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point. To the extent that conduct is undertaken within the scheme of regulation, within the procedures that have been set forth within that scheme of regulation by the appropriate body-in this case, the Federal Maritime Commission and to the extent that that scheme of regulation contemplates certain types of antitrust immunity as is true in the Shipping Act of 1916, and to the extent that the Commission effectively approves, formally approves that conduct and grants the immunity that it has the power to grant, the antitrust laws are then displaced.

To the extent that we are dealing with conduct outside of those parameters, the antitrust laws apply in full.

Mr. MCCLOSKEY. Under the 1916 act where there is an exemption for shipping conferences so prices may be set in a manner which would otherwise be in violation of the antitrust laws. What is your judgment on balancing that power by permitting shippers to form councils?

Mr. Sims. As I think you may be aware, Congressman, we have been asked to give our views from time to time on the formation of shippers' councils by private parties who were interested in that.

Mr. McCLOSKEY. I know you have. Would it be too much to ask you to furnish us with copies of all opinions the Justice Department has given in that connection over the past 4 years?

Mr. Sims. I would be more than happy to.

Mr. McCLOSKEY. I ask unanimous consent to leave the record open at this point for these for views.

Mr. ANDERSON. With no objection it is ordered. [The material referred to follows:]

UNITED STATES DEPARTMENT OF JUSTICE,

Washington, D.O., July 12, 1977. KEITH I. CLEARWATERS, Esq., Chapman & Clearwaters, Washington, D.C.

DEAR MR. CLEARWATERS : Reference is made to your letter and enclosures of May 17, 1976, and your subsequent discussions with my staff concerning your request for a statement of the Antitrust Division's present enforcement intention with regard to the proposed plan of the American Importers Association, Inc. to sponsor the creation of a United States Shippers' Council. This request has been made pursuant to the Division's Business Review Procedure.

As we understand your proposal, the Council would be a national organization with membership open to all American importers and exporters. Its function would encompass a broad range of activities involving the collection and dissemination of freight rate and service data, and the joint negotiation of freight rates generally applicable to its members. Among other things, this latter activity would involve discussions and negotiations on behalf of the Council's members with carriers and carrier conferences of all transportation modes operating in purely domestic commerce as well as in both the United States import and export trade. Our comments in this letter are directed principally to this rate-making aspect of the proposal.

We believe this plan is an inappropriate subject for our Business Review Procedure. Accordingly, we must decline your request for a statement of our present enforcement intentions. While the objective of the proposed Council is clear, the means of accomplishing the objective presents an almost infinite number of possible courses of action which may or may not result in an unreasonable restraint of trade. Because we are unable fully to predict the competitive consequences of the Council's planned activities, we are unable to provide a statement of our present enforcement intention. This problem is of particular concern where, as here, the matters in question relate to a sensitive rate-setting process in a significant area of the nation's economy.

In addition, as you know, the implications of joint shipper activity in connection with ocean carrier freight rates are currently within the scope of an existing Antitrust Division investigation in the ocean shipping industry. Because of this relationship between the Council's proposed activities and our investigation, we must also decline on this ground to pass upon your request.

Our statement herein is made in accordance with the Department's Business Review Procedure, 28 C.F.R. 50.6, a copy of which is enclosed. Pursuant to its terms, your business review request and your supporting data will be made publicly available within 30 days of the date of this letter unless you request that part of the material be withheld in accordance with paragraph 10(c) of the Business Review Procedure. Sincerely yours,

JOHN H. SHENEFIELD,
Acting Assistant Attorney General,

Antitrust Division. Enclosure.

Department of Justice News Release, July 12, 1977 The Department of Justice declined today to express its enforcement intentions concerning the contemplated rate-making activities of a proposed council of importers and exporters.

John H. Shenefield, Acting Assistant Attorney General in charge of the Antitrust Division, told the American Importers Association, Inc., that the transportation rate-making aspect of its proposed United States Shippers' Council was an inappropriate subject for the Department's Business Review Procedure.

According to a letter issued by Mr. Shenefield today, the Council would be a national organization with membership open to all American importers and exporters.

Its functions, the letter noted, would encompass collection and dissemination of freight rate and service data and the joint negotiation of freight rates generally applicable to its members.

The letter gave two reasons why the Department believed the plan was an inappropriate subject for its Business Review Procedure.

First, the letter said the potential means of accomplishing the council's proposed objectives could be so varied that it was not possible to predict their competitive consequences fully.

Second, the letter noted that the implications of joint shipper activity in connection with ocean carrier freight rates are within the scope of an existing Antitrust Division investigation in the ocean shipping industry.

Under the Business Review Procedure, a firm or organization may inform the Antitrust Division of a contemplated action. The Division normally will respond with a letter indicating enforcement intentions toward that action.

After a 30-day waiting period, the file containing the business review request and the Division's response may be examined in the Legal Procedure Unit of the Antitrust Division, Room 3307, Department of Justice, Washington, D.C.

Mr. McCLOSKEY. So far as I know, you have not been asked by any government agency or committee of the Congress to give your formal views on the formation of shippers' conferences ?

Mr. Sims. To the best of my knowledge, that's correct.

Mr. McCloskey. I'll try to use the term "shippers' councils" and "shipping conferences."

Would shippers' councils not be a reasonable way to counteract the economic power of shipping conferences? It has been tried in Australia. They exist in Europe. It seems reasonable to me to try it in the United States.

Mr. Sims. We have real concerns about the likely effect of trying to counteract the competitive power of a shipping conference with a similar combination of the people on the other side of the transaction.

Mr. McCLOSKEY. Couldn't we provide the same protections against abuses that we tried to apply to conferences in the 1916 act?

Mr. Sims. Certainly you could. The Congress could enact a similar statute. We are not at all convinced, however, that the protections that the Congress has provided in existing Shipping Act legislation has, in fact, been effective.

Mr. McCLOSKEY. As Mr. Keeney has been kind enough to offer, let me invite your technical assistance in drafting the language that would be necessary to protect against abuses by both conferences and shippers' councils. We would value the expert help of a division as experienced as yours with these problems.

Mr. Sims. We would be glad to help you, but I think it only fair, only candid to point out at this time that we are not at all convinced that appropriate protections can be drafted to guard against what we see as the inevitable anticompetitive effects of combinations of this type.

Mr. McCloskey. There is no question that they are anticompetitive, sir, but we are faced with a lessor of two evils situation. Let me then turn to the broader question. The Fraud Division, the Criminal Division, the Antitrust Division are all properly carrying out U.S. law as far as I can tell. But shipping is in the field of international trade. We are dealing with other nations who are trading partners who have treaties of friendship, commerce and navigation and who can also invoke sanctions against us or try to export their laws into international trade.

And here, the Attorney General has a new responsibility. In addition to enforcing existing law the Attorney General must be the attorney to the President of the United States and point out the impact of domestic law impinging on or inhibiting conduct of foreign affairs as it relates to negatiations by the State Department, the enforcement of domestic law by the Federal Maritime Commission, and the mandate of the 1936 act to promote a sound and prosperous U.S. merchant marine.

Is the Department of Justice in its capacity as attorney to the President of the United States prepared to advise this committee on how these conflicting interests should be resolved? I should direct that question to you, Mr. Keeney as well.

Mr. Sims. Certainly, I'm not competent to answer that question and I'm not prepared to do so today.

Mr. KEENEY. Mr. McCloskey, it's my understanding that the appropriate—and I think it's been communicated to you that appropriate contact has been made within the administration for the purpose of developing that overall policy and, hopefully, it's going to be forthcoming in

Mr. McCloskey. That's correct, Mr. Keeney. I just wanted to put on the record that the question I raised is being addressed by the Justice Department and that within the foreseeable future you expect to advise this committee about your position on the impact of domestic law, both anti-trust and fraud, on the foreign policy of the United States and the Attorney General's position in advising the President on this issue.

Mr. Sims. Let me just add one footnote to this point. There is, at least from the view of the antitrust division, nothing particularly unique about the international aspects of the application of antitrust

law to that portion of the shipping business which impacts on or is in U.S. commerce. There are a number of industries in which U.S. firms participate internationally, and the Division is relatively experienced in dealing with antitrust issues in those fields in ways that are, if not identical, totally analogous to the situation that we've got in the shipping industry.

Mr. MCCLOSKEY. I don't know of any situation which is totally analogous. I don't see any law such as the 1936 Shipping Act that applies to other businesses.

Mr. Sims. If I could give you one example, the international aviation industry has many of the same characteristics of the international shipping industry in the sense of foreign governmental involvement and interest in the exportation of their

Mr. McCLOSKEY. Certainly, but there the State Department exercises stern negotiating posture with respect to how many airlines will come to this coutry, what the U.S. landing rights in foreign countries will be and what the percentage of passenger allocation will be. The problem we are faced with is devising a cargo policy for the United States. If the same kind of strong negotiating posture existed on the part of our State Department for cargo allocation as does for passenger allocation, there would be no problem, would there?

Mr. Sims. Certainly, the regulatory schemes differ, although I'm not sure that I would agree with your description of the international aviation system.

Mr. MCCLOSKEY. Then comment on the international aviation. I would like to hear your description of it.

Mr. Sims. The United States, through the State Department, does attempt to negotiate bilateral agreements with other countries as to certain aspects of the ability of U.S. airlines to fly passengers from the United States to their countries and vice versa. They, as a matter of policy, have traditionally not negotiated such things as capacity on those lines. Rather, for example

Mr. Sims. That's what we're talking about in the ocean shipping industry

Mr. McCLOSKEY. Overtonnaging?

Mr. Sims [continuing). Overtonnaging. We do not, as a matter of course—the United States does not, as a matter of course, negotiate with foreign countries on the level of capacity in the international airline industry between our country and any particular foreign country.

Mr. McCLOSKEY. But don't we do it indirectly through CAB regulation?

Mr. Sims. Certainly not on capacity, no. There are frequently negotiations and agreements on the points from which in the United States and in the foreign country that particular carriers can fly, there are sometimes negotiations on how many carriers can participate in that trade. But we have traditionally, as a matter of national policy, avoided and tried very hard to avoid any kinds of limitations on capacity or allocations of capacity between our carriers and foreign carriers.

Mr. McCLOSKEY. Was I wrong when I thought I read in the press recently that the discussion about airline passenger traffic between England and the United States had resulted in 60 percent to be carried by U.S. airlines and 40 percent by British? Am I wrong?

Mr. Sums. I think that's incorrect.
Mr. McCLOSKEY. What is the correct statement on that?

Mr. Sims. To my knowledge, there are no capacity allocation agreements between the United States and Great Britain as to the amount of carriage by United States carriers as opposed to British carriers.

Mr. McCLOSKEY. Isn't the frequency of flights and the capacity of the types of planes involved equivalent ?

Mr. Sims. Certainly, the frequency of flights, and the planes involved, and the capacity of those planes, and the demand for particular services will determine what the capacity is, but the market will determine those capacity allocations between carriers. It is not an agreement. There is no agreement between the United States and Great Britain on that.

Mr. McCLOSKEY. You might give me another example of an existing law which promotes a U.S. industry with which you have antitrust problems. · Mr. Sims. There are obviously a variety of industries in which international-in which U.S. companies participate internationally. There probably is, at least to my knowledge, no specific industry with the same exact mix of regulatory and promotional schemes as the shipping industry. But that really doesn't answer the question, it seems to me, as to whether or not there is a particularly unique problem with the application of U.S. antitrust law to the activities of U.S. and foreign firms in the U.S. commerce in the shipping industry, which is, I think, the issue that you're raising. We have been able

to give you another analogous example-we have been perfectly able to apply U.S. antitrust law in the international aviation industry against both foreign and American companies with no difficulty at all.

Mr. McCloskey. But you can't do that in the shipping field, can you?

Mr. Sims. There's absolutely no reason why we can't do that in the shipping field. We don't see any barrier to that at all.

Mr. McCLOSKEY. I don't want to get into the details or the facts surrounding the present grand jury investigation in Washington other than to have it clear on the record is it happening. There is a criminal grand jury in Washington investigating international shipping including both U.S. and foreign carriers, is there not?

Mr. Sims. That is correct.
Mr. McCloskey. That is a criminal grand jury proceeding?
Mr. Sims. That is.

Mr. McCLOSKEY. You say you perceive no difficulty whatsoever in prosecuting both civil and foreign shipping companies and/or shippers under the present law?

Mr. Sims. There may well be, and there have been in the past in similar situations, various kinds of difficulties such as obtaining documents from a company located abroad that will create difficulties for us in carrying out our function, but we do not believe that those particular discrete difficulties prevent us, nor have they prevented us in the past, from prosecuting both domestic and foreign companies in

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