mission to use the Commission's data processing equipment to prepare a tabulation of the directors and officers of the 1,000 leading industrial corporations that would identify the corporations related by such officials and any competitive products or product lines made by such corporations. In response to this request, on April 3, 1964, FTC Chairman Dixon transmitted a tabulation, prepared by the Commission's Bureau of Economics, of the directors and officers in the 1,000 leading industrial corporations who held positions in other corporations. The tabulation listed the officer or director by name, the interlocked companies, and the products made by the respective companies, identified by five-digit Standard Industrial Classification (SIC) numbers that had been established by the Bureau of the Census. The five-digit SIC codes used by the FTC in the preparation of its tabulation were obtained from the 1963-64 Plant and Product Directory of the 1,000 Largest U.S. Industrial Corporations published by Fortune magazine. In the April 3, 1964 letter transmitting the tabulation, the FTC explained how the tabulation could be used to identify products made by the tied corporations. The letter states:

The tabulation also shows the SIC number in which the two or more interlocked corporations are engaged. The SIC industry numbers can be easily translated into actual product descriptions by referring to the Fortune 1963–64 Plant and Product Directory. To illustrate, we find the first entry in the tabulation showing one Julius W. Abernathy serving as a director or officer of both American & Efird Mills, Inc. and Dan River Mills, Inc. These two corporations are engaged in three of the same SIC industries, as follows:

(1) 22619 Finishers of broad-woven fabrics of cotton.

(2) 22629 Finishers of broad-woven fabrics of man-made fibre and silk. (3) 22811 Yarn spinning mills, cotton, man-made fibres, and silk. In other words, these two corporations are engaged in three different branches of the textile industry and Mr. Abernathy serves as a director-officer interlock. The FTC recognized that the listing furnished the subcommittee would serve only to identify potential violators and would not be sufficient for a determination as to whether competition in fact existed. In this connection the April 3, 1964, letter stated:

There are a number of factors which we would observe in studying this listing. First of all, there are some 400 interlocks, of which some may be in violation of Section 8 of the Clayton Act. However, additional information is needed before such a conclusion may be determined (i.e., it is necessary in some instances to refine the product data to determine that the two corporations in question are competitors). Secondly, in some instances we find that the two companies are already interrelated stock-wise (i.e., Kaiser and Permanente).

We are planning to take a careful scrutiny of this list to determine whether there have been any violations of law.

Correction of a number of errors in the initial tabulation required a subsequent revision. The final tabulation was supplied to the subcommittee on September 4, 1964, and is set forth in appendix B.

In an effort to verify the information relative to corporations and products that had been obtained from the FTC and from other sources, a questionnaire was prepared that would elicit precise responses relative to specifically named directors and their related interlocked corporations and products or product lines. On December 2, 1964, Chairman Celler sent this letter questionnaire to 17 of the 29 companies that made up the industrial and commercial category of the sample. The companies selected were those that appeared to have directors that linked two or more corporations with the same products or product lines as identified by the five-digit SIC codes set forth in the FTC tabulation.

The 17 companies that were selected were: American Motors Corp., Armour & Co., Chrysler Corp., Continental Oil Co., E. I. du Pont de Nemours & Co., Ford Motor Co., General Dynamics Corp., General Electric Co., General Motors Corp., International Business Machines Corp., Lockheed Aircraft Corp., North American Aviation, Inc., Sinclair Oil Corp., Standard Oil Co. of California, Texaco, Inc., United Aircraft Corp., and Westinghouse Electric Corp.

The letter-questionnaire asked three questions susceptible of eliciting yes or no responses. The following questions in the letter to American Motors Corp. were typical of those directed to each of the 17 companies:

Accordingly, would you please furnish, as promptly as convenient, the following information to the Antitrust Subcommittee:

1. Were the individuals named as directors in the attachment in fact directors of American Motors Corp. on December 31, 1962?

2. Were these individuals on December 31, 1962 directors of the companies designated in the attachment?

3. Did the business of American Motors Corp. on December 31, 1962 include the listed products or product lines?

In order to verify whether the products or product lines in fact were a part of the business of the companies that had been identified as being interlocked with the basic 17 corporations, commencing December 11 additional letters of inquiry were addressed to 52 companies so related. The following extract from the letter to Continental Can Co. is typical of these supplementary inquiries:

In the interest of accuracy, prior to publication of the staff study, I feel it is appropriate that this information be verified. Inquiries with respect to this matter already have been directed to the designated corporations. In order to complete our survey, would you please advise the Antitrust Subcommittee, as promptly as possible, whether the business of Continental Can Co. on December 31, 1962 included the products or product lines set forth on the attached list.

The letter-questionnaire to the 17 basic companies and the 52 interlocked companies requested information with respect to a total of 146 products or product lines identified by 5-nigit SIC codes. The response to the letter-questionnaire was good but not complete. All 17 basic companies responded, and only four of the other 52 tied companies failed to reply.

Analysis of the responses showed that 60 of the products or product lines identified by 5-digit SIC codes had been verified by the respective companies involved as being part of their businesses on December 31, 1962. With respect to 65 products or product lines, however, the companies involved denied that such products or product lines, as so identified, had been part of their businesses as of that date. Information in the responses with respect to the remaining 21 SIC code designations was ambiguous. Additionally, in a few cases the incumbency of a particular individual as a director in a particular company, as of December 31, 1962, was challenged.

In those instances where it was acknowledged that in fact their businesses included the products or product lined identified by the five-digit SIC codes, the companies involved frequently pointed out that such identification was not determinative as to whether in fact there was competition between the companies. The following response from Aluminum Co. of America is typical of this contention:

However, even if it should be determined that General Motors is making products included in the same code numbers, it cannot be concluded that they are

the same products that we are making or that they are being sold in competition with our products. I am sure that you and your staff know that information with respect to shipments of products under these code numbers is collected by the Bureau of Census on form MA-100, which requires that figures be given of the value of products shipped regardless of whether the shipment reflects a sale or an interplaut transfer. Even more significant, code Nos. *** and *** by their own definitions, include a number of different and non-competitive products. While code No. *** describes only magnet wire, there are many kinds and sizes of magnet wire, many of which are not competitive with each other.

For these reasons alone, the fact that Aluminum Co. of America and its subsidiaries have reported shipments of products within these three code numbers and the fact, if it be one, that General Motors Corp. has also reported shipments of products within these three code numbers, do not mean that Aluminum Co. of America and General Motors Corp. are competitors or potential competitors in these products or product lines.

While, therefore, we have given you the information which you requested in your letter of December 10, we respectfully submit that this information does not prove or disprove, and should not be used to determine, whether interlocking directorships may affect competitive or potentially competitive products or product line.

A number of the companies in their responses claimed that information relative to products or product lines identified by the five-digit SIC codes was confidential. These companies pointed out that the information had been supplied to the Department of Commerce on the assumption that it not be made public, and referred to statutory prohibitions against employees of the Department of Commerce making such information public. Notwithstanding the fact that the chairman's letter-questionnaire stated that the information had been obtained from publicly available sources, some of the companies assumed that the staff had acquired information relative to the SIC product codes from the Department of Commerce. The following extract from the response of Union Carbide Corp. is typical of this aspect of the survey:

You advise that your subcommittee staff has compiled, from publicly available sources, information which indicates that Union Carbide Corp.'s business included said products or product lines. Since the SIC code is the one adopted by the Department of Commerce in its Census of Manufactures report, presumably that has been the source of your staff's information.

Such information is submitted to the Bureau of the Census of the Department of Commerce on a confidential basis under the provisions of Sections 8 and 9 of Title 13, U.S.C.A., which prohibit the Department of Commerce from making public any data so furnished which could identify the corporation.

*** As a courtesy to you we are confirming this information to you but without waiving or intending to waive the confidentiality of that information or consenting to its use for any purpose.

Another example is found in the following extract from Chrysler Corp.'s response:

Answering your third question, Chrysler Corp. reported on the 1962 Annual Survey of Manufacturers of the U.S. Bureau of the Census under all but one of the five-digit SIC Code numbers you mentioned, the exception being * While we are not aware of your source of this information, its confidentiality is protected under Public Law 87-813, and our answer regarding it is for your own confidential use only, and not for publication to others.

As you may know, the five-digit SIC Code numbers used by the Census Bureau were developed to provide general industrial statistics and have no relationship whatever to actual competitive relationships. Without attempting to discuss

all of the defects in any such classification, the fact that two companies might report to the Census Bureau under the same five-digit number does not mean that they are competitors.

The staff, of course, has not obtained any information from the Department of Commerce that is subject to the restrictions on confidentiality that are applicable to information submitted to the Bureau of the Census. The information relative to the five-digit SIC codes was obtained by the staff from the FTC tabulations which, in turn, had been derived from Fortune magazine's 1963-64 Plant and Product Directory. The manner in which the editors of Fortune acquired. their information relative to the SIC codes is set forth in their foreword to the directory. It appears that the companies involved had voluntarily supplied to Fortune the very information that they were hesitant to supply to the subcommittee. In this connection the foreword to the "Plant and Product Directory" states:

In compiling the plant and product listings, FORTUNE came across many of the same problems encountered in 1961 with the first edition. The main difficulty was proper classification of products. FORTUNE wrote to each of the 1,000 companies asking for cooperation and requesting that they either verify and revise their listings in the first directory or, in the case of the companies to be included for the first time, supply detailed information about their plants and products. In many cases the product information supplied was vague or incorrect. Some companies had consulted information filed annually with the Government on the MA-100 form, in which the company lists the products it manufactures along with the SIC code (see page 4) applicable to each. It developed that in many cases the companies were assigning outdated or inaccurate codes to their products-e.g., identifying a line of products as "aircraft control systems, SIC No. 38111," when the correct designation was "electronic navigational aids, SIC No. 36624." Ultimately FORTUNE went back to better than three-fourths of the companies, asking for catalogs, specification sheets, and, in general, more information. With this in hand, it became possible for the staff to assign correct code numbers to the products.

Analysis of the responses to the letter-questionnaire indicates that the companies assert that a substantial number of the five-digit SIC coded products that had been associated with the business of particular companies are inaccurate. In view of these asserted errors, use of the five-digit SIC codes from the Plant and Product Directory is of doubtful value for any purpose other than as an initial lead to further information in determining whether, in fact, the business of the corporations included such products, or whether two corporations with the same products so identified, in fact, are competitors.

In the foreword to the "Plant and Product Directory" the editors of Fortune defined the objectives of the publication as follows:

The goal of the first Plant and Product Directory was to supply, primarily for sales and marketing purposes, some supplemental information about those 500 companies: where they manufactured and what they manufactured. As anticipated, this kind of information fulfilled a real need. Response to the directory was immediate and enthusiastic.

In view of the responses to the letter-questionnaire, while the Plant and Product Directory may have utility for use in the enthusiastic vagaries of corporate advertising and marketing programs, the companies seem to think it would be of little value in identifying what a particular company actually manufactures as far as competition is concerned.

In view of the responses to Chairman Celler's letter-questionnaire the staff has concluded that the FTC tabulation of the directors of the 1,000 largest corporations cannot be used to base a conclusion as to the effects on competition of any of the interlocking relationships included. The tabulation's value lies in its description of the frequency in which

interlocks appear, and as a first lead to relationships that may present problems under section 8 of the Clayton Act. With respect to the companies that received the letter-questionnaire, before conclusions may be reached as to whether or not relationships existed between the companies that involved violations of section 8, additional information should be obtained with respect to specific products and particular marketing areas. Further, inasmuch as the information considered by the staff had a termination date of December 31, 1962, additional information would have to be obtained to determine whether changes that have occurred since that date altered the relationship. Several of the companies submitted information about changes in directors and terminations of product lines that would have such effect.

For the foregoing reasons, in this report, although it is probable that further investigation would reveal positive violations of present law, the staff does not reach any conclusion as to whether any of the cor porate management interlocks included constitute violations of section 8 of the Clayton Act.

B. BANKS

Historically, interlocking relationships between bank managements and the directors of other corporations have been of special significance. Misuse of the power to control money and credit from financial institutions in the first instance generated the antitrust prohibitions of Clayton Act, section 8, and concern over the control of this power is reflected in many of the ancillary regulatory statutes.

The operations of banking and other financial institutions are prime factors in the functioning of the U.S. economy. Through these channels, in large part, have come the enormous flow of credit that supports postwar capital expansion programs and constantly enlarged business and consumer markets for all types of goods and services. Nor is the importance of the U.S. financial institutions confined to the domestic economy. Within the last generation, U.S. money sources have come to occupy a prominent, if not a dominant, place in the world's credit and payments system. The United States has become the center of gravity of the world's financial activity. Foreign financing activities are carried on by approximately 25 banks, centered mostly in New York City. Loans to foreigners by United States banks increased from $718 million in 1950 to $3,650 million in 1961.8

The dimensions and growth of U.S. banking is indicated by the following statistics: In 1952 there were 14,046 commercial banks in the United States with total deposits of $172,931 billion and outstanding loans of $64,163 billion. In 1962 there were 13,429 commercial banks with total deposits of $262,122 billion and loans outstanding of $140,106 billion. Similarly, mutual savings banks were 529 in number in 1952, with total deposits of $22,621 billion and outstanding loans of $11,349 billion; in 1962, there were 511 mutual savings banks, with $41,531 billion deposits and $32,716 billion in outstanding loans.9

Fred H. Klopstock, A New Look at Foreign and International Banking in the United States, Research Study No. 5 in Private Financial Institutions, Commission on Money and Credit, Prentice-Hall, 1963, p. 333.

Klopstock, op. cit., p. 335.

Annual Reports of Federal Reserve Board, 1953 and 1963.