GOVERNMENT
Antitrust Action Against Labs? Restrictive research practices could m a k e c h e m i c a l c o m p a n i e s t a r g e t of suits, Barnes of Justice D e p a r t m e n t says
Wisconsin-born Stanley N. Barnes, Assistant Attorney General in cbarge of the Ajiti-Trust Division, was presiding judge of Los Angeles county before conning to Washington in the research laboraC OMPETITION tories is as important as competition in the market place." These are the words of Attorney General Herbert Brownell, Jr. Consequently, h e indicates the Department of Justice will be alerted for possible antitrust action if research competition should become stifled. In an exclusive interview with C&EN, Stanley N . Barnes, Assistant Attorney General in charge of the Anti-Trust Division, explains the Justice D e p a r t ment's position. Q : Why is the Department of Justice— and particularly the Anti-Trust Division —interested in research laboratories? A : The Department of Justice is interested in any restraint of trade. Allocation of territory is w h a t is known as a per se violation of antitrust laws. Allocation of research with restrictive provisions affecting research is just as "bad from an industry point of view as allocation of territory. One of the reasons that Justice D e partment is especially interested at this time is an outgrowth of a recent patent licensing case. One outstanding American company with a very great interest in research has, through its officers in sworn testimony, stated t h e value of its own inventions is seriously depreciated by restrictive licensing agreements with other companies. T h e y described their own patent licensing system as frustrated. Under such pooling of licensing agreements, the companies that p o o l but have no complete licensing power —have little to offer licensees that desire to get into t h e larger field. Having little 596
to offer, they do not get the business, do n o t c o n d u c t the research nor produce for the company the resources which ordinary licensing of patents rights do.
the Sherman Act, nor any question of acquisition of assets a n d stock, nor mergers prohibited by the Clayton Act, then there is no antitrust policy against it.
Q: Judge Barnes, would you explain what the Department means when it refers to the somewhat general term "research laboratories?" Does it include laboratories maintained by individual companies, independent laboratories ichicli do consulting work, and laboratories in our colleges and universities?
Q: // an American company has an agreement with a foreign company to restrict research, would it be liable for prosecution under the antitrust lavo?
A: Primarily the research laboratories to which we refer are those maintained hy individual companies.
Q: Turning now to the general antitrust program. Judge Barnes, tvhen the Eisenhower Administration took office, certain critics said that few, if any, antitrust cases would be instituted. Would you care to comment on these statements?
Q: Criminal antitrust proceedings are generally brought against individuals or companies accused of restraining trade in some definite product, commodity or service. Would it not be difficulty however, to institute action on the basis of withholding research data? What is your opinion? A: Antitrust action would not b e on the basis of withholding research d a t a but on the basis of allocation of research or agreements to divide fields of research, and this primarily after obtaining basic patents. Q: What types of chemical research aci Hty might he subject to antitrust action? A: Any type that involves restrictive practices of any kind not exempted b y patent laws. Q: At presentt pending? A: No.
are any such
A: The determination of that question would rest on t h e same tests that are applied to any other group.
A: I would say that anyone who m a d e that statement didn't r e a d t h e Republican platform of 1 9 5 2 , which said, "We shall relentlessly protect our free enterprise system against any monopolistic and unfair t r a d e practices." Attorney General Brownell stated in June, 1953, that we believed i n equality of enforcement, simplification of administration, assistance t o the business man acting in good faith, b u t also we had an uncompromising determination to enforce the law. Q : How many new antitrust cases "Anti-trust action would b e . . . on the basis of allocation of research or agreements to divide fields of research- . ."
actions
Q: Some smaller companies have considered pooling research programs to cut individual costs. Would these programs be affected by the Justice Depart m enfs policies? A: If pooling of research facilities by small companies is organized on t h e basis that each company participates equally in t h e results, then it is not a violation of antitrust policy. If the small companies, however, do not share equally in t h e results or any unlawful restraint is exercised, then we would b e interested. If pooling of research facilities is done b y large companies and such pooling does not involve a question of monopolization within industries under CHEMICAL
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GOVERNMENT.
"Allocation of research . . . is just as bad from a n industry point of view as allocation of territory"
prospective defendents that we are intending to file suit and asking t h e m if they care to negotiate. This procedure, if successful, will save the litigant m u c h expense, much time and will aid materially in reducing the burden on our already over-taxed courts. This procedure applies to civil suits only, not to criminal. Q: What has been the disposition of these cases? A: The ordinary antitrust case, because of its size and complications, is disposed of in a little more than two years. I t would not be surprising if nothing had happened to these 31 cases filed by the new Administration. However, three were settled by plea or consent; in one other counsel had agreed t o a compromise; one case was tried and won; in two others all but a single défendent have settled, and the remaining 24 cases are in various stages of preparation for trial or negotiation for settlement.
have been filed since the advent of the new administration? A: Thirty-one. In addition, to those 3 1 , we have nine cases ready to be filed. In these nine cases w e are following a new procedure in advising counsel for
Beeson Offers t o C u t Ties W i t h Company in NLRB Fight Albert C. Beeson of Food Machinery and Chemical says he will terminate his association with the company and "sacrifice" his pension rights if his nomi-
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nation to the National Labor Relations Board is approved b y the Senate. Earlier, the San Jose, Calif., labor relations official was assured of Presid e n t Eisenhower's continuing support, despite strong objections voiced by Democratic members of the Senate Labor Committee. Beeson's appointment seemed ready for consideration b y the full Senate after it was approved by the committee on a strict party line votg of seven to six Jan. 26. Democrats on the committee, however, issued a forceful protest against what they termed "steamroller" tactics and suggested the hearings were inadequate. T h e y also questioned whether there might b e a conflict between Beeson's N L R B post and his job in private industry, since he h a d been q u o t e d by a California paper as saying h e planned to return to Food Machinery after a year with NLRB. Beeson denied making this statement in testimony before the committee. Senate d e b a t e on the nomination was postponed when Beeson requested that h e be allowed t o testify further on t h e matter of conflicting loyalties. At t h e hearing, h e said lie m a d e a n "honest mistake'* w h e n he d e n i e d making the newspaper statement, explaining that h e thought the committee was referring to another story which appeared in the same p a p e r t h e previous evening. Beeson restated earlier testimony that h e had no agreement with the company to return after his term of service with the Government. His testimony was supported by a telegram from Food Machinery's president Paul L . Davis, which said Beeson h a d n o written, oral, or implied arrangement to return to the •company. After the session, committee voted to extend the hearing and invite other company representatives to testify. To check rumors that Beeson's nomination would be withdrawn, Eisenhower expressed confidence in the Californian and said h e had no new plans concerning the nomination. Beeson himself indicated h e will continue his fight for the post. Beeson's prospective seat on N L R B represents the "balance of p o w e r " on the five-man board. Two of t h e present members were chosen during the Truman Administration and the other two were previously selected b y Eisenhower. NLRB's chief task is to administer and interpret the Taft-Hartley Act. Research P r o j e c t Deductions A p p r o v e d by House Committee Another of the tax revisions proposed by President Eisenhower in his b u d g e t (Continued on page 602) AND
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message (C&EN, F e b . 1, page 4 0 0 ) lias b e e n agreed to by t h e key House "Ways and Means Committee. T h e plan permits companies to deduct research a.id experimental costs as a current business expense. Trie committee-adopted proposal provides specifically that a company can either write off such costs in the year they are incurred or treat them as deferred expenses to b e written off after a period of five years or more. Once adopted, a method must b e adhered to unless approval for a change is ob tained from the Treasury D e p a r t m e n t . At present, the Internal Revenue Service is permitting taxpayers to write off research projects as current ex penses, but there is no specific law which authorizes this procedure. In practice, large companies with fulltime staffs of scientists a n d permanent laboratories have been able to take ad vantage of these provisions. Smaller firms, however, which may be inaugu rating research programs for the first time, have had difficulty in securing these deductions. Because of present limitations, sev eral of the smaller companies could be limited to research that has more than a5O-50 chance of "paying off." If their research projects cannot b e listed as cur rent expenses, the firms must capitalize these expenditures through special ac counts. If the project later was success ful, research expenses could be de ducted from the profits and only the reiïiiiining income would be taxed. If the project was a failure, on the other hand, recovering expenses would be doubtful unless the research could be charged off to some other successful operation. The new provision does not apply to expenditures for land, depreciable or cdepletable property, or mineral, oil
or gas explorations. The committee previously approved a plan which would grant certain concessions to oil, gas or mining companies suffering heavy losses caused b y unprofitable explorations. O n Jan. 27, the group voted to revise certain sections of the tax law dealing with business losses. Under the present law, business losses of more than $50,000 a year, sustained for five consecutive years, must be recomputed for tax purposes. In refiguring the taxes only losses of $50,000 or less are allowed in a single calendar year and any losses over this figure are ignored. Taxes and interest are not included in the losses, however. T h e committee amendment provides that in determining whether h e has losses in excess of $50,000, the taxpayer would not have to include casualty or abandonment losses, losses attributable to drought, or expenditures which h e has the right to deduct or capitalize.
ί Military a l u m i n u m requirements are due for a complete reappraisal, accord ing to Office of Defense Mobilization. Spot check among Defense Depart ment's aircraft contractors discloses a sufficient number of undetermined fac tors to require a reworking of the en tire requirements for aluminum. Air Force and Navy will submit revised requirements May 15. ί Army p r o c u r e m e n t cutbacks, an nounced for the last half of fiscal 1954, are expected to have little effect upon chemical industry as such, say Defense Department spokesmen. Cutbacks are part of plan to reduce stock levels, now at an average of 15.7 months, to about 90 or 180 days.
Certificates of Necessity F r o m Dec. 31 through Jan. 13 the Office of Defense Mobilization granted 5 8 certificates of necessity amounting to $118,487,751. In addition, 26 applications were denied. Amortization grand total now amounts to $29,134,413,000 for 18,687 facilities at an average 6 0 % eligible for rapid depreciation. T w o largest certificates issued for t h e period are: National Steel Corp., Weirton Steel Co., Weirton, W . Va., electrolytic tin plate, $77,305,000, 2 5 % allowed; Esso Oil Co., Bayway, N. J., petroleum refining, 5 5 % allowed on $11,671,000 and 4 5 % allowed on $3,243,600. Certificates of chemical interest are listed below. N A M E OF C O M P A N Y AND LOCATION O F F A C I L I T I E S
PRODUCT OR S E R V I C E
National Steel Corp. Weirton, W . Va. Wasrren Petroleum Corp., Operat o r - T h e Garvin County Plants P a n t h e r Creek, Okla. The California Oil Co. Perth Amboy, N. J . lisso Standard OU Co. Bayway, N. J. Westoil Terminals Co. San Pedro, Calif. Consolidated Chemical Industries Houston, Tex.
Electrolytic tin
plate
N'atural gasoline Petroleum refining Petroleum
refining
Petroleum refining Sulfuric Acid
CHEMICAL
AND
AMOUNT CERTIFIED
PERCENTAGE ALLOWED
$77,305,000
25
1,306,000 535,073
65 40
175,000
65
11,671,000 3.243,000 600,000
55 45 65
3,175,000
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