestowing bounties on others, without
+the necessity for disclosure or responsibility to any electorate.
+It is truly a method of imposing taxation without representation.
+This is true in every cartel case. Some time ago it
+was fashionable to scoff at international relief or development
+projects as being international <abbr class="spell">WPA</abbr>s. Americans were asked
+rhetorically whether they wished to take care of inhabitants on
+some other portion of the globe. But no relief scheme has ever
+been imagined, and no one would dare to present it, which could
+begin to compare with the international relief societies maintained
+for themselves by the international cartels. Gigantic sums
+are drained from the American consumer each year and given
+outright to domestic monopolists and to foreign companies operating
+in protected markets. When it is urged that American
+companies should be allowed to join with foreign cartels in
+order to promote foreign trade, it should be remembered that
+what is there called foreign trade is in reality a gigantic relief
+enterprise supported by the American consumer. I can illustrate
+this with an example taken from one of our earliest cartel cases.</p>
+
+<p>The story begins prior to the First World War with the
+<span class="pagenum" id="Page_240">[Pg 240]</span>discovery and development in Germany of a way of making
+synthetic nitrate of soda by taking nitrogen out of the air. Prior
+to that discovery, the world was dependent upon Chile for its
+nitrate of soda for use in both fertilizer and the making of
+munitions. The discovery of this new way of making nitrate of
+soda changed the history of the world for it made it possible for
+the Germans to wage war without depending upon a raw material
+to be found only in the Western Hemisphere. It is probable
+that if synthetic nitrogen had not been discovered, the
+Germans could not have been able to go to war.</p>
+
+<p>The Allies at that time were dependent upon Chilean nitrate
+of soda, and as a military matter, this dependence made the
+Allied position in the first years of the war exceedingly precarious.
+The Germans knew that Great Britain could not stay
+in the war for any considerable length of time if it were cut
+off from its only source of nitrogen, and accordingly in 1917,
+the Germans set up a blockade outside of Valparaiso. The first
+attempt of the British to break this blockade was unsuccessful,
+but the blockade was finally removed as a result of the battle
+of the Falkland Islands when Admiral Von Spee was defeated.
+As an economic matter, this dependence of the Allies upon
+Chilean nitrate of soda was, of course, good for Chile. The
+United States in 1917 and 1918 purchased almost four million
+tons of nitrate from Chile; we paid on the average of about
+$82.50 per ton. At one time, the price rose to $150.00 per ton.
+In those days, Chile had a unique product, a natural monopoly,
+and we had to pay for it. The First World War gave to Chile
+the chance to receive large revenues on a valuable asset, but the
+First World War also created a situation where in the days to
+come that asset would depreciate enormously.</p>
+
+<p>The asset of Chilean nitrate of soda was depreciated enormously
+because all of the important countries of the world,
+<span class="pagenum" id="Page_241">[Pg 241]</span>including our own, began to produce synthetic nitrate of soda.
+Chile no longer had a natural monopoly safe from effective
+competition. The producers of synthetic nitrate of soda began
+to compete with each other and with the Chileans. In order
+to remove this competition they formed a cartel.</p>
+
+<p>The cartel was formed in 1926 and by 1938 it had reached its
+full growth. The cartel was dominated in Europe by the so-called
+<abbr class="spell">DEN</abbr> group, composed of Imperial Chemical Industries,
+<abbr title="Limited">Ltd.</abbr> for the British, Stickstoff-Syndikat, controlled by I. G.
+Farbenindustrie for the Germans, and Norsk Hydro for the
+Norwegians. The European end of the cartel formed an international
+company in Switzerland to handle the cartel affairs,
+and thus to represent the thirty-five principal European producers.
+By special agreements the cartel was extended to cover
+the Chilean producers of natural nitrate, and I am sorry to say,
+the important American producers as well. The cartel was an
+international combination to restrict production, maintain prices
+and to allocate territories. The world was divided up into special
+zones of influence; quotas were assigned, and sales in forbidden
+areas or above the allowed quota resulted in the assessment
+of penalties. Mexico, for instance, was allocated to the
+German producers. The American producers were required to
+refrain from exporting to certain areas. The Barrett Company
+could not sell substantial quantities of nitrate of soda into foreign
+markets reserved for the Chilean producers. Du Pont
+was kept from selling a nitrogenous product in the Philippine
+Islands. This was not an international trade agreement; as is
+true with all cartel agreements, this was an agreement to
+restrict trade.</p>
+
+<p>The cartel agreements covered the American market. Imports
+by a foreign company to this country had to be included
+in determining whether that company had exceeded its quota
+<span class="pagenum" id="Page_242">[Pg 242]</span>of the world market. American companies were restricted in
+their exports and to some extent in their production. And sales
+in the American market, whether for Chilean, European or
+American producers were at agreed upon prices. An elaborate
+system of distribution was worked out and adhered to so that
+these agreed upon prices could be maintained down through
+the wholesalers and retailers. The cartel thus reached down and
+touched the American farmer buying in the country store.</p>
+
+<p>Now nitrate of soda is important to the American farmer as
+are the other fertilizer nitrogen products which were covered
+by this cartel. In 1937, approximately 700,000 tons of nitrate
+of soda were imported from Chile for distribution to the American
+farmer. If there is a cartel in fertilizer nitrogen, it is the
+American farmer who pays. And he has paid in millions of dollars—a
+hidden tax to the foreign and domestic producers.</p>
+
+<p>Production was restricted and prices were fixed by this cartel.
+Some of the higher prices went to Chile; some of them went
+to our own producers and abroad. The consumer, who in this
+country happened to be the American farmer, paid a tax in the
+form of higher prices to keep this cartel going. He did not
+know he was paying this tax. He did not have the opportunity
+to elect a representative who might have been for or against
+this tax. And yet, out of every dollar the farmer paid, a part
+of it was an involuntary offering to the cartel.</p>
+
+<p>And what was the good from all of this? A hidden tax was
+collected; purchasing power was destroyed. And all of this
+was done so that productive capacity could go unused. Out of
+the hidden tax paid by the American farmer, only a part of it
+went to the Chilean companies; a good deal of it went to American
+and European producers.</p>
+
+<p>Whenever the argument is made that a cartel supports a distress
+industry, the complete answer is that it would be cheaper
+<span class="pagenum" id="Page_243">[Pg 243]</span>and better to make an outright gift, raised, if necessary, by lawful
+general taxation through the Congress. It would be cheaper
+because consumers would not be required to pay an additional
+amount to those who are not distressed as they have to do when
+the cartel keeps the general price up. It would be better because
+if it were a gift, it would not be raised from only one
+group of consumers, as in this case, the farmers. It would be
+better because the contributors to the gift fund would have some
+chance to know what they were doing and to decide whether
+they wanted to do it. Nor would the gift be as likely to disappear
+under the burden of an inefficient method of production
+as is the case with the hidden tax which is collected every year
+and which imposes no incentive upon the monopolist to change
+his ways. You cannot expect the monopolist to change his ways
+when he can collect a hidden tax every year. No doubt after
+this war, it will be argued that synthetic nitrogen capacity should
+go unused by agreement between the large companies. We
+should remember that if this is done, as with all cartel agreements,
+there is a <span id="TN21">hidden and unlawful tax</span>; in this case it would
+be the American farmers who would pay.</p>
+
+<p>I do not revive this synthetic nitrogen story in order to make
+charges, but merely as a specific illustration of the way cartels
+operate. The actual cases are the best answers to the argument
+that cartels promote trade. The synthetic nitrogen cartel was
+typical in many ways. The particular occasion for the birth of
+this cartel was the development of a synthetic process which
+threatened to destroy the capital value of a natural product.
+After this war, there will be many new processes whose existence
+will destroy old capital values and which can be looked
+upon either as keys to open the doors of new opportunities or as
+occasions for restrictive agreements. The synthetic nitrogen
+cartel brought together producers fearful of each other’s productive
+<span class="pagenum" id="Page_244">[Pg 244]</span>capacity. As is true in almost every important cartel,
+the restrictive agreements might have had important military
+consequences, even though many of the private producers were
+only thinking in terms of a peace-time market. And finally, this
+foreign cartel, as is so frequently the case, bred a domestic cartel.</p>
+
+<p>The effect is far-reaching both politically and economically.
+You can never deal with just one cartel separate from the others
+because the cartel world is an intricate and interrelated maze.
+Thus the foreign participants in the nitrogen cartel include the
+German I. G. Farbenindustrie and the British Imperial Chemical
+Industries—each a member of a variety of world dividing
+cartels. The American producers, whether they knew it or not,
+were entering into an international game to divide markets in
+which every market and every type of product was involved if
+the full scope of the cartel agreements of their partners were
+revealed. They were dealing in secret international diplomacy.</p>
+
+<p>In many cases they were in reality dealing with foreign governments,
+despite the fact that it has not been the policy of this
+country to have the conduct of our foreign affairs in private
+hands. Since 1799 an Act of Congress has prohibited every citizen
+of the United States, without the permission of the Government,
+from carrying on any written or verbal correspondence
+or intercourse with any foreign government with an intent to
+influence the measures or conduct of any foreign government
+in relation to any disputes or controversies with the United
+States. Quite apart from whether this criminal statute is applicable,
+its spirit would deny to any citizen the right to barter
+away the trade of the United States by agreement with a foreign
+government.</p>
+
+<p>One need only think of the possible disastrous effects of permitting
+Germany to build up a monopoly position in Latin
+<span class="pagenum" id="Page_245">[Pg 245]</span>America. The economic effects grow like a snow-ball. Thus in
+the instance of the synthetic nitrogen cartel, the American consumer
+lost purchasing power; that meant that American producers
+could sell less and could therefore buy less. The Chileans
+received only a portion of the amount of money taken out
+of purchasing power, but the related cartels operate in Chile,
+such as the chemical cartel of which both Imperial Chemical
+Industries and du Pont’s are members. And these cartels do
+the same thing to Chile that the synthetic nitrogen cartel did
+to us. Economic life is so related today that you cannot restrict
+one part and not have almost endless repercussions. For instance,
+if American movies should be kept out of foreign areas, the
+effect is immediate on all kinds of American products which
+are advertised continually through the medium of the motion
+picture. If the motion picture producers enter into a cartel
+agreement, they are restricting a good deal of American trade
+in addition to their own.</p>
+
+<p>What then is the solution? There is no solution if the problem
+is how can you have American firms enter into foreign
+cartel agreements but not restrict American trade and commerce.
+It is surely no solution to say that in the future we
+will have the governments enter into cartel agreements for us.
+As an economic matter, it makes no difference whether an agreement
+to restrict trade is private or governmental. As a political
+matter, I would agree that if we are going to have such agreements,
+with their widespread economic diseases, they had better
+be the responsibility of the government, if only because, the
+government which makes such agreements can be changed by
+the voters. But I would suggest that effective governmental
+control over such agreements would require such a degree of
+interferences and surveillance over private industry as to place
+in great jeopardy our own free enterprise-private property system.
+<span class="pagenum" id="Page_246">[Pg 246]</span>The history of attempts to control cartels by legalizing
+and controlling them is not particularly inspiring. Germany is
+one example.</p>
+
+<p>There is not any one solution because there is not just one
+problem. There are many things which must and can be done
+if this country is to encourage foreign trade.</p>
+
+<p><i>First</i>, we must encourage domestic research. Any country
+which wishes to engage in trade and commerce in the future
+industrial era must develop its own laboratories and encourage
+its own domestic research. It has sometimes been suggested that
+the reason why some of our larger American companies entered
+into agreements to <span id="TN22">stay out of important markets</span> such as Latin
+America was because such was the price they had to pay to
+get the benefits of European research. It has sometimes even
+been suggested that we have been dependent upon European
+research acquired in this manner for many of the important
+developments which have helped us in this war.</p>
+
+<p>There will probably always be a certain amount of obscurity
+about this claim that we are dependent upon European research.
+The files of some of the Antitrust Division cases, however, indicate
+that even though German firms may have been bound
+under their agreements to make their research available to their
+American friends, in many important instances they did not
+do so. In any event, I think we would agree that it is of the
+utmost importance that American firms be able to stand on their
+own feet, and that they should not be dependent upon research
+from abroad. It has been quite natural, of course, for European
+research to be in advance of our own in some fields. But failure
+to develop our own laboratories and our own scientists would
+be criminal negligence.</p>
+
+<p>I suggest that we ought to have an impartial and searching
+survey begun as soon as possible as to American research facilities
+<span class="pagenum" id="Page_247">[Pg 247]</span>and the state of American research. This is not a matter
+which concerns only our foreign trade. It goes to the very heart
+of our future domestic well-being.</p>
+
+<p>Of course, I do not mean to suggest that we should cut ourselves
+off from European research. There is every reason to
+believe that research in the future will be truly international
+in the sense that a partial discovery in England will be supplemented
+by work done in France or in this country. Possibly
+some inter-governmental agency can be developed which will
+act as a kind of international clearing house in order to speed
+the development of common research carried on in separate
+areas. It is likely that private institutions in this country and
+the government itself, as suggested by Senator Kilgore, could
+aid in the performing of this function. If a study were made
+of our own domestic research facilities, I would expect that out
+of that study a recommendation might well come to set up some
+kind of an international clearing house for research.</p>
+
+<p>There is a further step we can take. The research which has
+been developed in Germany during the last ten years under
+the Nazi regime is research which in right belongs to the people
+of the United Nations. It was Nazi government sponsored research
+used for the purpose of making war upon us. It is research
+which should now be put to use for the general good of
+mankind. It should not be considered as belonging to private
+hands either in Germany or elsewhere. The United Nations
+should make sure that steps are taken to make available this
+research so that it can be used generally.</p>
+
+<p><i>Second</i>, we must remove, through inter-governmental action,
+the waste and misuse of resources which occur when industries
+cannot compete and are artificially maintained. It will be much
+cheaper for this country to offer transitional credit to be used
+to develop new industries than to continue paying hidden taxes
+<span class="pagenum" id="Page_248">[Pg 248]</span>which don’t accomplish anything. We should set up an international
+mechanism whereby substantial credit can be made
+available to other countries upon such terms as will encourage
+the readjustment of the use of their resources so that these resources
+can be employed, without the crutch of a trade barrier,
+in the free trade of the world. Consistent with this aim, we can
+urge also the adoption of minimum wage and health standards
+so that labor exploitation does not become the means of providing
+a hidden subsidy for industry in countries having substandard
+labor conditions.</p>
+
+<p><i>Third</i>, it is, of course, imperative that this country make
+known its determination to encourage foreign trade and to
+make it possible for American firms, large and small, to bring
+their goods to the consumers who will buy. Through vigorous
+antitrust action, we can break up the activities of a great number
+of foreign cartels. And American firms are perfectly capable
+of engaging in vigorous competition with the old monopolistic
+companies of Europe. Where American industry is competitive
+at home, such as the automobile industry, there is no way a
+foreign company effectively can keep out American goods, and
+foreign consumers would be the first to object if that were
+tried. It is the industries which are monopolistically dominated
+at home which seem to have the greatest difficulty. I suspect,
+however, that in those industries there are smaller firms who
+will be glad to have the opportunity of selling abroad.</p>
+
+<p><i>Fourth</i>, we should stand ready to help create an international
+forum to which countries denied access to raw materials or
+allowed to purchase them only on the basis of monopolistic
+prices can go to present their case. This does not mean that
+we should take part in any international control of business, but
+it does mean that for those few areas where monopolies continue
+to persist, we must create a world where there is a remedy within
+<span class="pagenum" id="Page_249">[Pg 249]</span>the structure of the peace. Many of these raw materials no
+longer have their former importance. Poetic justice may come
+to rubber, quinine and eventually to diamonds. Persistence in
+monopoly prices usually stimulates the development of a substitute.
+The international forum which I urge will probably not
+have to hear too many cases. The power of competition has
+grown more powerful during the war because of the development
+of myriads of substitutes for the key raw materials.</p>
+
+<p>The opportunities are tremendous. The tools needed for the
+job are the productive facilities and materials which we will
+have in abundance. We can play our part with energy and
+initiative; we would not have it otherwise. We believe in competition,
+and we are ready to compete. We are ready to engage
+wholeheartedly in rebuilding a world of peace in which every
+man and every country can have a stake. We know that we
+cannot maintain, let alone advance our standard of living save
+upon the basis of an active and expanding international trade.
+Our expanding trade will enlarge the area of the interests which
+we have in common with other peoples, and for us, as well
+as for them, will narrow the intensity of our differences. And
+we will have played our part in foreign trade in such a way as
+to preserve the symbol of our political and economic democracy.</p>
+
+
+<hr class="chap x-ebookmaker-drop">
+<div class="chapter">
+
+<p><span class="pagenum" id="Page_250">[Pg 250]</span></p>
+
+
+  <h2 class="nobreak" id="APPENDIX_I">
+    <span class="xsmall">APPENDIX <abbr title="1">I</abbr></span>
+    <br>
+    <i>Recent Cases</i>
+  </h2>
+</div>
+
+
+<p>The most effective weapon presently available for combatting
+the influence of monopoly and cartel-minded international
+groups is vigorous enforcement of the antitrust laws. Congress
+has recognized that the natural effect of competition is to increase
+commerce—to extinguish or prevent the free play of
+competition is to hinder commerce. As was stated by <abbr>Mr.</abbr> Chief
+Justice Stone in the <i>Trenton Potteries</i> case:</p>
+
+<p>“Whatever difference of opinion there may be among economists
+as to the social and economic desirability of an unrestrained
+competitive system, it cannot be doubted that the Sherman
+Law and the judicial decisions interpreting it are based
+upon the assumption that the public interest is best protected
+from the evils of monopoly and price control by the maintenance
+of competition.”</p>
+
+<p>By passage of the antitrust laws, Congress has expressed the
+American policy of free competition not only in interstate trade
+and commerce but also in our foreign trade and commerce. The
+provisions of Section 73 of the Wilson Tariff Act further exemplify
+this doctrine with specific reference to imports to this
+country. Section 11 of the Panama Canal Act prohibits passage
+<span class="pagenum" id="Page_251">[Pg 251]</span>through the Panama Canal of ships owned or operated by
+persons doing business in violation of the antitrust laws. Thus,
+the practices of foreign cartels, involving elimination of competition
+and collectivization of industry, are inconsonant with
+the basic concepts of our antitrust laws and national economic
+policy. The type of arrangements which are the cornerstone of
+European cartelization, such as agreements dividing markets,
+allocating customers, controlling production and prices, and
+apportioning business have all been long declared to be in violation
+of our antitrust statutes by the courts.</p>
+
+<p>By and large, the antitrust laws can be effectively applied to
+combat restraints upon the domestic and foreign commerce of
+the United States whether the practices, agreements or conspiracies
+complained of have their inception in this country or
+elsewhere.</p>
+
+<p>It has become an accepted principle of law that acts done or
+agreements entered into in a foreign jurisdiction, even though
+lawful there, may be prosecuted or enjoined in this country
+where the effect or result of such acts or agreements is a violation
+of our laws. This principle has been applied in antitrust
+cases, and agreements which restrain our trade with foreign
+nations have been uniformly declared illegal. Our courts
+may control foreign citizens or corporations operating wholly
+in foreign territory, where their operations extend into the
+domestic and foreign commerce of this country, just as we may
+undoubtedly control the activities of our own citizens and our
+own corporations which impinge upon our domestic and foreign
+trade and commerce.</p>
+
+<p>The mere fact that a combination is formed in a foreign
+country does not prevent the application of our laws where
+it affects the foreign commerce of this country and is put into
+operation here. Conversely, combinations or agreements entered
+<span class="pagenum" id="Page_252">[Pg 252]</span>into in the United States and adversely affecting the foreign
+trade of this country are subject to the antitrust laws even
+though the acts done to effectuate the restraints are performed
+outside this country. It is recognized that some cartel arrangements
+are instigated by or under cover of foreign governmental
+authority, but unless the cartel arrangements complained of are
+solely participated in by the foreign government, the situation
+is not altered.</p>
+
+<p>While a foreign sovereign may have immunity from suit,
+such immunity does not apply to private individuals or organizations
+even though they may be acting pursuant to the laws
+of their own country, or as agents for their government or
+though a foreign government may have a substantial financial
+interest in the challenged organization and activities.</p>
+
+<p>The practical difficulty of acquiring personal jurisdiction over
+some of the foreign individual or corporate participants in a
+cartel which affects our foreign or domestic commerce is often
+confused with the question of whether or not a violation of
+our antitrust laws is involved. This, however, is a technical
+problem depending upon an aggregation of facts rather than
+a question of substantive law involved in restraints upon commerce.</p>
+
+<p>The following is a list of antitrust cartel cases instituted by
+the Department of Justice since 1937:</p>
+
+<p><i>Aircraft Accessories</i>: Bendix Aviation Corporation, <span lang="la">et <abbr title="alia">al.</abbr></span>;
+complaint filed November 19, 1942; postponement of trial
+requested by War and Navy Departments.</p>
+
+<p><i>Alkali</i>: United States Alkali Export <abbr title="Association">Assn.</abbr>, <abbr title="Incorporated">Inc.</abbr>, <span lang="la">et <abbr title="alia">al.</abbr></span>; complaint
+filed March 16, 1944; argument had May 10, 1944 on
+motions to dismiss.</p>
+
+<p><i>Aluminum</i>: Aluminum Company of America, <span lang="la">et <abbr title="alia">al.</abbr></span>; petition
+<span class="pagenum" id="Page_253">[Pg 253]</span>filed April 23, 1937; judgment denying Government relief
+filed July 23, 1942; on appeal.</p>
+
+<p><i>Chemicals</i>: Imperial Chemical Industries, <abbr title="Limited">Ltd.</abbr>, <span lang="la">et <abbr title="alia">al.</abbr></span>; complaint
+filed January 6, 1944.</p>
+
+<p><i>Chemicals and Petroleum (Including Synthetic Rubber)</i>:
+Standard Oil Company (<abbr title="New Jersey">N. J.</abbr>), <span lang="la">et <abbr title="alia">al.</abbr></span>; complaint filed March
+25, 1942; consent decree entered March 25, 1942; supplemental
+judgment filed April 7, 1943. Information filed and pleas
+of <span lang="la">nolo contendere</span> on March 25, 1942; fines levied totaled
+$50,000.</p>
+
+<p><i>Dyestuffs</i>: Allied Chemical &amp; Dye <abbr title="Corporation">Corp.</abbr>, <span lang="la">et <abbr title="alia">al.</abbr></span>; indictment
+returned May 14, 1942; Attorney General acquiesced to postponement
+of trial until it will not interfere with defendant’s
+war production. General Dyestuff <abbr title="Corporation">Corp.</abbr>, <span lang="la">et <abbr title="alia">al.</abbr></span>; indictment returned
+December 19, 1941; pending on preliminary motions.</p>
+
+<p><i>Fertilizer</i>: American Potash &amp; Chemical <abbr title="Corporation">Corp.</abbr>, <span lang="la">et <abbr title="alia">al.</abbr></span>; complaint
+filed May 15, 1940; consent decree entered May 21,
+1940. Chilean Nitrate Sales <abbr title="Corporation">Corp.</abbr>, <span lang="la">et <abbr title="alia">al.</abbr></span>; indictment returned
+September 1, 1939; dismissed as to 18 defendants June 3,
+1941 to August 28, 1942; pleas of <span lang="la">nolo contendere</span> by 6 defendants
+August 28, 1942; fines levied totalling $35,000. Allied
+Chemical &amp; Dye <abbr title="Corporation">Corp.</abbr>, <span lang="la">et <abbr title="alia">al.</abbr></span>; complaint and consent decree
+entered May 29, 1941. Imperial Chemical Industries
+(<abbr title="New York">N. Y.</abbr>), <abbr title="Limited">Ltd.</abbr>, <span lang="la">et <abbr title="alia">al.</abbr></span>; complaint and consent decree February
+17 and 18, 1942. Mutual Chemical Company of America, <span lang="la">et
+<abbr title="alia">al.</abbr></span>; indictment returned June 26, 1942; Attorney General
+acquiesced to requests by War and Navy Departments for postponement
+of trial. Synthetic Nitrogen Products <abbr title="Corporation">Corp.</abbr>, <span lang="la">et <abbr title="alia">al.</abbr></span>;
+complaint and consent decree, September 5, 1941.</p>
+
+<p><i>Fluorescent Lamps</i>: General Electric Company, <span lang="la">et <abbr title="alia">al.</abbr></span>; complaint
+filed December 9, 1942; Attorney General acquiesced to
+postponement of trial requested by War and Navy Departments.</p>
+
+<p><span class="pagenum" id="Page_254">[Pg 254]</span></p>
+
+<p><i>Fuel Injection Equipment</i>: American Bosch <abbr title="Corporation">Corp.</abbr> and Donald
+P. Hess; complaint and consent decree, December 29, 1942.</p>
+
+<p><i>Glass Bulbs</i>: Corning Glass Works, <span lang="la">et <abbr title="alia">al.</abbr></span>; indictment returned
+August 28, 1940; pleas of <span lang="la">nolo contendere</span> and fines totalling
+$47,000 September 9, 1941.</p>
+
+<p><i>Gyroscopic Instruments</i>: The Sperry Corporation, <span lang="la">et <abbr title="alia">al.</abbr></span>;
+complaint and consent decree entered September 1, 1942.</p>
+
+<p><i>Hormones</i>: Ciba Pharmaceutical Products, <abbr title="Incorporated">Inc.</abbr>, <span lang="la">et <abbr title="alia">al.</abbr></span>; information
+filed and pleas of <span lang="la">nolo contendere</span>, December 17, 1941;
+fines of $18,000. Roche-Organon, <abbr title="Incorporated">Inc.</abbr>, and Elmer H. Bobst;
+information filed and pleas of <span lang="la">nolo contendere</span>, December 17,
+1941; fines of $6,000. Schering Corporation, <span lang="la">et <abbr title="alia">al.</abbr></span>; information
+filed and pleas of <span lang="la">nolo contendere</span>, December 17, 1941;
+fines of $24,000; complaint and consent decree entered same
+day. Swiss Bank Corporation; complaint and consent decree,
+December 17, 1941. Julius Weltzien and Schering Corporation;
+information filed and pleas of <span lang="la">nolo contendere</span>, December
+17, 1941; fines of $6,000.</p>
+
+<p><i>Incandescent Lamps</i>: General Electric Company, <span lang="la">et <abbr title="alia">al.</abbr></span>; complaint
+filed January 27, 1941; Attorney General acquiesced to
+postponement of trial requested by War and Navy Departments.</p>
+
+<p><i>Magnesite Brick</i>: Harbison-Walker Refractories Company,
+<span lang="la">et <abbr title="alia">al.</abbr></span>; indictment returned January 20, 1941; pleas of <span lang="la">nolo
+contendere</span> and fines of $76,500, July 22, 1941; pending as
+to Veitscher Magnesitwerke Aktiengesellschaft and Magnesit
+<abbr title="Company">Co.</abbr>, <abbr title="Limited">Ltd.</abbr>, whose motion to vacate services of summons has been
+referred to a special master, also as to Magnesit Industrie
+Aktiengesellschaft.</p>
+
+<p><i>Magnesium</i>: Aluminum Company of America, <span lang="la">et <abbr title="alia">al.</abbr></span>; complaint
+filed; consent decree entered April 15, 1942; indictment
+returned January 30, 1941; pleas of <span lang="la">nolo contendere</span>,
+<span class="pagenum" id="Page_255">[Pg 255]</span>April 15, 1942, and fines of $104,993. To be set for trial as
+to I. G. Farben and Dietrich Schmitz. American Magnesium
+Corporation, <span lang="la">et <abbr title="alia">al.</abbr></span>; indictment returned January 30, 1941;
+pleas of <span lang="la">nolo contendere</span> and fines of $15,003, April 15, 1942;
+case to be set for trial as to I. G. Farben and Gustav Pistor.
+Dow Chemical Company, <span lang="la">et <abbr title="alia">al.</abbr></span>; indictment returned January
+30, 1941; pleas of <span lang="la">nolo contendere</span> and fines of $20,004, April
+15, 1942; to be set for trial as to I. G. Farben.</p>
+
+<p><i>Matches</i>: Diamond Match Company, <span lang="la">et <abbr title="alia">al.</abbr></span>; complaint filed
+May 1, 1944.</p>
+
+<p><i>Military Optical Instruments</i>: Bausch &amp; Lomb Optical Company,
+<span lang="la">et <abbr title="alia">al.</abbr></span>; indictment returned March 26, 1940; pleas of
+<span lang="la">nolo contendere</span> and fines of $41,000, May 27, 1940 and March
+5, 1941; pending as to Carl Zeiss (a German firm). Complaint
+filed July 9, 1940, and consent decree entered same day as to
+all defendants except Carl Zeiss.</p>
+
+<p><i>Molybdenum</i>: Climax Molybdenum Company, <span lang="la">et <abbr title="alia">al.</abbr></span>; complaint
+filed August 19, 1942 and consent decree entered August
+21, 1942.</p>
+
+<p><i>News Reporting</i>: The Associated Press, <span lang="la">et <abbr title="alia">al.</abbr></span>; complaint filed
+August 28, 1942; Decree for Government January 13, 1944;
+appeal of defendants docketed in Supreme Court, April 13,
+1944.</p>
+
+<p><i>Newsprint Paper</i>: Crown Zellerbach Corporation, <span lang="la">et <abbr title="alia">al.</abbr></span>; indictment
+returned July 12, 1939; 6 defendants pleaded <span lang="la">nolo
+contendere</span> and were fined $30,000, May 2, 1941; remaining
+defendants dismissed.</p>
+
+<p><i>Pharmaceutical Products</i>: Alba Pharmaceutical Company,
+<abbr title="Incorporated">Inc.</abbr>, <span lang="la">et <abbr title="alia">al.</abbr></span>; information filed, pleas of <span lang="la">nolo contendere</span>, and
+fines of $26,000, September 5, 1941; complaint filed and consent
+decree entered same day. The Bayer Company, <abbr title="Incorporated">Inc.</abbr>, <span lang="la">et
+<abbr title="alia">al.</abbr></span>; complaint filed and consent decree entered, September 5,
+<span class="pagenum" id="Page_256">[Pg 256]</span>1941. Merck &amp; Company, <abbr title="Incorporated">Inc.</abbr>, <span lang="la">et <abbr title="alia">al.</abbr></span>; complaint filed October
+28, 1943; Government moved to join the Alien Property
+Custodian as party plaintiff, May 8, 1944.</p>
+
+<p><i>Photographic Materials</i>: General Aniline &amp; Film Corporation,
+<span lang="la">et <abbr title="alia">al.</abbr></span>; indictment returned December 19, 1941; pending
+on preliminary motions. Dietrich A. Schmitz, <span lang="la">et <abbr title="alia">al.</abbr></span>; indictment
+returned December 19, 1941; pending on preliminary
+motions.</p>
+
+<p><i>Plastics</i>: E. I. du Pont de Nemours &amp; Company, <span lang="la">et <abbr title="alia">al.</abbr></span>; indictment
+returned August 10, 1942; Attorney General acquiesced
+to postponement of trial requested by War and Navy
+Departments.</p>
+
+<p><i>Quebracho</i>: The Forestal Land, Timber and Railways, <abbr title="Limited">Ltd.</abbr>,
+<span lang="la">et <abbr title="alia">al.</abbr></span>; complaint filed December 20, 1943; pending on preliminary
+motions. The Tannin Corporation, <span lang="la">et <abbr title="alia">al.</abbr></span>; indictment
+returned November 24, 1942; pleas of <span lang="la">nolo contendere</span> <span id="TN23">and
+fines of $59,003</span>, January 12, 1943 and April 19, 1943; dismissed
+as to the remaining defendants, August 24, 1943.</p>
+
+<p><i>Titanium Compounds</i>: National Lead Company, <span lang="la">et <abbr title="alia">al.</abbr></span>; indictment
+returned June 28, 1943; case set for trial on October
+3, 1944; complaint filed July 1, 1944.</p>
+
+<p><i>Tungsten Carbide</i>: General Electric Company, <span lang="la">et <abbr title="alia">al.</abbr></span>; indictment
+returned August 30, 1940; superceding indictment returned
+October 21, 1941; Attorney General acquiesced to postponement
+of trial requested by War and Navy Departments.</p>
+
+
+<hr class="chap x-ebookmaker-drop">
+<div class="chapter">
+
+<p><span class="pagenum" id="Page_257">[Pg 257]</span></p>
+
+
+  <h2 class="nobreak" id="APPENDIX_II">
+    <span class="xsmall">APPENDIX <abbr title="2">II</abbr></span>
+    <br>
+    <i>Bibliography</i>
+  </h2>
+</div>
+
+
+<p>Arnold, Thurman W., <cite>The Bottlenecks of Business</cite>, New
+York, 1940.</p>
+
+<p>Ballande, Laurence, <cite lang="fr">Essai d’etude Monographique et Statistique
+sur les Ententes Economiques Internationales</cite>, Paris, 1936.</p>
+
+<p>Boehm, Franz, <cite lang="de">Wettbewerb und Monopolkampf</cite>, Berlin,
+1933.</p>
+
+<p>Borkin, Joseph and Welsh, Charles A., <cite>Germany’s Master
+Plan</cite>, New York, 1943.</p>
+
+<p>Burns, Arthur R., <cite>The Decline of Competition</cite>, New York,
+1936.</p>
+
+<p>Clark, John B., <cite>Control of Trusts</cite>, New York, 1912.</p>
+
+<p>Conte, Roger, <cite>Report on International Industrial Ententes</cite>,
+Paris, 1927. (International Chamber of Commerce Brochure
+<abbr title="Number">No.</abbr> 46).</p>
+
+<p>Domeratzky, Louis, <cite>The International Cartel Movement</cite>,
+Washington, 1928. (<abbr title="United States">U. S.</abbr> Department of Commerce, Bureau
+of Foreign and Domestic Commerce, Trade Information Bulletin
+<abbr title="Number">No.</abbr> 556).</p>
+
+<p>Edwards, Corwin, <cite>Economic and Political Aspects of International
+Cartels</cite>, Washington, 1944.</p>
+
+<p><span class="pagenum" id="Page_258">[Pg 258]</span></p>
+
+<p>Elliott, William Y., and May, Elizabeth S., and Rowe,
+I. W. F., and others, <cite>International Control in the Nonferrous
+Metals</cite>, New York, 1937.</p>
+
+<p>Ely, Richard T., <cite>Monopoly and Trusts</cite>, New York, 1912.</p>
+
+<p>Ertel, Erich, <cite lang="de">Internationale Kartelle und Konzerne der Industrie</cite>,
+Stuttgart, 1930.</p>
+
+<p>Fetter, Frank A., <cite>The Masquerade of Monopoly</cite>, New York,
+1931.</p>
+
+<p>Friedlaender, Heinrich, <cite lang="de">Die Rechtslage der Konzerne und
+Kartelle in Europa</cite>, Zurich, 1938.</p>
+
+<p>Greaves, H. R. G., <cite>Raw Materials and International Control</cite>,
+London, 1936.</p>
+
+<p>Hamilton, Walton H., <cite>The Pattern of Competition</cite>, New
+York, 1940.</p>
+
+<p>Hantos, Elemer, <cite lang="de">Mitteleuropaeische Kartelle im Dienste des
+Industriellen Zusammenschlusses</cite>, Berlin, 1931.</p>
+
+<p>Hexner, Ervin, <cite>The International Steel Cartel</cite>, Chapel Hill,
+1943.</p>
+
+<p>Hodson, H. V., <cite>Slump and Recovery</cite>, 1929–37, London,
+New York, Toronto, 1938.</p>
+
+<p>Holland, W. L., Editor, <cite>Commodity Control in the Pacific
+Area</cite>, Stanford, 1935.</p>
+
+<p>International Labor Office, <cite>Intergovernmental Commodity
+Control Agreements</cite>, Montreal, 1943.</p>
+
+<p>Jenks, Jeremiah W., <cite>The Trust Problem</cite>, New York, 1929.</p>
+
+<p>Johnson, Eric, <cite>America Unlimited</cite>, New York, 1944.</p>
+
+<p>Kyrpriotis, M., <cite lang="fr">Les Cartels Internationaux</cite>, Paris, 1936.</p>
+
+<p>Laidler, Harry W., <cite>Concentration of Control in American
+Industry</cite>, New York, 1931.</p>
+
+<p>League of Nations Council, Report of the Committee for the
+Study of Raw Materials, <cite>Official Journal</cite>, December, 1937.</p>
+
+<p><span class="pagenum" id="Page_259">[Pg 259]</span></p>
+
+<p>League of Nations, <cite>Economic Aspects of Several International
+Industrial Agreements</cite>, Geneva, 1930.</p>
+
+<p>Levi, Edward H., “Cartels and the War” in <cite>War and the
+Law</cite>, edited by B. W. Puttkammer, Chicago, 1944.</p>
+
+<p>Liefmann, Robert, <cite>Cartels, Concerns and Trusts</cite>, London,
+1932.</p>
+
+<p>MacGregor, David H., <cite>Industrial Combinations</cite>, London,
+1938.</p>
+
+<p>MacGregor, David H., <cite>International Cartels</cite>, Geneva, 1927.</p>
+
+<p>Marquand, Hilary A., <cite>Dynamics of Industrial Combinations</cite>,
+New York, 1931.</p>
+
+<p>Meyers, Ernest S., &amp; Lewis, Seymour D., “The Patent
+‘Franchise’ and the Antitrust Laws,” <cite>Georgetown Law Journal</cite>,
+December 1941 and January 1942.</p>
+
+<p>Michels, Rudolf, <cite>Cartels, Combines and Trusts in Postwar
+Germany</cite>, London, 1928.</p>
+
+<p>Notz, William F., <cite>Representative International Cartels,
+Combines, and Trusts</cite>, Washington, 1929. (<abbr title="United States">U. S.</abbr> Department
+of Commerce, Bureau of Foreign and Domestic Commerce,
+Trade Promotion Series <abbr title="Number">No.</abbr> 81).</p>
+
+<p>Oualid, William, <cite>International Raw Materials Cartels</cite>, Paris,
+1938. (League of Nations, International Studies Conference.)</p>
+
+<p>Piotrowski, Roman, <cite>Cartels and Trusts</cite>, London, 1933.</p>
+
+<p>Plummer, Alfred, <cite>International Combines in Modern Industry</cite>,
+London, 1938.</p>
+
+<p>Pribram, Karl, <cite>Cartel Problems</cite>, Washington, 1935.</p>
+
+<p>Rappeport, Samuel, <cite lang="fr">Les Cartels en Pologne</cite>, Nancy, 1935.</p>
+
+<p>Razous, Paul, <cite lang="fr">Cartels, Trusts, et Divers Ententes de Producteurs</cite>,
+Paris, 1935.</p>
+
+<p>Reimann, Guenter, <cite>Patents for Hitler</cite>, New York, 1943.</p>
+
+<p><span class="pagenum" id="Page_260">[Pg 260]</span></p>
+
+<p>Robbins, Lionel, <cite>Economic Planning and International Order</cite>,
+London, 1937.</p>
+
+<p>Rowe, I. W. F., <cite>Markets and Men</cite>, New York, Cambridge,
+1936.</p>
+
+<p>Staley, Eugene, <cite>Raw Materials in Peace and War</cite>, New
+York, 1937.</p>
+
+<p>Tschernoff, J., <cite lang="fr">Ententes Economiques et Financieres</cite>, Paris,
+1933.</p>
+
+<p>United States Congress, <cite>Hearings Before the Temporary
+National Economic Committee, <abbr>76th</abbr> Congress, <abbr>3rd</abbr> Session on
+Public Resolution <abbr title="Number">No.</abbr> 113, Investigation of Concentration of
+Economic Power</cite>, Testimony of Theodore J. Kreps, Part 25,
+Washington, 1940.</p>
+
+<p>United States Congress, <cite>Hearings Before the Senate Committee
+on Patents, <abbr>77th</abbr> Congress, <abbr>2nd</abbr> Session on S-2303, Patents</cite>.
+Washington, 1942.</p>
+
+<p>Veblen, Thorstein, <cite>Imperial Germany and the Industrial
+Revolution</cite>, New York, 1942.</p>
+
+<p>Voorhis, Jerry, <cite>Beyond Victory</cite>, New York, 1944.</p>
+
+<p>Wallace, Benjamin Bruce and Edminster, Lynn Ramsey, <cite>International
+Control of Raw Materials</cite>, Washington, 1930.</p>
+
+<p>Warriner, Dorun, <cite>Combines and Rationalization in Germany</cite>,
+London, 1931.</p>
+
+<p>Watkins, Myron W., <cite>Industrial Combinations and Public
+Policy</cite>, Boston, 1927.</p>
+
+<p>Wheeler, Leslie, “Agricultural Surpluses in the Postwar
+World,” <cite>Foreign Affairs</cite>, <abbr title="volume">v.</abbr> 20, 1941.</p>
+
+<p>Wiedenfeld, Kurt, <cite>Cartels and Combines</cite>, Geneva, 1927.
+(League of Nations publication.)</p>
+
+
+<hr class="chap x-ebookmaker-drop">
+<div class="chapter">
+
+<p><span class="pagenum" id="Page_261">[Pg 261]</span></p>
+
+
+  <h2 class="nobreak" id="Index">
+    <i>Index</i>
+  </h2>
+</div>
+
+
+<ul class="index">
+  <li class="ifrst">Abbe, <abbr>Dr.</abbr> Ernst, <a href="#Page_144">144</a></li>
+
+  <li class="indx">Abbott Laboratories, <a href="#Page_92">92</a>, <a href="#Page_95">95</a>, <a href="#Page_96">96</a>, <a href="#Page_110">110</a></li>
+
+  <li class="indx">Acetol Products, <abbr title="Incorporated">Inc.</abbr>, <a href="#Page_87">87</a>, <a href="#Page_91">91</a>, <a href="#Page_93">93</a>, <a href="#Page_105">105</a>, <a href="#Page_110">110</a></li>
+
+  <li class="indx">Addison’s disease, <a href="#Page_61">61</a>, <a href="#Page_73">73</a></li>
+
+  <li class="indx">Agriculture, <abbr title="Department">Dept.</abbr> of, <a href="#Page_109">109</a></li>
+
+  <li class="indx">Aircraft accessories, <a href="#Page_252">252</a></li>
+
+  <li class="indx">Airplanes, <a href="#Page_157">157</a></li>
+
+  <li class="indx">Alba Pharmaceutical <abbr title="Company">Co.</abbr>, <a href="#Page_256">256</a></li>
+
+  <li class="indx">Alien Property Custodian, <a href="#Page_34">34</a>, <a href="#Page_59">59</a>, <a href="#Page_64">64</a>, <a href="#Page_76">76</a>, <a href="#Page_81">81</a>,
+    <a href="#Page_125">125</a>, <a href="#Page_140">140</a>, <a href="#Page_143">143</a>, <a href="#Page_178">178</a>, <a href="#Page_200">200</a>, <a href="#Page_219">219</a>,
+    <a href="#Page_220">220</a>, <a href="#Page_256">256</a></li>
+
+  <li class="indx">Alig Agreement, <a href="#Page_222">222</a></li>
+
+  <li class="indx">Alkasso (See <a href="#idx_United_States_Alkali_Export_Assn">United States Alkali Export <abbr title="Association">Ass’n.</abbr></a>), <a href="#Page_193">193</a>, <a href="#Page_199">199–204</a>, <a href="#Page_252">252</a></li>
+
+  <li class="indx">Allied Chemical and Dye, <a href="#Page_181">181</a>, <a href="#Page_253">253</a></li>
+
+  <li class="indx">Allies, <a href="#Page_215">215</a>, <a href="#Page_240">240</a></li>
+
+  <li class="indx">Aluminum, <a href="#Page_11">11</a>, <a href="#Page_33">33</a>, <a href="#Page_221">221</a>, <a href="#Page_222">222</a>, <a href="#Page_236">236</a>,
+    <a href="#Page_253">253</a></li>
+
+  <li class="indx">Aluminum <abbr title="Company">Co.</abbr> of America, <a href="#Page_221">221–225</a>, <a href="#Page_253">253</a>, <a href="#Page_255">255</a></li>
+
+  <li class="indx">Aluminum production, French, <a href="#Page_6">6</a></li>
+
+  <li class="indx">American Bosch <abbr title="Corporation">Corp.</abbr>, <a href="#Page_254">254</a></li>
+
+  <li class="indx">American Magnesium <abbr title="Corporation">Corp.</abbr>, <a href="#Page_221">221–223</a>, <a href="#Page_255">255</a></li>
+
+  <li class="indx">American Medical <abbr title="Association">Ass’n.</abbr>, <a href="#Page_90">90</a>, <a href="#Page_106">106</a></li>
+
+  <li class="indx">American Potash and Chemical <abbr title="Corporation">Corp.</abbr>, <a href="#Page_200">200</a>, <a href="#Page_202">202</a>, <a href="#Page_253">253</a></li>
+
+  <li class="indx">American Tanners, <abbr title="Limited">Ltd.</abbr>, <a href="#Page_122">122</a></li>
+
+  <li class="indx">American Telephone and Telegraph <abbr title="Company">Co.</abbr>, <a href="#Page_21">21</a></li>
+
+  <li class="indx">Animal Industries Bureau, <a href="#Page_109">109</a></li>
+
+  <li class="indx">Antitrust Division of <abbr title="Department">Dept.</abbr> of Justice, <a href="#Page_35">35</a>, <a href="#Page_83">83</a></li>
+
+  <li class="indx">Antitrust laws, <a href="#Page_38">38</a>, <a href="#Page_48">48</a>, <a href="#Page_58">58</a>, <a href="#Page_77">77</a>, <a href="#Page_130">130</a>, <a href="#Page_154">154</a>,
+    <a href="#Page_176">176</a>, <a href="#Page_198">198</a>, <a href="#Page_205">205</a>, <a href="#Page_250">250</a>, <a href="#Page_251">251</a></li>
+
+  <li class="indx">Argentina, <a href="#Page_71">71</a>, <a href="#Page_113">113–115</a>, <a href="#Page_119">119</a>, <a href="#Page_165">165</a>, <a href="#Page_176">176</a>,
+    <a href="#Page_183">183</a>, <a href="#Page_184">184</a></li>
+
+  <li class="indx">Armistice, <a href="#Page_215">215</a></li>
+
+  <li class="indx">Army Air Corps, <a href="#Page_22">22</a>, <a href="#Page_23">23</a>, <a href="#Page_25">25</a></li>
+
+  <li class="indx">Arthritis, <a href="#Page_57">57</a>, <a href="#Page_91">91</a></li>
+
+  <li class="indx">Associated Press, <a href="#Page_256">256</a></li>
+
+  <li class="indx">Asthma, <a href="#Page_91">91</a></li>
+
+  <li class="indx">Atabrine, <a href="#Page_229">229</a>, <a href="#Page_230">230</a></li>
+
+  <li class="indx">Atlantic Charter, <a href="#Page_10">10</a>, <a href="#Page_209">209</a></li>
+
+  <li class="indx">Atlantis S. A. Panama, <a href="#Page_69">69</a>, <a href="#Page_70">70</a>, <a href="#Page_71">71</a></li>
+
+  <li class="indx">Ayerst, McKenna and <abbr title="Company">Co.</abbr>, <a href="#Page_89">89</a></li>
+
+
+  <li class="ifrst">Badische Anilin und Sodafabrik A.G., <a href="#Page_211">211</a></li>
+
+  <li class="indx">Barkey, J. A., <a href="#Page_121">121</a></li>
+
+  <li class="indx">Barney, L. D., <a href="#Page_85">85</a>, <a href="#Page_87">87</a>, <a href="#Page_97">97</a>, <a href="#Page_100">100</a>, <a href="#Page_104">104</a></li>
+
+  <li class="indx">Barrett <abbr title="Company">Co.</abbr>, <a href="#Page_241">241</a></li>
+
+  <li class="indx">Bartholomew, Sir Clarence, <a href="#Page_185">185</a></li>
+
+  <li class="indx">Barton, L. E., <a href="#Page_126">126</a></li>
+
+  <li class="indx">Basal Agency, <a href="#Page_122">122</a></li>
+
+  <li class="indx">Bauer, K. A., <a href="#Page_173">173</a></li>
+
+  <li class="indx">Bausch and Lomb <abbr class="spell">G.m.b.H.</abbr> Frankfort-on-the Main, <a href="#Page_155">155</a></li>
+
+  <li class="indx">Bausch and Lomb Optical <abbr title="Company">Co.</abbr> (Rochester), <a href="#Page_24">24</a>, <a href="#Page_142">142–175</a>, <a href="#Page_255">255</a></li>
+
+  <li class="indx">Bausch, Carl L., <a href="#Page_155">155</a></li>
+
+  <li class="indx">Bausch, <abbr>Dr.</abbr> Edward, <a href="#Page_154">154</a>, <a href="#Page_165">165</a>, <a href="#Page_166">166</a>, <a href="#Page_170">170</a>, <a href="#Page_171">171</a></li>
+
+  <li class="indx"><span id="idx_Bayer">Bayer</span>, <a href="#Page_205">205</a> (See <a href="#idx_Germanin">Germanin</a>), <a href="#Page_55">55</a></li>
+
+  <li class="indx">Bayer <abbr title="Company">Co.</abbr>, <abbr title="Incorporated">Inc.</abbr>, <a href="#Page_256">256</a></li>
+
+  <li class="indx">Bayliss, <a href="#Page_60">60</a></li>
+
+  <li class="indx">Belgian Congo, <a href="#Page_1">1</a></li>
+
+  <li class="indx">Belgian Solvay (See <a href="#idx_Solvay_et_Cie">Solvay et Cie</a>), <a href="#Page_202">202–204</a></li>
+
+  <li class="indx">Bell Laboratories, <a href="#Page_21">21</a></li>
+
+  <li class="indx">Bell System, <a href="#Page_22">22</a></li>
+
+  <li class="indx">Bendix Aviation <abbr title="Corporation">Corp.</abbr>, <a href="#Page_218">218</a>, <a href="#Page_252">252</a></li>
+
+  <li class="indx">Berst-Forster-Dixfield <abbr title="Company">Co.</abbr>, <a href="#Page_185">185–189</a>, <a href="#Page_191">191</a></li>
+
+  <li class="indx">Beryllium, <a href="#Page_34">34</a>, <a href="#Page_47">47</a>, <a href="#Page_220">220</a></li>
+
+  <li class="indx">Beryllium <abbr title="Corporation">Corp.</abbr> of America, <a href="#Page_220">220</a></li>
+
+  <li class="indx">Binoculars, <a href="#Page_143">143</a>, <a href="#Page_166">166</a>, <a href="#Page_170">170–174</a></li>
+
+  <li class="indx">Blacklisting, <a href="#Page_101">101</a></li>
+
+  <li class="indx">Blumenfeld, Joseph, <a href="#Page_127">127</a>, <a href="#Page_129">129</a></li>
+
+  <li class="indx">Bobst, Elmer H., <a href="#Page_254">254</a></li>
+
+  <li class="indx">Boehringer and Sons, C. F. (Mannheim), <a href="#Page_61">61</a>, <a href="#Page_74">74–76</a></li>
+
+  <li class="indx">Bombsights, <a href="#Page_144">144</a>, <a href="#Page_156">156</a></li>
+
+  <li class="indx">Borden <abbr title="Company">Co.</abbr>, <a href="#Page_89">89</a>, <a href="#Page_106">106</a></li>
+
+  <li class="indx">Bosch, Robert, A. G., <a href="#Page_214">214</a></li>
+
+  <li class="indx">Brazil, <a href="#Page_113">113</a>, <a href="#Page_114">114</a>, <a href="#Page_176">176</a>, <a href="#Page_183">183</a></li>
+
+  <li class="indx">British Cabinet, <a href="#Page_5">5</a>, <a href="#Page_8">8</a></li>
+
+  <li class="indx">British Laporte <abbr title="Company">Co.</abbr>, <a href="#Page_133">133</a></li>
+
+  <li class="indx">British Match <abbr title="Corporation">Corp.</abbr>, <abbr title="Limited">Ltd.</abbr>, <a href="#Page_185">185</a></li>
+
+  <li class="indx">British Maxium, <a href="#Page_223">223</a></li>
+
+  <li class="indx">British Purchasing Commission, <a href="#Page_217">217</a></li>
+
+  <li class="indx">British Titan Products, <abbr title="Limited">Ltd.</abbr>, <a href="#Page_133">133</a>, <a href="#Page_134">134</a></li>
+
+  <li class="indx"><span class="pagenum" id="Page_262">[Pg 262]</span>Brodbeck, James, <a href="#Page_72">72</a></li>
+
+  <li class="indx">Bryant and May, <abbr title="Limited">Ltd.</abbr>, <a href="#Page_185">185</a>, <a href="#Page_189">189</a>, <a href="#Page_190">190</a></li>
+
+  <li class="indx">Bulbs, glass, <a href="#Page_254">254</a></li>
+
+  <li class="indx">Buna, <a href="#Page_212">212</a></li>
+
+  <li class="indx">Buttle, N. A., <a href="#Page_101">101</a></li>
+
+
+  <li class="ifrst">California Alkali Export <abbr title="Association">Ass’n.</abbr>, <a href="#Page_193">193</a>, <a href="#Page_199">199–204</a></li>
+
+  <li class="indx">Canada, <a href="#Page_16">16</a>, <a href="#Page_79">79</a>, <a href="#Page_132">132</a>, <a href="#Page_176">176–178</a>, <a href="#Page_181">181</a>, <a href="#Page_186">186</a>,
+    <a href="#Page_187">187</a>, <a href="#Page_190">190</a>, <a href="#Page_203">203</a>, <a href="#Page_217">217</a>, <a href="#Page_218">218</a>, <a href="#Page_225">225</a></li>
+
+  <li class="indx">Canadian Industries <abbr title="Limited">Ltd.</abbr>, <a href="#Page_134">134</a>, <a href="#Page_181">181</a>, <a href="#Page_184">184</a>, <a href="#Page_225">225</a></li>
+
+  <li class="indx">Canadian Titanium Pigments, <abbr title="Limited">Ltd.</abbr>, <a href="#Page_134">134</a></li>
+
+  <li class="indx">Carnation <abbr title="Company">Co.</abbr>, <a href="#Page_106">106</a></li>
+
+  <li class="indx">Carpenter, Walter Samuel, <abbr title="Junior">Jr.</abbr>, <a href="#Page_179">179</a></li>
+
+  <li class="indx">Casado extract, <a href="#Page_118">118</a></li>
+
+  <li class="indx">Chamberlain, Joseph, <a href="#Page_5">5</a></li>
+
+  <li class="indx">Chemical and Pharmaceutical Enterprises, <abbr title="Limited">Ltd.</abbr>, <a href="#Page_64">64</a>, <a href="#Page_68">68–70</a></li>
+
+  <li class="indx">Chemical Marketing <abbr title="Company">Co.</abbr>, <a href="#Page_215">215</a></li>
+
+  <li class="indx">Chemical pharmaceutical industry, <a href="#Page_54">54</a></li>
+
+  <li class="indx">Chemicals, <a href="#Page_253">253</a></li>
+
+  <li class="indx">Chepha, <a href="#Page_64">64</a>, <a href="#Page_68">68–70</a></li>
+
+  <li class="indx">Chilean Nitrate Sales <abbr title="Corporation">Corp.</abbr>, <a href="#Page_253">253</a></li>
+
+  <li class="indx"><span id="idx_Chimio">Chimio</span> (See <a href="#idx_Les_Laboratories_Francais_de_Chimiotherapie">Les Laboratoires Francais de Chimiotherapie</a>), <a href="#Page_61">61</a>, <a href="#Page_76">76</a></li>
+
+  <li class="indx">Chlorate of potash, <a href="#Page_186">186</a>, <a href="#Page_190">190</a></li>
+
+  <li class="indx">Cholesterol, <a href="#Page_89">89</a>, <a href="#Page_110">110</a></li>
+
+  <li class="indx">Church and Dwight, <abbr title="Incorporated">Inc.</abbr>, <a href="#Page_200">200</a>, <a href="#Page_202">202</a></li>
+
+  <li class="indx">Ciba (Basle) (See <a href="#idx_Society_of_Chemical_Industry_Basle">Society of Chemical Industry (Basle)</a>), <a href="#Page_61">61</a>, <a href="#Page_72">72–81</a></li>
+
+  <li class="indx">Ciba Pharmaceutical Products, <abbr title="Incorporated">Inc.</abbr>, <a href="#Page_72">72</a>, <a href="#Page_254">254</a></li>
+
+  <li class="indx">Climax Molybdenum <abbr title="Company">Co.</abbr>, <a href="#Page_255">255</a></li>
+
+  <li class="indx">Cocomalt, <a href="#Page_89">89</a></li>
+
+  <li class="indx">Cod Liver Oil with Viosterol, <a href="#Page_97">97</a>, <a href="#Page_100">100</a></li>
+
+  <li class="indx">Commander Larrabee <abbr title="Company">Co.</abbr>, <a href="#Page_89">89</a></li>
+
+  <li class="indx">Commerce and Industry <abbr title="Association">Ass’n.</abbr>, of <abbr title="New York">N. Y.</abbr>, <a href="#Page_193">193</a></li>
+
+  <li class="indx">Commercial Pigments <abbr title="Corporation">Corp.</abbr>, <a href="#Page_130">130</a></li>
+
+  <li class="indx">Compania Sud-Americana de Explosivos, <a href="#Page_182">182</a></li>
+
+  <li class="indx">Congress, <a href="#Page_16">16</a>, <a href="#Page_36">36</a>, <a href="#Page_37">37</a>, <a href="#Page_192">192</a>, <a href="#Page_193">193</a>, <a href="#Page_197">197</a>,
+    <a href="#Page_198">198</a>, <a href="#Page_217">217</a>, <a href="#Page_232">232</a>, <a href="#Page_243">243</a>, <a href="#Page_244">244</a>, <a href="#Page_250">250</a></li>
+
+  <li class="indx">Corning Glass Works, <a href="#Page_254">254</a></li>
+
+  <li class="indx">Cortate, <a href="#Page_73">73</a></li>
+
+  <li class="indx">Cotan, S. A., <a href="#Page_120">120</a>, <a href="#Page_122">122</a></li>
+
+  <li class="indx">Crown Zellerbach <abbr title="Corporation">Corp.</abbr>, <a href="#Page_256">256</a></li>
+
+  <li class="indx">Czechoslovakia, <a href="#Page_14">14</a>, <a href="#Page_129">129</a>, <a href="#Page_162">162</a></li>
+
+
+  <li class="ifrst">Davis, Charles Krum, <a href="#Page_179">179</a></li>
+
+  <li class="indx">Davis and <abbr title="Company">Co.</abbr>, R. B., <a href="#Page_89">89</a></li>
+
+  <li class="indx">Delta Pharmaceutical <abbr title="Corporation">Corp.</abbr>, <a href="#Page_69">69–71</a></li>
+
+  <li class="indx"><abbr class="spell">D.E.N.</abbr>, <a href="#Page_241">241</a></li>
+
+  <li class="indx"><span id="TN24">Deutsche Gold-und-Silber Scheideanstalt</span>, <a href="#Page_215">215</a></li>
+
+  <li class="indx">Diabetes, <a href="#Page_52">52</a>, <a href="#Page_53">53</a>, <a href="#Page_57">57</a></li>
+
+  <li class="indx">Diamond Alkali <abbr title="Company">Co.</abbr>, <abbr title="Incorporated">Inc.</abbr>, <a href="#Page_200">200</a>, <a href="#Page_202">202</a></li>
+
+  <li class="indx">Diamond Match <abbr title="Company">Co.</abbr>, <a href="#Page_185">185–191</a>, <a href="#Page_255">255</a></li>
+
+  <li class="indx">Dodds, E. C., <a href="#Page_80">80</a></li>
+
+  <li class="indx">Doitsu Senryo Gomei Kaisha, <a href="#Page_135">135</a></li>
+
+  <li class="indx">Dow Chemical <abbr title="Company">Co.</abbr>, <abbr title="Incorporated">Inc.</abbr>, <a href="#Page_200">200</a>, <a href="#Page_202">202</a>, <a href="#Page_221">221–225</a>, <a href="#Page_255">255</a></li>
+
+  <li class="indx">Drisdol, <a href="#Page_103">103</a></li>
+
+  <li class="indx">Duisberg, Carl, <a href="#Page_232">232</a></li>
+
+  <li class="indx">du Pont de Nemours and <abbr title="Company">Co.</abbr>, E. I., <a href="#Page_24">24</a>, <a href="#Page_124">124</a>, <a href="#Page_125">125</a>, <a href="#Page_130">130–134</a>, <a href="#Page_140">140</a>,
+    <a href="#Page_141">141</a>, <a href="#Page_179">179–185</a>, <a href="#Page_218">218</a>, <a href="#Page_225">225–227</a>, <a href="#Page_241">241</a>, <a href="#Page_244">244</a>,
+    <a href="#Page_245">245</a>, <a href="#Page_256">256</a></li>
+
+  <li class="indx">du Pont, Lammot, <a href="#Page_179">179</a>, <a href="#Page_183">183</a>, <a href="#Page_226">226</a></li>
+
+  <li class="indx">Dusseldorf, peace of, <a href="#Page_14">14</a>, <a href="#Page_16">16</a></li>
+
+  <li class="indx">Dyestuffs, <a href="#Page_6">6</a>, <a href="#Page_30">30</a>, <a href="#Page_43">43</a>, <a href="#Page_184">184</a>, <a href="#Page_214">214</a>, <a href="#Page_215">215</a>,
+    <a href="#Page_253">253</a></li>
+
+  <li class="indx">Dynamit Aktiengesellschaft, <a href="#Page_182">182</a></li>
+
+
+  <li class="ifrst">Economy, American, <a href="#Page_36">36–39</a>, <a href="#Page_51">51</a></li>
+
+  <li class="indx">Eddy Match <abbr title="Company">Co.</abbr>, <abbr title="Limited">Ltd.</abbr>, <a href="#Page_185">185</a>, <a href="#Page_190">190</a></li>
+
+  <li class="indx">Edison, Thomas, <a href="#Page_44">44</a>, <a href="#Page_46">46</a></li>
+
+  <li class="indx">Egeler, <abbr>Mr.</abbr>, <a href="#Page_28">28</a></li>
+
+  <li class="indx">Ehrlich’s “Magic Bullet” (See <a href="#idx_Salvarsan">Salvarsan</a>), <a href="#Page_47">47</a></li>
+
+  <li class="indx">Eisenhart, M. H., <a href="#Page_165">165</a></li>
+
+  <li class="indx">Elley, H. W., <a href="#Page_88">88</a>, <a href="#Page_92">92</a></li>
+
+  <li class="indx">Ely, Carl B., <a href="#Page_116">116</a>, <a href="#Page_117">117</a></li>
+
+  <li class="indx">Engi, <abbr>Dr.</abbr> Joseph, <a href="#Page_78">78</a></li>
+
+  <li class="indx">Ephedrine, <a href="#Page_92">92</a></li>
+
+  <li class="indx">Ergosterol, <a href="#Page_89">89–93</a>, <a href="#Page_103">103</a>, <a href="#Page_104">104</a>, <a href="#Page_111">111</a></li>
+
+  <li class="indx">Ergosterol, Irradiated, <a href="#Page_98">98</a></li>
+
+  <li class="indx">Espionage, Nazi, <a href="#Page_12">12</a></li>
+
+  <li class="indx">Ethyl Gasoline <abbr title="Corporation">Corp.</abbr>, <a href="#Page_24">24</a>, <a href="#Page_25">25</a>, <a href="#Page_26">26</a>, <a href="#Page_27">27</a></li>
+
+  <li class="indx">Explosives Industries, <abbr title="Limited">Ltd.</abbr>, <a href="#Page_182">182</a></li>
+
+
+  <li class="ifrst">Fairburn, William A., <a href="#Page_185">185–189</a></li>
+
+  <li class="indx">Falkland Islands, <a href="#Page_240">240</a></li>
+
+  <li class="indx">Fauth Instrument <abbr title="Company">Co.</abbr>, <a href="#Page_144">144</a></li>
+
+  <li class="indx">Federal Trade Commission, <a href="#Page_194">194</a>, <a href="#Page_195">195</a>, <a href="#Page_201">201</a></li>
+
+  <li class="indx">Federation of British Industries, <a href="#Page_13">13</a>, <a href="#Page_235">235</a></li>
+
+  <li class="indx">Fertilizer, <a href="#Page_253">253</a></li>
+
+  <li class="indx">Fleischmann <abbr title="Company">Co.</abbr>, <a href="#Page_87">87</a>, <a href="#Page_90">90</a>, <a href="#Page_93">93</a>, <a href="#Page_103">103</a>, <a href="#Page_105">105</a></li>
+
+  <li class="indx">Fluorescent lighting, <a href="#Page_44">44</a>, <a href="#Page_254">254</a></li>
+
+  <li class="indx">Foreign Agents’ Registration Act, <a href="#Page_209">209</a></li>
+
+  <li class="indx">Forestal Land, Timber and Railways, <abbr title="Limited">Ltd.</abbr>, <a href="#Page_114">114</a>, <a href="#Page_116">116</a>, <a href="#Page_118">118</a>, <a href="#Page_121">121</a>,
+    <a href="#Page_122">122</a>, <a href="#Page_256">256</a></li>
+
+  <li class="indx">Forinvent, <a href="#Page_68">68</a>, <a href="#Page_70">70</a></li>
+
+  <li class="indx">Fortune Magazine, <a href="#Page_168">168</a></li>
+
+  <li class="indx">Freedmen’s Hospital, <a href="#Page_93">93</a></li>
+
+  <li class="indx">Fritzsching, E. T., <a href="#Page_74">74</a>, <a href="#Page_75">75</a></li>
+
+
+  <li class="ifrst">General Aniline and Film <abbr title="Corporation">Corp.</abbr>, <a href="#Page_256">256</a></li>
+
+  <li class="indx">General Aniline Works, <a href="#Page_31">31</a>, <a href="#Page_216">216</a></li>
+
+  <li class="indx">General Baking <abbr title="Company">Co.</abbr>, <a href="#Page_104">104</a>, <a href="#Page_105">105</a></li>
+
+  <li class="indx"><span class="pagenum" id="Page_263">[Pg 263]</span>General Dyestuff <abbr title="Corporation">Corp.</abbr>, <a href="#Page_253">253</a></li>
+
+  <li class="indx">General Electric <abbr title="Company">Co.</abbr>, <a href="#Page_42">42–45</a>, <a href="#Page_237">237</a>, <a href="#Page_254">254</a>, <a href="#Page_257">257</a></li>
+
+  <li class="indx">General Mills, <a href="#Page_93">93</a>, <a href="#Page_104">104</a></li>
+
+  <li class="indx">General Motors <abbr title="Corporation">Corp.</abbr>, <a href="#Page_26">26</a>, <a href="#Page_180">180</a>, <a href="#Page_232">232</a></li>
+
+  <li class="indx">Geophysical Laboratory, <a href="#Page_145">145</a></li>
+
+  <li class="indx">George, Lloyd, <a href="#Page_5">5</a>, <a href="#Page_6">6</a></li>
+
+  <li class="indx"><span id="idx_Germanin">Germanin</span> (See <a href="#idx_Bayer">Bayer</a> 205), <a href="#Page_55">55</a></li>
+
+  <li class="indx">Germany, <a href="#Page_5">5</a>, <a href="#Page_14">14</a>, <a href="#Page_15">15</a>, <a href="#Page_22">22–27</a>, <a href="#Page_33">33</a>, <a href="#Page_62">62</a>,
+    <a href="#Page_64">64</a>, <a href="#Page_129">129</a>, <a href="#Page_135">135</a>, <a href="#Page_138">138</a>, <a href="#Page_142">142–147</a>, <a href="#Page_151">151</a>,
+    <a href="#Page_161">161</a>, <a href="#Page_166">166</a>, <a href="#Page_175">175</a>, <a href="#Page_176">176</a>, <a href="#Page_182">182</a>, <a href="#Page_210">210–215</a>,
+    <a href="#Page_219">219–221</a>, <a href="#Page_224">224</a>, <a href="#Page_227">227</a>, <a href="#Page_228">228</a>, <a href="#Page_231">231</a>, <a href="#Page_232">232</a>,
+    <a href="#Page_235">235</a>, <a href="#Page_240">240</a>, <a href="#Page_246">246</a>, <a href="#Page_247">247</a></li>
+
+  <li class="indx">Glass container industry, <a href="#Page_41">41</a>, <a href="#Page_42">42</a></li>
+
+  <li class="indx">Glucose-D, <a href="#Page_89">89</a></li>
+
+  <li class="indx">Goodlass Wall Lead Industries, <abbr title="Limited">Ltd.</abbr>, <a href="#Page_133">133</a></li>
+
+  <li class="indx">Good Neighbor policy, <a href="#Page_10">10</a>, <a href="#Page_12">12</a>, <a href="#Page_209">209</a>, <a href="#Page_214">214</a>, <a href="#Page_230">230</a></li>
+
+  <li class="indx">Goodrich, <a href="#Page_212">212</a></li>
+
+  <li class="indx">Goodyear, <a href="#Page_212">212</a></li>
+
+  <li class="indx">Gordon <abbr title="Corporation">Corp.</abbr>, William, <a href="#Page_185">185</a>, <a href="#Page_187">187</a>, <a href="#Page_191">191</a></li>
+
+  <li class="indx">Graham crackers, <a href="#Page_89">89</a></li>
+
+  <li class="indx">Great Britain, <a href="#Page_14">14–17</a>, <a href="#Page_80">80</a>, <a href="#Page_132">132</a>, <a href="#Page_166">166</a>, <a href="#Page_216">216</a>,
+    <a href="#Page_217">217</a>, <a href="#Page_224">224</a>, <a href="#Page_235">235</a>, <a href="#Page_237">237</a>, <a href="#Page_240">240</a></li>
+
+  <li class="indx">Grecian Navy <abbr title="Department">Dept.</abbr>, <a href="#Page_149">149</a></li>
+
+
+  <li class="ifrst">Hague, The, <a href="#Page_150">150</a></li>
+
+  <li class="indx">Haight, George I., <a href="#Page_84">84</a>, <a href="#Page_85">85</a></li>
+
+  <li class="indx">Hammond and Carpenter <abbr title="Corporation">Corp.</abbr>, <a href="#Page_120">120</a></li>
+
+  <li class="indx">Harbison-Walker Refractories <abbr title="Company">Co.</abbr>, <a href="#Page_255">255</a></li>
+
+  <li class="indx">Hayfever, <a href="#Page_91">91</a></li>
+
+  <li class="indx">Hess, Donald P., <a href="#Page_254">254</a></li>
+
+  <li class="indx">Hitler, Adolf, <a href="#Page_142">142</a>, <a href="#Page_143">143</a>, <a href="#Page_146">146</a>, <a href="#Page_150">150</a>, <a href="#Page_154">154–159</a>,
+    <a href="#Page_162">162</a></li>
+
+  <li class="indx">Hoffman-La Roche, <abbr title="Incorporated">Inc.</abbr>, <a href="#Page_73">73</a>, <a href="#Page_74">74</a></li>
+
+  <li class="indx">Holland, <a href="#Page_27">27</a></li>
+
+  <li class="indx">Holman, Howard F., <a href="#Page_185">185</a></li>
+
+  <li class="indx">Hooker Electrochemical <abbr title="Company">Co.</abbr>, <abbr title="Incorporated">Inc.</abbr>, <a href="#Page_200">200</a>, <a href="#Page_202">202</a></li>
+
+  <li class="indx">Hormones, <a href="#Page_58">58</a>, <a href="#Page_59">59</a>, <a href="#Page_60">60</a>, <a href="#Page_61">61</a>, <a href="#Page_67">67</a>, <a href="#Page_69">69</a>,
+    <a href="#Page_72">72</a>, <a href="#Page_74">74</a>, <a href="#Page_76">76</a>, <a href="#Page_254">254</a></li>
+
+  <li class="indx">Horton, Ralph, <a href="#Page_103">103</a></li>
+
+  <li class="indx">House Judiciary Committee, <a href="#Page_196">196</a>, <a href="#Page_198">198</a></li>
+
+  <li class="indx">Howard, Frank, <a href="#Page_210">210</a></li>
+
+  <li class="indx">Howes <abbr title="Brothers">Bros.</abbr>, <a href="#Page_117">117</a></li>
+
+  <li class="indx">Hydrogenation, <a href="#Page_22">22</a></li>
+
+  <li class="indx">Hydrogenation plants, <a href="#Page_23">23</a></li>
+
+
+  <li class="ifrst">I. G. Farbenindustrie, <a href="#Page_24">24</a>, <a href="#Page_25">25–27</a>, <a href="#Page_54">54</a>, <a href="#Page_84">84</a>, <a href="#Page_88">88</a>,
+    <a href="#Page_124">124</a>, <a href="#Page_125">125</a>, <a href="#Page_129">129–132</a>, <a href="#Page_135">135</a>, <a href="#Page_137">137</a>, <a href="#Page_141">141</a>,
+    <a href="#Page_180">180</a>, <a href="#Page_181">181</a>, <a href="#Page_184">184</a>, <a href="#Page_186">186</a>, <a href="#Page_190">190</a>, <a href="#Page_201">201–204</a>,
+    <a href="#Page_211">211–213</a>, <a href="#Page_216">216–225</a>, <a href="#Page_228">228</a>, <a href="#Page_229">229</a>, <a href="#Page_232">232</a>, <a href="#Page_241">241</a>,
+    <a href="#Page_255">255</a></li>
+
+  <li class="indx">Illinois, University of, <a href="#Page_91">91</a></li>
+
+  <li class="indx">Imperial Chemical Industries, <a href="#Page_125">125</a>, <a href="#Page_132">132</a>, <a href="#Page_133">133</a>, <a href="#Page_179">179–185</a>, <a href="#Page_199">199</a>,
+    <a href="#Page_203">203</a>, <a href="#Page_204">204</a>, <a href="#Page_225">225–227</a>, <a href="#Page_241">241</a>, <a href="#Page_245">245</a>, <a href="#Page_253">253</a></li>
+
+  <li class="indx">Imperial Chemical Industries (<abbr title="New York">N. Y.</abbr>), <abbr title="Limited">Ltd.</abbr>, <a href="#Page_200">200</a>, <a href="#Page_201">201</a>, <a href="#Page_204">204</a></li>
+
+  <li class="indx">Imperial Smelting, <a href="#Page_133">133</a></li>
+
+  <li class="indx">Indiana Condensed Milk <abbr title="Company">Co.</abbr>, <a href="#Page_106">106</a></li>
+
+  <li class="indx">Industrias Chimicas Brazeileiras “Duperial,” S.A., <a href="#Page_183">183</a></li>
+
+  <li class="indx">Industrias Quimicas Argentinas “Duperial,” S.A., <a href="#Page_183">183</a></li>
+
+  <li class="indx">Instruments, gyroscopic, <a href="#Page_254">254</a></li>
+
+  <li class="indx">Instruments, military optical, <a href="#Page_255">255</a></li>
+
+  <li class="indx">Insulin, <a href="#Page_52">52</a>, <a href="#Page_53">53</a>, <a href="#Page_60">60</a>, <a href="#Page_66">66</a></li>
+
+  <li class="indx">Interflash Signal <abbr title="Corporation">Corp.</abbr>, <a href="#Page_148">148</a></li>
+
+  <li class="indx">International Match, <a href="#Page_189">189</a></li>
+
+  <li class="indx">International Products <abbr title="Corporation">Corp.</abbr>, <a href="#Page_114">114</a>, <a href="#Page_117">117</a>, <a href="#Page_119">119–122</a></li>
+
+  <li class="indx">International Standard Electric <abbr title="Corporation">Corp.</abbr>, <a href="#Page_167">167</a></li>
+
+
+  <li class="ifrst">Jackson Laboratory (du Pont’s), <a href="#Page_31">31</a></li>
+
+  <li class="indx">Japan, <a href="#Page_118">118</a>, <a href="#Page_129">129</a>, <a href="#Page_132">132–136</a>, <a href="#Page_186">186</a>, <a href="#Page_190">190</a></li>
+
+  <li class="indx">Japanese Titanium <abbr title="Company">Co.</abbr>, <a href="#Page_135">135</a></li>
+
+  <li class="indx">Jebsen, Gustav, <a href="#Page_127">127</a>, <a href="#Page_128">128</a>, <a href="#Page_129">129</a>, <a href="#Page_133">133</a>, <a href="#Page_136">136</a>,
+    <a href="#Page_137">137</a>, <a href="#Page_139">139</a></li>
+
+  <li class="indx">Jewett, <abbr>Dr.</abbr> F. B., <a href="#Page_21">21</a></li>
+
+  <li class="indx">Justice, <abbr title="Department">Dept.</abbr> of, <a href="#Page_3">3</a>, <a href="#Page_35">35</a>, <a href="#Page_39">39</a>, <a href="#Page_46">46</a>, <a href="#Page_58">58</a>, <a href="#Page_112">112</a>,
+    <a href="#Page_176">176</a>, <a href="#Page_179">179</a>, <a href="#Page_185">185</a>, <a href="#Page_193">193</a>, <a href="#Page_195">195</a>, <a href="#Page_199">199</a>,
+    <a href="#Page_204">204</a>, <a href="#Page_220">220</a>, <a href="#Page_225">225</a>, <a href="#Page_252">252</a></li>
+
+
+  <li class="ifrst">Kaiserism, <a href="#Page_3">3</a>, <a href="#Page_5">5</a></li>
+
+  <li class="indx">Kamp, H., <a href="#Page_72">72</a>, <a href="#Page_73">73</a>, <a href="#Page_76">76</a>, <a href="#Page_80">80</a></li>
+
+  <li class="indx">Keim, R. D., <a href="#Page_97">97</a></li>
+
+  <li class="indx">Keuffel and Esser, <a href="#Page_160">160</a>, <a href="#Page_168">168</a></li>
+
+  <li class="indx">Kewley, Joseph E., <a href="#Page_254">254</a></li>
+
+  <li class="indx">Kies, W. S., <a href="#Page_103">103</a></li>
+
+  <li class="indx">Kilgore, Senator Harley, <a href="#Page_247">247</a></li>
+
+  <li class="indx">King, Kenneth T., <a href="#Page_103">103</a></li>
+
+  <li class="indx">Kokusan Kogyo Kabushiki Kaisha, <a href="#Page_135">135</a></li>
+
+  <li class="indx">Kovaks, S. S., <a href="#Page_89">89</a></li>
+
+  <li class="indx">Krebs Pigment and Color <abbr title="Corporation">Corp.</abbr>, <a href="#Page_130">130</a></li>
+
+  <li class="indx">Kreuger, Ivar, <a href="#Page_187">187</a>, <a href="#Page_188">188</a>, <a href="#Page_189">189</a>, <a href="#Page_190">190</a></li>
+
+  <li class="indx">Krupp Works (Germany), <a href="#Page_42">42</a></li>
+
+
+  <li class="ifrst">La Chaquena, S. A., <a href="#Page_120">120</a></li>
+
+  <li class="indx">La Forestal Argentina, S.A., <a href="#Page_114">114</a>, <a href="#Page_117">117</a>, <a href="#Page_118">118</a></li>
+
+  <li class="indx">Lamps, electric, <a href="#Page_43">43</a>, <a href="#Page_236">236</a></li>
+
+  <li class="indx">Lamps, flashlight, <a href="#Page_28">28</a></li>
+
+  <li class="indx">Lamps, incandescent, <a href="#Page_254">254</a></li>
+
+  <li class="indx">La Prensa, <a href="#Page_119">119</a></li>
+
+  <li class="indx">Larson, W. N., <a href="#Page_100">100</a></li>
+
+  <li class="indx">Lasdon, W. S., <a href="#Page_75">75</a></li>
+
+  <li class="indx">Latin America, <a href="#Page_12">12</a>, <a href="#Page_13">13</a>, <a href="#Page_68">68–71</a>, <a href="#Page_176">176</a>, <a href="#Page_214">214</a></li>
+
+  <li class="indx"><span id="idx_Les_Laboratories_Francais_de_Chimiotherapie">Les Laboratories Francais de Chimiotherapie</span> (See <a href="#idx_Chimio">Chimio</a> (France)), <a href="#Page_61">61</a>, <a href="#Page_76">76</a></li>
+
+  <li class="indx">Lever <abbr title="Brothers">Bros.</abbr>, <a href="#Page_105">105</a></li>
+
+  <li class="indx">Light metals, <a href="#Page_33">33</a></li>
+
+  <li class="indx">Lignite, <a href="#Page_211">211</a></li>
+
+  <li class="indx">Lind, Paul Bertil, <a href="#Page_185">185</a></li>
+
+  <li class="indx"><span class="pagenum" id="Page_264">[Pg 264]</span>Lion Match <abbr title="Company">Co.</abbr>, <abbr title="Incorporated">Inc.</abbr>, <a href="#Page_185">185</a>, <a href="#Page_187">187</a>, <a href="#Page_189">189</a></li>
+
+  <li class="indx">Literary Digest, <a href="#Page_166">166</a></li>
+
+  <li class="indx">Lithopone, <a href="#Page_126">126</a>, <a href="#Page_140">140</a>, <a href="#Page_141">141</a></li>
+
+  <li class="indx">Lomb, August, <a href="#Page_155">155–161</a>, <a href="#Page_170">170</a></li>
+
+  <li class="indx">Lomb, Carl, <a href="#Page_154">154</a>, <a href="#Page_165">165</a></li>
+
+  <li class="indx">London, University of, <a href="#Page_86">86</a></li>
+
+  <li class="indx">Loose-Wiles Biscuit <abbr title="Company">Co.</abbr>, <a href="#Page_89">89</a></li>
+
+
+  <li class="ifrst">Magnesit <abbr title="Company">Co.</abbr>, <abbr title="Limited">Ltd.</abbr>, <a href="#Page_255">255</a></li>
+
+  <li class="indx">Magnesite Brick, <a href="#Page_255">255</a></li>
+
+  <li class="indx">Magnesit Industrie Aktiengesellschaft, <a href="#Page_255">255</a></li>
+
+  <li class="indx">Magnesium, <a href="#Page_11">11</a>, <a href="#Page_34">34</a>, <a href="#Page_214">214</a>, <a href="#Page_220">220–224</a>, <a href="#Page_236">236</a>, <a href="#Page_237">237</a>,
+    <a href="#Page_255">255</a></li>
+
+  <li class="indx">Magnesium Development <abbr title="Company">Co.</abbr>, <a href="#Page_222">222</a></li>
+
+  <li class="indx">Malaria, <a href="#Page_57">57</a>, <a href="#Page_229">229</a></li>
+
+  <li class="indx">Matches, <a href="#Page_186">186</a>, <a href="#Page_255">255</a></li>
+
+  <li class="indx">Mathieson Alkali Works, <abbr title="Incorporated">Inc.</abbr>, <a href="#Page_200">200</a>, <a href="#Page_202">202</a></li>
+
+  <li class="indx">McGowan, Harry Duncan, <a href="#Page_179">179</a>, <a href="#Page_181">181</a>, <a href="#Page_183">183</a>, <a href="#Page_226">226</a></li>
+
+  <li class="indx">Meade-Johnson and <abbr title="Company">Co.</abbr>, <a href="#Page_94">94</a>, <a href="#Page_95">95</a>, <a href="#Page_96">96</a>, <a href="#Page_99">99–101</a></li>
+
+  <li class="indx">Medical Research Council, <a href="#Page_80">80</a></li>
+
+  <li class="indx">Meinhardt, <a href="#Page_231">231</a></li>
+
+  <li class="indx">Merck and <abbr title="Company">Co.</abbr>, <abbr title="Incorporated">Inc.</abbr> (<abbr title="New Jersey">N. J.</abbr>), <a href="#Page_76">76</a>, <a href="#Page_176">176–178</a>, <a href="#Page_256">256</a></li>
+
+  <li class="indx">Merck, E. (Darmstadt, Germany), <a href="#Page_76">76</a>, <a href="#Page_176">176</a>, <a href="#Page_177">177</a>, <a href="#Page_178">178</a></li>
+
+  <li class="indx">Merck, George W., <a href="#Page_177">177</a></li>
+
+  <li class="indx">Mercurials, <a href="#Page_178">178</a></li>
+
+  <li class="indx">Merrell <abbr title="Company">Co.</abbr>, W. S., <a href="#Page_98">98</a>, <a href="#Page_111">111</a></li>
+
+  <li class="indx">Metal and Thermit <abbr title="Company">Co.</abbr> of <abbr title="New York">N. Y.</abbr>, <a href="#Page_220">220</a></li>
+
+  <li class="indx">Metals, Alkali, <a href="#Page_184">184</a></li>
+
+  <li class="indx">Methyl Methacrylate, <a href="#Page_28">28</a>, <a href="#Page_29">29</a></li>
+
+  <li class="indx">Milas process, <a href="#Page_88">88</a></li>
+
+  <li class="indx">Milk of Magnesia, <a href="#Page_66">66</a></li>
+
+  <li class="indx">Mines, <abbr title="United States">U. S.</abbr> Bureau of, <a href="#Page_221">221</a></li>
+
+  <li class="indx">Molybdenum, <a href="#Page_255">255</a></li>
+
+  <li class="indx">Mond, Henry, <a href="#Page_179">179</a></li>
+
+  <li class="indx">Monroe Doctrine, <a href="#Page_214">214</a></li>
+
+  <li class="indx">Moore-McCormack Steamship <abbr title="Company">Co.</abbr>, <a href="#Page_121">121</a></li>
+
+  <li class="indx">Munich, peace of, <a href="#Page_14">14</a></li>
+
+  <li class="indx">Mutual Chemical <abbr title="Company">Co.</abbr>, of America, <a href="#Page_254">254</a></li>
+
+
+  <li class="ifrst">Narcotics, <a href="#Page_55">55</a>, <a href="#Page_178">178</a></li>
+
+  <li class="indx">Nathan and <abbr title="Company">Co.</abbr>, Joseph (Great Britain), <a href="#Page_84">84</a>, <a href="#Page_88">88</a></li>
+
+  <li class="indx">National Lead <abbr title="Company">Co.</abbr>, <a href="#Page_124">124–137</a>, <a href="#Page_140">140</a>, <a href="#Page_257">257</a></li>
+
+  <li class="indx">National Titanium Pigments <abbr title="Company">Co.</abbr>, <abbr title="Limited">Ltd.</abbr>, <a href="#Page_133">133</a></li>
+
+  <li class="indx">Navy, <abbr title="United States">U. S.</abbr>, <a href="#Page_143">143</a>, <a href="#Page_147">147</a>, <a href="#Page_148">148</a>, <a href="#Page_158">158</a>, <a href="#Page_163">163</a>,
+    <a href="#Page_164">164</a>, <a href="#Page_166">166</a>, <a href="#Page_170">170–174</a></li>
+
+  <li class="indx">Nederlandsche Instrumenten Compagnie (Nedinsco), <a href="#Page_149">149–153</a>, <a href="#Page_157">157–158</a>, <a href="#Page_167">167</a></li>
+
+  <li class="indx">Neoprene, <a href="#Page_184">184</a></li>
+
+  <li class="indx">Nestle’s Milk Products, <abbr title="Incorporated">Inc.</abbr>, <a href="#Page_106">106</a></li>
+
+  <li class="indx">News reporting, <a href="#Page_256">256</a></li>
+
+  <li class="indx">New York Match <abbr title="Company">Co.</abbr>, <abbr title="Incorporated">Inc.</abbr>, <a href="#Page_185">185</a></li>
+
+  <li class="indx">Niagara Alkali Company, <a href="#Page_200">200</a>, <a href="#Page_202">202</a></li>
+
+  <li class="indx">Nieuwe Nederlandsche Maatschappij Tot Vervaardigen Van Spiegelglas N.V., <a href="#Page_254">254</a></li>
+
+  <li class="indx">Nitrate of soda, <a href="#Page_240">240</a>, <a href="#Page_241">241</a>, <a href="#Page_242">242</a></li>
+
+  <li class="indx"><span lang="la">Nolo contendere</span>, <a href="#Page_113">113</a>, <a href="#Page_142">142</a>, <a href="#Page_254">254–256</a></li>
+
+  <li class="indx">Norsk Hydro, <a href="#Page_241">241</a></li>
+
+  <li class="indx"><abbr class="spell">N.R.A.</abbr>, <a href="#Page_159">159</a></li>
+
+  <li class="indx">Nylon, <a href="#Page_184">184</a></li>
+
+
+  <li class="ifrst">Office of Facts and Figures, <a href="#Page_8">8</a></li>
+
+  <li class="indx">Ohio Match <abbr title="Company">Co.</abbr>, <a href="#Page_185">185</a>, <a href="#Page_187">187</a>, <a href="#Page_189">189</a></li>
+
+  <li class="indx">Optical glass, military, <a href="#Page_24">24</a>, <a href="#Page_214">214</a>, <a href="#Page_236">236</a></li>
+
+  <li class="indx">Optical Triple Alliance, <a href="#Page_144">144</a></li>
+
+  <li class="indx">Ordnance, Bureau, <a href="#Page_147">147</a></li>
+
+  <li class="indx">Organon, N. J., <a href="#Page_61">61</a></li>
+
+  <li class="indx">Organon, N. V. (Oss, Holland), <a href="#Page_73">73</a>, <a href="#Page_76">76</a>, <a href="#Page_77">77</a>, <a href="#Page_79">79</a></li>
+
+  <li class="indx">Ottawa Conference, <a href="#Page_226">226</a></li>
+
+  <li class="indx">Ottawa Journal, <a href="#Page_17">17</a></li>
+
+  <li class="indx">Otterberg, Fritz, <a href="#Page_185">185</a></li>
+
+  <li class="indx">Ovaltine, <a href="#Page_89">89</a></li>
+
+  <li class="indx">Oxford University, <a href="#Page_80">80</a></li>
+
+
+  <li class="ifrst">Pacific Alkali <abbr title="Company">Co.</abbr>, <abbr title="Incorporated">Inc.</abbr>, <a href="#Page_200">200</a>, <a href="#Page_202">202</a></li>
+
+  <li class="indx">Palladium, A. G., <a href="#Page_68">68</a></li>
+
+  <li class="indx">Panama Canal Act, <a href="#Page_250">250</a></li>
+
+  <li class="indx">Paper, newsprint, <a href="#Page_256">256</a></li>
+
+  <li class="indx">Paraguay, <a href="#Page_113">113</a></li>
+
+  <li class="indx">Parke-Davis and <abbr title="Company">Co.</abbr>, <a href="#Page_94">94–97</a></li>
+
+  <li class="indx">Patent Office, <abbr title="United States">U. S.</abbr>, <a href="#Page_77">77</a>, <a href="#Page_170">170</a></li>
+
+  <li class="indx">Patent system, <a href="#Page_3">3</a>, <a href="#Page_6">6</a>, <a href="#Page_36">36</a>, <a href="#Page_37">37</a>, <a href="#Page_38">38</a>, <a href="#Page_47">47</a>,
+    <a href="#Page_48">48</a>, <a href="#Page_51">51</a></li>
+
+  <li class="indx">Patents and processes agreement, <a href="#Page_184">184</a>, <a href="#Page_225">225</a>, <a href="#Page_226">226</a></li>
+
+  <li class="indx">Patents, <a href="#Page_5">5</a>, <a href="#Page_36">36–47</a>, <a href="#Page_53">53</a>, <a href="#Page_56">56</a>, <a href="#Page_59">59</a>, <a href="#Page_64">64–66</a>,
+    <a href="#Page_77">77</a>, <a href="#Page_83">83</a>, <a href="#Page_85">85</a>, <a href="#Page_86">86</a>, <a href="#Page_92">92</a>, <a href="#Page_128">128</a>, <a href="#Page_130">130</a>,
+    <a href="#Page_133">133</a>, <a href="#Page_136">136</a>, <a href="#Page_139">139</a>, <a href="#Page_140">140</a>, <a href="#Page_162">162</a>, <a href="#Page_184">184</a>,
+    <a href="#Page_190">190</a>, <a href="#Page_191">191</a>, <a href="#Page_220">220</a></li>
+
+  <li class="indx">Pearl Harbor, <a href="#Page_34">34</a>, <a href="#Page_36">36</a>, <a href="#Page_70">70</a>, <a href="#Page_175">175</a>, <a href="#Page_212">212</a></li>
+
+  <li class="indx">Pellagra, <a href="#Page_57">57</a></li>
+
+  <li class="indx"><abbr title="Pennsylvania">Penn.</abbr> Salt Manufacturing <abbr title="Company">Co.</abbr>, <a href="#Page_200">200</a>, <a href="#Page_201">201</a></li>
+
+  <li class="indx">Periscopes, <a href="#Page_144">144</a>, <a href="#Page_148">148</a>, <a href="#Page_156">156</a>, <a href="#Page_166">166</a></li>
+
+  <li class="indx">Pet Milk <abbr title="Company">Co.</abbr>, <a href="#Page_106">106</a></li>
+
+  <li class="indx">Petroleum, <a href="#Page_253">253</a></li>
+
+  <li class="indx">Pharmex, <abbr title="Incorporated">Inc.</abbr>, <a href="#Page_69">69</a>, <a href="#Page_70">70</a></li>
+
+  <li class="indx">Phillips of Holland, <a href="#Page_237">237</a></li>
+
+  <li class="indx">Pistor, Gustav, <a href="#Page_255">255</a></li>
+
+  <li class="indx">Pittsburgh Plate Glass <abbr title="Company">Co.</abbr>, <a href="#Page_145">145</a>, <a href="#Page_200">200</a>, <a href="#Page_201">201</a></li>
+
+  <li class="indx">Plastics, <a href="#Page_24">24</a>, <a href="#Page_28">28</a>, <a href="#Page_34">34</a>, <a href="#Page_43">43</a>, <a href="#Page_184">184</a>, <a href="#Page_214">214</a>,
+    <a href="#Page_227">227</a>, <a href="#Page_236">236</a>, <a href="#Page_256">256</a></li>
+
+  <li class="indx">Plexiglass, <a href="#Page_24">24</a></li>
+
+  <li class="indx">Pomerene, Senator, <a href="#Page_195">195</a>, <a href="#Page_198">198</a></li>
+
+  <li class="indx">Powers-Weightman-Rosengarten <abbr title="Corporation">Corp.</abbr>, <a href="#Page_177">177</a></li>
+
+  <li class="indx">Price fixing, <a href="#Page_83">83</a>, <a href="#Page_84">84</a>, <a href="#Page_97">97</a>, <a href="#Page_104">104</a></li>
+
+  <li class="indx">Proctor, Ellison, <a href="#Page_117">117</a></li>
+
+  <li class="indx">Pure Food and Drug Act, <a href="#Page_29">29</a>, <a href="#Page_30">30</a></li>
+
+  <li class="indx">Pyridium <abbr title="Corporation">Corp.</abbr>, <a href="#Page_75">75</a></li>
+
+
+  <li class="ifrst"><span class="pagenum" id="Page_265">[Pg 265]</span>Quaker Oats, <a href="#Page_89">89</a></li>
+
+  <li class="indx">Quebracho, <a href="#Page_112">112–123</a>, <a href="#Page_256">256</a></li>
+
+  <li class="indx">Quinine derivatives, <a href="#Page_55">55</a>, <a href="#Page_229">229</a>, <a href="#Page_230">230</a>, <a href="#Page_249">249</a></li>
+
+
+  <li class="ifrst">Range-finders, <a href="#Page_144">144</a>, <a href="#Page_148">148</a>, <a href="#Page_155">155</a>, <a href="#Page_156">156</a>, <a href="#Page_166">166</a>,
+    <a href="#Page_168">168</a></li>
+
+  <li class="indx">Rare Chemicals, <abbr title="Incorporated">Inc.</abbr>, <a href="#Page_74">74</a>, <a href="#Page_75">75</a>, <a href="#Page_77">77</a></li>
+
+  <li class="indx">Reciprocal trade pacts, <a href="#Page_10">10</a></li>
+
+  <li class="indx">Reichsgruppe Industrie of Germany, <a href="#Page_14">14</a>, <a href="#Page_235">235</a></li>
+
+  <li class="indx">Remington Arms <abbr title="Company">Co.</abbr>, <a href="#Page_179">179</a>, <a href="#Page_183">183</a>, <a href="#Page_217">217</a></li>
+
+  <li class="indx">Resins, synthetic, <a href="#Page_184">184</a></li>
+
+  <li class="indx">Rheinische Westfalische Sprengstoff, <a href="#Page_217">217</a></li>
+
+  <li class="indx">Rickets, <a href="#Page_57">57</a>, <a href="#Page_82">82</a>, <a href="#Page_98">98</a></li>
+
+  <li class="indx">Robinson, E. G., <a href="#Page_111">111</a></li>
+
+  <li class="indx">Roche-Organon, <abbr title="Incorporated">Inc.</abbr>, <a href="#Page_74">74</a>, <a href="#Page_78">78–81</a>, <a href="#Page_254">254</a></li>
+
+  <li class="indx">Rohm and Haas (Darmstadt, Germany), <a href="#Page_24">24</a></li>
+
+  <li class="indx">Rohm and Haas <abbr title="Company">Co.</abbr> (Philadelphia), <a href="#Page_24">24</a>, <a href="#Page_29">29</a>, <a href="#Page_30">30</a>, <a href="#Page_227">227</a></li>
+
+  <li class="indx">Ross, Ward, <a href="#Page_85">85</a>, <a href="#Page_91">91</a>, <a href="#Page_97">97</a>, <a href="#Page_100">100</a>, <a href="#Page_102">102</a>, <a href="#Page_104">104</a>,
+    <a href="#Page_105">105</a></li>
+
+  <li class="indx">Rossi, <abbr>Dr.</abbr> A. J., <a href="#Page_126">126</a></li>
+
+  <li class="indx">Russell, <abbr>Dr.</abbr> Henry L., <a href="#Page_85">85</a>, <a href="#Page_90">90</a>, <a href="#Page_91">91</a>, <a href="#Page_92">92</a>, <a href="#Page_96">96–100</a>,
+    <a href="#Page_105">105</a></li>
+
+  <li class="indx">Russia, <a href="#Page_186">186</a>, <a href="#Page_190">190</a></li>
+
+
+  <li class="ifrst">Sachtleben <abbr title="Company">Co.</abbr>, <a href="#Page_129">129</a></li>
+
+  <li class="indx">Saegmuller, George, <a href="#Page_144">144</a>, <a href="#Page_147">147</a></li>
+
+  <li class="indx"><span id="idx_Salvarsan">Salvarsan</span>, <a href="#Page_46">46</a>, <a href="#Page_54">54</a></li>
+
+  <li class="indx">Samuhi, S. A., <a href="#Page_117">117</a>, <a href="#Page_118">118</a>, <a href="#Page_120">120</a>, <a href="#Page_122">122</a></li>
+
+  <li class="indx">Saraka, <a href="#Page_66">66</a>, <a href="#Page_69">69</a></li>
+
+  <li class="indx">Schering A. G. (Berlin), <a href="#Page_61">61–71</a>, <a href="#Page_74">74</a>, <a href="#Page_77">77</a>, <a href="#Page_79">79</a>, <a href="#Page_80">80</a>,
+    <a href="#Page_227">227</a></li>
+
+  <li class="indx">Schering <abbr title="Corporation">Corp.</abbr> (Bloomfield, <abbr title="New Jersey">N. J.</abbr>), <a href="#Page_64">64–69</a>, <a href="#Page_73">73</a>, <a href="#Page_76">76</a>, <a href="#Page_77">77</a>, <a href="#Page_79">79</a>,
+    <a href="#Page_80">80</a>, <a href="#Page_227">227</a>, <a href="#Page_245">245</a></li>
+
+  <li class="indx">Schering, <abbr title="Limited">Ltd.</abbr>, (London), <a href="#Page_68">68</a></li>
+
+  <li class="indx">Schmitz, Dietrich, <a href="#Page_255">255</a></li>
+
+  <li class="indx">Schweitzer, <abbr>Dr.</abbr> Samuel, <a href="#Page_68">68</a>, <a href="#Page_70">70</a></li>
+
+  <li class="indx">Shangri-La, <a href="#Page_238">238</a></li>
+
+  <li class="indx">Sherka Chemical <abbr title="Company">Co.</abbr>, <a href="#Page_69">69</a></li>
+
+  <li class="indx">Sherman Act, <a href="#Page_1">1</a>, <a href="#Page_13">13</a>, <a href="#Page_16">16</a>, <a href="#Page_37">37</a>, <a href="#Page_179">179</a>, <a href="#Page_185">185</a>,
+    <a href="#Page_191">191</a>, <a href="#Page_193">193–199</a>, <a href="#Page_202">202</a>, <a href="#Page_205">205</a>, <a href="#Page_206">206</a>, <a href="#Page_234">234</a>,
+    <a href="#Page_250">250</a></li>
+
+  <li class="indx">Siemens-Halske <abbr title="Company">Co.</abbr>, <a href="#Page_218">218</a>, <a href="#Page_220">220</a>, <a href="#Page_237">237</a></li>
+
+  <li class="indx">Sights, gun, <a href="#Page_144">144</a>, <a href="#Page_148">148</a>, <a href="#Page_166">166</a></li>
+
+  <li class="indx">Smith, Adam, <a href="#Page_19">19</a></li>
+
+  <li class="indx">Snider Packing <abbr title="Company">Co.</abbr>, <a href="#Page_90">90</a>, <a href="#Page_91">91</a></li>
+
+  <li class="indx">Societe de Products Chemiques des Terres Rares, <a href="#Page_130">130</a></li>
+
+  <li class="indx"><span id="idx_Society_of_Chemical_Industry_Basle">Society of Chemical Industry (Basle)</span>, <a href="#Page_61">61</a>, <a href="#Page_72">72</a></li>
+
+  <li class="indx">Soda ash, <a href="#Page_201">201</a></li>
+
+  <li class="indx">Soda, caustic, <a href="#Page_201">201</a></li>
+
+  <li class="indx"><span id="idx_Solvay_et_Cie">Solvay et Cie</span>, <a href="#Page_200">200</a>, <a href="#Page_203">203</a>, <a href="#Page_204">204</a></li>
+
+  <li class="indx">Solvay Process <abbr title="Company">Co.</abbr>, <a href="#Page_200">200</a></li>
+
+  <li class="indx">South America, <a href="#Page_12">12</a>, <a href="#Page_55">55</a>, <a href="#Page_56">56</a>, <a href="#Page_71">71</a>, <a href="#Page_112">112</a>, <a href="#Page_115">115</a>,
+    <a href="#Page_128">128</a>, <a href="#Page_131">131</a>, <a href="#Page_177">177</a>, <a href="#Page_181">181</a>, <a href="#Page_182">182</a>, <a href="#Page_215">215</a>,
+    <a href="#Page_216">216</a></li>
+
+  <li class="indx">Southern Alkali <abbr title="Corporation">Corp.</abbr>, <a href="#Page_200">200</a>, <a href="#Page_202">202</a></li>
+
+  <li class="indx">Soviet match monopoly, <a href="#Page_190">190</a></li>
+
+  <li class="indx">Spain, <a href="#Page_71">71</a>, <a href="#Page_129">129</a></li>
+
+  <li class="indx">Spencer Lens <abbr title="Company">Co.</abbr>, <a href="#Page_145">145</a></li>
+
+  <li class="indx">Sperry <abbr title="Corporation">Corp.</abbr>, <a href="#Page_254">254</a></li>
+
+  <li class="indx">Sperti, George, <a href="#Page_95">95</a></li>
+
+  <li class="indx">Sprague Steamship <abbr title="Company">Co.</abbr>, <a href="#Page_121">121</a></li>
+
+  <li class="indx">Squibb and Sons, E. R., <a href="#Page_95">95–97</a></li>
+
+  <li class="indx">Squibb’s Viosterol, <a href="#Page_94">94</a></li>
+
+  <li class="indx"><abbr title="Saint">St.</abbr> Helen’s, <abbr title="Limited">Ltd.</abbr>, <a href="#Page_115">115</a></li>
+
+  <li class="indx">Standard Brands, <abbr title="Incorporated">Inc.</abbr>, <a href="#Page_87">87</a>, <a href="#Page_89">89</a>, <a href="#Page_103">103</a>, <a href="#Page_107">107</a>, <a href="#Page_108">108</a></li>
+
+  <li class="indx">Standard-I. G. <abbr title="Corporation">Corp.</abbr>, <a href="#Page_219">219</a>, <a href="#Page_220">220</a></li>
+
+  <li class="indx">Standard Oil <abbr title="Company">Co.</abbr> (New Jersey), <a href="#Page_22">22</a>, <a href="#Page_24">24</a>, <a href="#Page_26">26</a>, <a href="#Page_210">210–213</a>, <a href="#Page_219">219</a>,
+    <a href="#Page_228">228</a>, <a href="#Page_253">253</a></li>
+
+  <li class="indx">Standards, Bureau of, <a href="#Page_145">145</a></li>
+
+  <li class="indx">Standard Telephone and Cables, <abbr title="Limited">Ltd.</abbr>, <a href="#Page_167">167</a></li>
+
+  <li class="indx">Starling, <a href="#Page_60">60</a></li>
+
+  <li class="indx">Steenbock patents, <a href="#Page_84">84–87</a>, <a href="#Page_90">90</a>, <a href="#Page_92">92</a>, <a href="#Page_99">99</a>, <a href="#Page_107">107</a>,
+    <a href="#Page_108">108</a></li>
+
+  <li class="indx">Sterols, <a href="#Page_89">89</a>, <a href="#Page_109">109</a>, <a href="#Page_111">111</a></li>
+
+  <li class="indx">Stickstoff-Syndikat, <a href="#Page_241">241</a></li>
+
+  <li class="indx">Stilbestrol, <a href="#Page_79">79</a>, <a href="#Page_80">80</a>, <a href="#Page_81">81</a></li>
+
+  <li class="indx">Stockard Steamship <abbr title="Corporation">Corp.</abbr>, <a href="#Page_121">121</a></li>
+
+  <li class="indx">Stragnell, Gregory, <a href="#Page_69">69</a>, <a href="#Page_70">70</a></li>
+
+  <li class="indx">Sulfa drugs, <a href="#Page_55">55</a>, <a href="#Page_178">178</a></li>
+
+  <li class="indx">Sullivan, John B., <a href="#Page_114">114</a>, <a href="#Page_116">116</a>, <a href="#Page_119">119</a></li>
+
+  <li class="indx"><span id="idx_Svenska_Tandsticks_Aktiebolaget">Svenska Tandsticks Aktiebolaget</span> (See <a href="#idx_Swedish_Match_Co">Swedish Match <abbr title="Company">Co.</abbr></a>), <a href="#Page_185">185–190</a></li>
+
+  <li class="indx"><span id="idx_Swedish_Match_Co">Swedish Match <abbr title="Company">Co.</abbr></span> (See <a href="#idx_Svenska_Tandsticks_Aktiebolaget">Svenska Tandsticks Aktiebolaget</a>), <a href="#Page_185">185–190</a></li>
+
+  <li class="indx">Swiss Bank <abbr title="Corporation">Corp.</abbr> (Basle), <a href="#Page_68">68</a>, <a href="#Page_70">70</a>, <a href="#Page_254">254</a></li>
+
+  <li class="indx">Synthetic nitrogen, <a href="#Page_236">236</a>, <a href="#Page_243">243</a>, <a href="#Page_245">245</a></li>
+
+  <li class="indx">Synthetic Nitrogen Products <abbr title="Corporation">Corp.</abbr>, <a href="#Page_254">254</a></li>
+
+  <li class="indx">Synthetic rubber, <a href="#Page_24">24</a>, <a href="#Page_47">47</a>, <a href="#Page_67">67</a>, <a href="#Page_184">184</a>, <a href="#Page_210">210</a>,
+    <a href="#Page_212">212</a></li>
+
+  <li class="indx">Synthetic rubber manufacture, <a href="#Page_7">7</a>, <a href="#Page_8">8</a></li>
+
+  <li class="indx">System Nedinsco-Zeiss, <a href="#Page_152">152</a></li>
+
+
+  <li class="ifrst">Tanks, <a href="#Page_157">157</a></li>
+
+  <li class="indx">Tannic, acid, <a href="#Page_114">114</a></li>
+
+  <li class="indx">Tannin <abbr title="Corporation">Corp.</abbr> (<abbr title="New York">N. Y.</abbr>), <a href="#Page_114">114–116</a>, <a href="#Page_120">120</a>, <a href="#Page_122">122</a>, <a href="#Page_256">256</a></li>
+
+  <li class="indx">Tannin Products <abbr title="Corporation">Corp.</abbr> (<abbr title="Delaware">Dela.</abbr>), <a href="#Page_115">115–116</a></li>
+
+  <li class="indx">Teagle, Walter, <a href="#Page_210">210</a></li>
+
+  <li class="indx">Tetra-ethyl lead, <a href="#Page_25">25</a></li>
+
+  <li class="indx">Tetrazene primed ammunition, <a href="#Page_217">217</a></li>
+
+  <li class="indx">Thyroid, <a href="#Page_66">66</a></li>
+
+  <li class="indx">Titan <abbr title="Company">Co.</abbr> <abbr class="spell">A/S</abbr>, <a href="#Page_127">127–129</a>, <a href="#Page_139">139</a></li>
+
+  <li class="indx">Titan <abbr title="Company">Co.</abbr>, <abbr title="Incorporated">Inc.</abbr>, <a href="#Page_124">124</a>, <a href="#Page_127">127</a>, <a href="#Page_132">132–139</a></li>
+
+  <li class="indx">Titangesellschaft, <abbr class="spell">G.m.b.H.</abbr>, <a href="#Page_129">129</a>, <a href="#Page_132">132–139</a></li>
+
+  <li class="indx">Titanium Alloy Manufacturing <abbr title="Company">Co.</abbr>, <a href="#Page_126">126</a></li>
+
+  <li class="indx">Titanium Pigment <abbr title="Company">Co.</abbr>, <a href="#Page_126">126–130</a></li>
+
+  <li class="indx">Titan Kogyo Kaisha, <abbr title="Limited">Ltd.</abbr>, <a href="#Page_135">135</a>, <a href="#Page_136">136</a></li>
+
+  <li class="indx">Titus, <abbr>Dr.</abbr> Harry, <a href="#Page_109">109</a></li>
+
+  <li class="indx"><abbr class="spell">T.N.E.C.</abbr>, <a href="#Page_46">46</a></li>
+
+  <li class="indx"><span class="pagenum" id="Page_266">[Pg 266]</span>Transamerican Match <abbr title="Corporation">Corp.</abbr>, <a href="#Page_185">185</a></li>
+
+  <li class="indx">Truman Committee, <a href="#Page_63">63</a></li>
+
+  <li class="indx">Tschopski, <abbr title="Professor">Prof.</abbr>, <a href="#Page_144">144</a></li>
+
+  <li class="indx">Tungsten carbide, <a href="#Page_42">42</a>, <a href="#Page_257">257</a></li>
+
+
+  <li class="ifrst">Uniform Chemical Products, <a href="#Page_190">190</a></li>
+
+  <li class="indx">United American Bosch <abbr title="Corporation">Corp.</abbr>, <a href="#Page_214">214</a></li>
+
+  <li class="indx">United Nations, <a href="#Page_16">16</a>, <a href="#Page_20">20</a>, <a href="#Page_33">33</a>, <a href="#Page_175">175</a>, <a href="#Page_247">247</a></li>
+
+  <li class="indx"><span id="idx_United_States_Alkali_Export_Assn">United States Alkali Export <abbr title="Association">Ass’n</abbr></span>, <a href="#Page_193">193</a>, <a href="#Page_199">199</a>, <a href="#Page_201">201–204</a>, <a href="#Page_252">252</a></li>
+
+  <li class="indx">United States Army, <a href="#Page_143">143</a>, <a href="#Page_147">147</a>, <a href="#Page_158">158</a>, <a href="#Page_160">160</a>, <a href="#Page_166">166</a></li>
+
+  <li class="indx">Universal Match <abbr title="Company">Co.</abbr>, <a href="#Page_185">185</a>, <a href="#Page_187">187</a>, <a href="#Page_189">189</a></li>
+
+
+  <li class="ifrst">Valentine, T., <a href="#Page_121">121</a>, <a href="#Page_122">122</a></li>
+
+  <li class="indx">Veitscher Magnesitwerke Aktiengesellschaft, <a href="#Page_255">255</a></li>
+
+  <li class="indx">Vernon-Benshoff <abbr title="Company">Co.</abbr> (Pittsburgh), <a href="#Page_29">29</a>, <a href="#Page_30">30</a></li>
+
+  <li class="indx">Versailles Treaty, <a href="#Page_142">142–153</a></li>
+
+  <li class="indx">Viosterol, <a href="#Page_91">91–94</a>, <a href="#Page_97">97</a>, <a href="#Page_98">98</a>, <a href="#Page_100">100</a>, <a href="#Page_103">103</a></li>
+
+  <li class="indx">Vitamin D, <a href="#Page_82">82–87</a>, <a href="#Page_90">90–99</a>, <a href="#Page_103">103–111</a></li>
+
+  <li class="indx">Vitamins, <a href="#Page_55">55</a>, <a href="#Page_60">60</a>, <a href="#Page_92">92</a>, <a href="#Page_178">178</a></li>
+
+  <li class="indx">Vitamin Technologists, <abbr title="Incorporated">Inc.</abbr>, <a href="#Page_107">107</a></li>
+
+  <li class="indx">Von Spee, Admiral, <a href="#Page_240">240</a></li>
+
+
+  <li class="ifrst">Waddell, <abbr>Dr.</abbr>, <a href="#Page_104">104</a></li>
+
+  <li class="indx">Wanter <abbr title="Company">Co.</abbr>, <a href="#Page_89">89</a></li>
+
+  <li class="indx">War Department, Mexico, <a href="#Page_149">149</a>, <a href="#Page_150">150</a>, <a href="#Page_160">160</a></li>
+
+  <li class="indx">War Department, <abbr title="United States">U. S.</abbr>, <a href="#Page_167">167</a></li>
+
+  <li class="indx">Wardenburg, <a href="#Page_227">227</a></li>
+
+  <li class="indx">Webb Act, <a href="#Page_192">192–196</a>, <a href="#Page_199">199</a>, <a href="#Page_205">205–207</a></li>
+
+  <li class="indx">Webb, Congressman, <a href="#Page_196">196</a>, <a href="#Page_197">197</a>, <a href="#Page_198">198</a></li>
+
+  <li class="indx">Webb, E. W., <a href="#Page_24">24</a></li>
+
+  <li class="indx">Weisburd and Cia, <abbr>Ltda.</abbr>, <a href="#Page_120">120</a>, <a href="#Page_121">121</a></li>
+
+  <li class="indx">Weltzien, <abbr>Dr.</abbr> Julius, <a href="#Page_62">62</a>, <a href="#Page_70">70</a>, <a href="#Page_73">73</a>, <a href="#Page_81">81</a>, <a href="#Page_254">254</a></li>
+
+  <li class="indx">West End Chemical <abbr title="Company">Co.</abbr>, <abbr title="Incorporated">Inc.</abbr>, <a href="#Page_200">200</a>, <a href="#Page_202">202</a></li>
+
+  <li class="indx">West Haven Creamery <abbr title="Company">Co.</abbr>, <abbr title="Incorporated">Inc.</abbr>, <a href="#Page_107">107</a>, <a href="#Page_108">108</a></li>
+
+  <li class="indx">Westvaco Chlorine Products <abbr title="Corporation">Corp.</abbr>, <a href="#Page_200">200</a>, <a href="#Page_202">202</a></li>
+
+  <li class="indx">White lead, <a href="#Page_126">126</a></li>
+
+  <li class="indx">Whitelisting, <a href="#Page_101">101</a></li>
+
+  <li class="indx">Wilson, Tariff Act, <a href="#Page_250">250</a></li>
+
+  <li class="indx">Wilson, Woodrow, <a href="#Page_7">7</a>, <a href="#Page_193">193</a></li>
+
+  <li class="indx">Winnipeg Free Press, <a href="#Page_17">17</a></li>
+
+  <li class="indx">Winthrop Chemical <abbr title="Company">Co.</abbr>, <a href="#Page_95">95–97</a>, <a href="#Page_101">101</a>, <a href="#Page_103">103</a></li>
+
+  <li class="indx">Wisconsin Alumni Research Foundation, <a href="#Page_82">82–111</a></li>
+
+  <li class="indx">Wisconsin, University of, <a href="#Page_82">82–85</a></li>
+
+  <li class="indx">World War <abbr title="1">I</abbr>, <a href="#Page_39">39</a>, <a href="#Page_126">126</a>, <a href="#Page_144">144</a>, <a href="#Page_151">151</a>, <a href="#Page_186">186</a>, <a href="#Page_187">187</a>,
+    <a href="#Page_215">215</a>, <a href="#Page_228">228</a>, <a href="#Page_239">239</a>, <a href="#Page_240">240</a></li>
+
+  <li class="indx"><abbr class="spell">WPA</abbr>, <a href="#Page_239">239</a></li>
+
+  <li class="indx">Wyandotte Chemicals <abbr title="Corporation">Corp.</abbr>, <a href="#Page_200">200</a></li>
+
+
+  <li class="ifrst">Zeiss, Carl, <a href="#Page_24">24</a>, <a href="#Page_142">142–156</a>, <a href="#Page_159">159–164</a>, <a href="#Page_168">168–175</a>, <a href="#Page_255">255</a></li>
+</ul>
+
+<div class="transnote">
+<h2 class="nobreak">Transcriber’s Note</h2>
+
+<p>
+Some inconsistencies in spelling, hyphenation, and punctuation have been
+retained.
+</p>
+
+<ul>
+
+<li><abbr title="page">p.</abbr> 42: changed “th” to “the” (<a href="#TN1">complete control of the situation</a>)</li>
+
+<li><abbr title="page">p.</abbr> 90: changed “violent” to “violet” (<a href="#TN2">by ultra violet rays</a>)</li>
+
+<li><abbr title="page">p.</abbr> 90: changed “Fleischman” to “Fleischmann” (<a href="#TN3">irradiated yeast from Fleischmann</a>)</li>
+
+<li><abbr title="page">p.</abbr> 109: changed “moxed” to “mixed” (<a href="#TN4">tons of commercial mixed feed</a>)</li>
+
+<li><abbr title="page">p.</abbr> 115: changed “Tanning” to “Tannin” (<a href="#TN25">The Tannin Corporation imports approximately</a>)</li>
+
+<li><abbr title="page">p.</abbr> 117: changed “Lo” to “La” (<a href="#TN5">cooperated closely with La Forestal</a>)</li>
+
+<li><abbr title="page">p.</abbr> 127: changed “Jebson” to “Jebsen” (<a href="#TN6">National Lead and Jebsen organized</a>)</li>
+
+<li><abbr title="page">p.</abbr> 132: changed “entere dinto” to “entered into” (<a href="#TN7">entered into a series</a>)</li>
+
+<li><abbr title="page">p.</abbr> 143: changed “an dconsent” to “and consent” (<a href="#TN8">civil complaint and consent decree</a>)</li>
+
+<li><abbr title="page">p.</abbr> 154: changed “violatio nof” to “violation of” (<a href="#TN9">violation of the antitrust laws</a>)</li>
+
+<li><abbr title="page">p.</abbr> 157: changed “de-demands” to “demands” (<a href="#TN10">satisfy the actual demands</a>)</li>
+
+<li><abbr title="page">p.</abbr> 182: changed “Explosives” to “Explosivos” (<a href="#TN11">Compania Sud-Americana de Explosivos</a>)</li>
+
+<li><abbr title="page">p.</abbr> 191: changed “hope” to “hoped” (<a href="#TN12">It is to be hoped that</a>)</li>
+
+<li><abbr title="page">p.</abbr> 193: removed duplicated word “the” from “<a href="#TN13">Board of Directors of the the Commerce and Industry Association</a>”</li>
+
+<li><abbr title="page">p.</abbr> 205: changed “Sheriman” to “Sherman” (<a href="#TN14">embodied in the Sherman Act</a>)</li>
+
+<li><abbr title="page">p.</abbr> 206: changed “would would” to “would make” (<a href="#TN15">would make such abuses impossible</a>)</li>
+
+<li><abbr title="page">p.</abbr> 210: changed “every” to “ever” (<a href="#TN16">which has ever faced the company</a>)</li>
+
+<li><abbr title="page">p.</abbr> 211: removed duplicated word “was” from “<a href="#TN17">petroleum was was made part of</a>”</li>
+
+<li><abbr title="page">p.</abbr> 229: changed “authortiy” to “authority” (<a href="#TN18">Public authority must not be left</a>)</li>
+
+<li><abbr title="page">p.</abbr> 229: changed “securtiy” to “security” (<a href="#TN19">national security and national welfare</a>)</li>
+
+<li><abbr title="page">p.</abbr> 231: changed “thees” to “these” (<a href="#TN20">engaged in these practices</a>)</li>
+
+<li><abbr title="page">p.</abbr> 243: changed “an dunlawful” to “and unlawful” (<a href="#TN21">hidden and unlawful tax</a>)</li>
+
+<li><abbr title="page">p.</abbr> 246: changed “say” to “stay” (<a href="#TN22">stay out of important markets</a>)</li>
+
+<li><abbr title="page">p.</abbr> 256: changed “ofr” to “of” (<a href="#TN23">and fines of $59,003</a>)</li>
+
+<li><abbr title="page">p.</abbr> 262: changed “Scheidenstalt” to “Scheideanstalt” (<a href="#TN24">Deutsche Gold-und-Silber Scheideanstalt</a>)</li>
+</ul>
+
+</div>
+
+<div style='text-align:center'>*** END OF THE PROJECT GUTENBERG EBOOK 78077 ***</div>
+</body>
+</html>
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author	www-data <www-data@mail.pglaf.org>	2026-02-28 23:03:23 -0800
committer	www-data <www-data@mail.pglaf.org>	2026-02-28 23:03:23 -0800
commit	59b5be2eddfd1ec6929ee0c29409635ee9b744b5 (patch)
tree	0549a07d3cd32e0d2ad878e1e56e61e00e025f10 /78077-h