2. By 1974 the eight majors controlled 52 percent of national marketingthough local and regional concentration of marketing was far higher. Almost all of the 1,200 gas stations that had to close after the 1973 embargo due to lack of access to crude oil were independent stations.

3. In 1965 only Gulf Oil among oil firms was engaged in coal operations. Ten years later, eight oil firms produced 20 percent of the industry's output. Two of the top three coal companies, and six of the largest ten, are oil companies.

4. Oil companies control over half of the uranium industry's reserves; three of the top five uranium producers are oil companies or their subsidiaries.

5. A lattice-work of direct and indirect interlocking directorates, joint ventures and joint ownership of pipelines are not reflected in concentration ratios, bat grossly reduce the competitiveness of this industry.

Of course, there is also the exporting nations' cartel, OPEC, which collaborates in a monopoly-oligopsony relationship with the major oil firms in a way that profits both.

"CONGLOMERATE CONCENTRATION" SHOULD BE STEMMED

Mr. Chairman, I won't here repeat the statement on S. 600 that Ralph Nader and I made to this committee on the issue of conglomerate mergers generally. We then argued that undue aggregate concentration has such economic costs entrenchment, reciprocity, decline of potential competition, disincentives to innorate, diseconomies of scale) and political and social costs (absentee ownership in local communities, multiplied political power) that public policy should attempt to restrict such aggregate concentration. Such criticisms apply especially oil-based conglomerates-first, because oil firms have $16 billion in cash holdings (twice that of any other industry) available for conglomerate acquisitions; second, because recent years have indeed witnessed a trend toward such huge Furchases (Mobil-Marcor, ARCO-Anaconda, Tenneco-Philadelphia Life InsurLee, Sun-Becton Dickinson); and third, because the oil industry has such unasual political power that President Franklin D. Roosevelt was once moved to remark that "you can't get elected without the oil industry and you can't govern with it."

I have heard critics of S. 600 say that the only support offered is anecdotal case examples, not econometric studies. Imagine, if you will, how this line of criticism could be applied to the first amendment in 1787. Presumably, critics would have rejected the case of John Peter Zenger as an anecdote not proving the need for free speech. Presumably that period's Robert Bork and Ira Millstein Would demand not real-life examples but quantative proof that we really needed a first amendment. Yet the benefit of free speech, and of a nation not dominated by huge conglomerate enterprises, are bound up with social, cultural, and economic values—which are not readily reducible to mathematical computation. Defenders of increasing conglomeratization are forced to doubt what every politician and political scientist knows-that great companies have great political power. To deny that is to make believe the Business Roundtable is no different than Gino's Pizza. For those forced to such analytic absurdity and who desire studies rather than examples, I urge they read a recent study by Lester Salamon and J. S. Siegfried on "Economic Power and Political Influence: The Impact of Industry Structure on Public Policy," that appeared in the September 1977, American Political Science Journal. It concluded that large companies had more political power than smaller ones—especially large oil firms. "If the free market tor of the economy is allowed to develop under antitrust rules that are blind to all but economic concerns," writes FTC Commissioner Robert Pitofsky, "the kely result will be an economy so dominated by a few corporate giants that it will be impossible for the State not to play a more intrusive role in economic 1fairs."

THE PROMISE OF MORE PRODUCTION FROM MORE PROFITS IS A RUSE

We are repeatedly told by the oil industry that if only the Federal Government would now get out of the pricing business and allow a greater return, these firms would produce the energy we now need. Among other things, this promise premes that all the rest of us engage in collective amnesia:

1. In 1972 the Independent Association of America stated that America could energy self-sufficient by 1980 if prices rose to $4.10 a barrel.

2. In October 1973, John Swearington, the chairman of Standard Oil of Indiana, laimed $4.50 per barrel would provide "additional incentives and additional unds for intensified exploration for new supplies of oil."

3. In November 1973, the Petroleum Independent quoted a Texas oil produ as saying that, “with new oil prices of $5.30 to $6 per barrel, there is incent now to go looking for oil."

4. In July 1975, speaking of a proposed $7.50 price ceiling, the president Ashland Oil stated, "I would say that at those levels it would be very profitabl Yet about 2 months ago, John Swearington significantly upgraded his 19 estimate; he said he doubted that there would be any increased domestic p duction below the price of $1.50 a galon.

Yet since the price domestic oil rose 170 percent between 1972 to 1978, a U.S. petroleum output actually declined, one has to believe in the tooth fa and the cardiff giant to acept industry pleas of poverty now.

Upping the ante has neither credibility, nor will it solve the shortage energy. There is little assurance, given this dismal record, that the laissez-fa of decontrol will make the necessary difference either-since most experts knowledge that the production and conservation effects will be modest.

ANTITRUST ENFORCEMENT HAS FAILED

Despite this increasing lockhold of oil and alternate energy sources by t majors, Federal antitrust enforcement has been desultory. Here we agree wi Rep. John Anderson (R.-II.) who supports this legislation because it wou "slow the trend toward further concentration in our economy *** (and) } cause antitrust enforcement in this area has been less than predictable und both this and prior administrations." In opportunity after opportunity, the an trust tiger bared its teeth, and then shuffled away. Since this litigative failu justifies a legislative remedy, allow us to chart this failure in some mode detail:

In the late 1930's the Justice Department charged 22 major vertically int grated oil companies, 379 of their subsidiaries, and the American Petroleu Institute with combinations and attempts to monopolize and regulate crudeproduction, transportation, refining and marketing.

The defendants allegedly employed a full array of antitrust violations: pri fixing, predatory price wars, basing point of delivered price schemes, exclusi dealing contracts, full-line forcing, tying arrangements, and a variety of oth practices. The complaint demanded sweeping divestiture of the oil companie transportation and marketing facilities—pipelines, gas stations, et cetera—pl injunctive relief against 15 separate categories of anticompetitive practices. B that was only the Sherman Act part. In addition, the defendants had controllin interests in the major oil pipelines that by statue were supposed to be regulate common carriers.

The eventual consent decree, however, contained no antitrust relief. The pr visions dealt only with the pipeline rebates, the "relief" limiting dividend pa ments to shipper-owners to 7 percent of total pipeline assets. The root of th failure was the oil industry's power. The provisions for divestiture of marketin and transportation never even got into the complaint as filed. Before approvin it, Attorney General Robert Jackson referred the complaint to the Council fo National Defense, which passed it to an oil advisory committee, 9 of whose 1 members were connected with either Standard Oil or Shell, both defendant The oil industry in effect threatened to withhold commitments to the war effo unless the most serious charges were dropped. The decree reflected this coercion Only Division Chief Thurman Arnold signed it on the Antitrust Division's behal All the lawyers on the case refused.

If it were not for the question of national security, we would be willing to fac either a criminal or a civil suit. But this is the kind of information that th Kremlin would love to get its hands on.

That argument was made in 1952 by Arthur Dean, attorney for Standard O of New Jersey, urging that documents be withheld from a grand jury investigat ing the international oil cartel. The documents had already been screened by a interdepartmental committee representing the CIA and the Department o Justice, State, and Defense. One document this committee kept from the gran jury was the FTC's International Petroleum Cartel Report, which, after carefu editing, had already been released to the public. This report had formed the basi for the Antitrust Division's attempt to indict Jersey Standard, California Stand. ard, Gulf, Texaco, and Socony-Vacuum-now Mobil-for conspiring since 1928 to divide world markets, fix oil prices, and limit imports of cheap foreign oil

The eventual oil cartel case, perhaps better than any other, shows the difficulty of when the Government attempts to bring antitrust measures to bear against this industry.

The case was originally filed by the Justice Department under President Truman, who had extreme difficulty in obtaining the necessary information on which to pursue the case. The incoming Secretary of State, John Foster Dulles, was Arthur Dean's law partner. The Eisenhower administration hastily dismissed the grand jury investigation into what the FTC report considered a multibilliondollar theft, again citing "national security." A civil suit was substituted, but without an advance commitment by the defendants to turn over the documents they fought to keep from the grand jury.

At that point Leonard Emmerglick, the division's chief prosecutor resigned. As the civil case "progressed," the interdepartmental screening committee, again institutionally connected to the oil defendants, continued its work. And, for example, the National Security Council forbade any attempt to dismantle the Cartel's structure. By 1960 rumors of a "sell-out" consent-decree settlement had reached Senator Joseph C. O'Mahoney (D.-Wy.). He was reassured by the Justice Department that no settlement was imminent-the day before settlements with Gulf and Jersey Standard were announced.

The relief consisted primarily of vague bans on future agreements to fix prices. divide markets, restrict output, or exclude competitors. Even these provisions were riddled with loopholes. O'Mahoney was so furious over the decree provisions, according to his former aide, that he briefly considered bringing suit against the settlement. By 1963 another consent decree, similar to the earlier es, was entered against Texaco. In 1967 the cases against California Standard and Mobil were dismissed "without prejudice," a legal formalism which means that the Division can reopen the case and spend another 13 years seeking another meaningless decree.

The Division has even had difficulty securing convictions in straightforward price-fixing cases. During the mid-1950's veteran trial attorneys persuaded Antitrust Assistant Attorney General Stanley Barnes to call a broad grand jury iniry into patterns of regional gasoline-price leadership that had persisted, at least in some areas, since the 1911 breakup of the Standard Oil Trust. Attorney GeLeral Brownell's office finally permitted a nationwide investigation, but only if a grand jury empaneled at Alexandria, Va., first found evidence of a local price conspiracy.

Then in 1957, during the Suez crisis, 29 oil companies issued price increases shortly after their executives had talked to one another by telephone, after several executives had publicly invited price hikes, and when crude oil was in ample supply. The Alexandria grand jury returned an indictment for the price increase, with the case later transferred to Judge Royce H. Savage in Tulsa, over the Dirision's objection.

At the close of the Government's 11-day presentation of its case, the defendants moved for a dismissal due to lack of evidence. Although an Atlantic executive's diary contained a January 2 notation of Humble's January 3 price increase, and although the defendants had presented no rebuttal evidence of their own, Judge Savage promptly stated his "absolute conviction, personally" that the defendants had done nothing wrong and dismissed the case.

The entire oil industry rejoiced. Headlines in the Oil and Gas Journal read: Oil is Acquitted, But the Government Now Stands Indicted." It was rather embarrassing when, a year later, Judge Savage resigned from the bench to become 1 vice president of Gulf, one of the defendants. It was one of the only cases where « President did not send a notice of thanks and appreciation to a retiring district court judge.

The Antitrust Division in the mid and late 1960's failed to stem a series of Lergers that increased concentration in this industry. Donald Turner, then head of the Division, did not challenge the $1.7 billion Union-Pure merger, which oned the 15th and 16th largest oil companies to form the 9th largest. Yet the Division staff working on the case all favored a civil complaint, because the two competed in the exploration of crude oil and because they were potential competitors in gasoline marketing, especially with the rise of national credit cards and advertising. Turner also overruled his staff and allowed a merger between Sun Oil and Sunray DX, the 13th and 17th largest oil firms in the Nation. Other acquisitions that the Antitrust Division allowed include the following: Atlantic, the 14th largest in assets, acquired Richfield, ranked 23d; Gulf ac

quired Cities Service's marketing and refining assets in the Midwest where G had recently entered; Continental, No. 9, merged with the largest coal produc Consolidation, which held 11 percent of the market. The failure to bring the test cases, a Division trial attorney told me, effectively “immunized the oil dustry from antitrust." Indeed, shortly after the Con-Con deal, Occidental I troleum acquired Island Creek Coal, the second largest noncaptive producer and a trend began which has resulted in 24 oil firms controlling 77 billion to of coal reserves, 44 percent of all coal leased or owned privately.

Richard McLaren, the Assistant Attorney General in charge of antitrust und President Nixon, secretly allowed American Oil firms to jointly bargain wi OPEC. By a business review letter it refuses to make public-I requested it a was turned down-the Antitrust Division has waived the antitrust laws for the petitioning petroleum firms. This pooling arrangement, admitted a Division la yer in an interview, was a "technical violation" of the consent decrees settli the 1952 oil cartel case. "But you have to understand," he said, "that we did have much choice in the matter."

Finally, there was cause for some optimism with the advent of the Carter a ministration. John Shenefield, at his confirmation hearings before this subcoi mittee, said that he intended to file a shared monopoly lawsuit during his tenui that he would study vertical divestiture in the oil industry and that he wou "vote aye" for a horizontal divestiture bill. No cases in these three areas ha been brought in the subsequent 2 years.

S. 1246 will help persuade cash-rich oil companies to stop playing monopoly a to either invest their retained earnings in energy production or distribute the to their shareholders. We believe this is what the American people want ar expect as they should. An individual oil company might rationally want to dive sify its investments so as to reduce risk and maximize profit. But what is ec nomically sound for a firm-in a world with a world cartel and depleting assetsis not the same as what is economically sound for the Nation. An oil firm migl want to buy a circus or a newspaper. Americans want them to produce energya message they can send them with this measure. We support it.

Senator BAYI. Our next witness is Mr. Harold W. Wright, pres dent of the Indiana Farmers Union.

STATEMENT OF HAROLD W. WRIGHT, PRESIDENT, INDIANA FARMERS UNION

Mr. WRIGHT. Good morning, Mr. Chairman.

Senator BAYI. Mr. Wright, it is good to have you here this morning Mr. WRIGHT. It is an honor to be here, Senator.

Senator Bayh, members of this committee, I am Harold Wright. am president of the Indiana Farmers Union. I have with me today also Mr. Robert Mullin, from our Washington office. You have a pre pared statement which I have submitted to this committee. I suggest i be entered into the record and I will just kind of survey what is in tha prepared statement and give some other remarks.

Senator BAYH. Without objection, so ordered.

Mr. WRIGHT. I want you to know that it is quite an honor for a farm boy from Delaware County to have this opportunity to appear before this distinguished committee.

I also want to point out that our agriculture is vitally interested in the subject that we are discussing today. I want to take this opportu nity to commend the sponsors of this legislation and we will work with them in an effort to see that it becomes law.

Farmers in their transition from the horse to the tractor have be come quite involved in the utilization of petroleum. We have changed that horse to the tractor. We have changed the plow to the chemical. In doing so, we are quite heavily dependent upon the utilization of our petroleum products.

Farmers are major users of this very important commodity. So, therefore, the farmers are being heavily dependent on this important commodity and are vitally concerned about its availability and also concerned about the price that they have to pay for this very important input that they have.

Our national organization in its convention this year put forth a very strong statement with regard to the monopolistic controls that our petroleum industry can have and also make the very strong recommendations which are in my prepared statement.

Farmers and other citizens have experienced considerable increases in petroleum prices in recent years. My statement points out the fact that in 1970-we could purchase gasoline for an average of 35 cents a gallon. Just last year that price increased to an average of 57 cents a gallon.

I would like to point out that we have increased by 30 percent in the price of our petroleum products just this year.

You know, I have never been a very strong advocate of deregulation of fuel prices. I felt that deregulation would hurt the people who could least afford to pay the price, farmers in particular.

Farmers are unique in the fact that even though our costs of production have increased substantially in recent years, we don't have That ability to add this increased cost to the price of our product. While we are experiencing this increase in our fuel costs, the price of our farm commodities in recent weeks have dropped substantially, Senator. I am sure that you are quite aware of this.

So with this inability to pass this price on to the consuming public, it puts the farmer in a further financial bind. I want to point out to this committee that in June of 1978 the parity ratio on corn was $3.70 a bushel. Maybe I should explain that parity is the yardstick that the Government uses to determine the price that a farmer should have for a particular commodity to put him on an equal basis with the other egments of our economy. In June of this year, the parity price on corn was $4.17 a bushel, or 47 cents higher than it was just a year previous. It is my firm belief that a substantial part of this increase in the parity level of this important commodity to farmers is created by the fact that our energy costs have increased substantially in this period of time.

So, in summary, I want to recommend that this legislation be passed as rapidly as it can. I would also add at this point, you know, in my opinion, it does not go far enough.

The question was brought up by one of the previous witnesses, does the consuming public really believe that there is an energy problem now. As a farmer and as a consumer, I believe, and I think my friends and neighbors out there on the farm and also in town are beginning to realize that we do have a problem with the petroleum, with energy. I paid $1 a gallon for regular gasoline in Indianapolis yesterday. I am sure when you are doing that, Senator, you begin to realize there a problem.

I would wholeheartedly recommend that this legislation be passed. Senator BAYH. Thank you very much, Mr. Wright. I know you ome here at a significant sacrifice, leaving your farm operation. I would not want the record to show that you are just a simple farm boy