spectacle of a trial severely damaging to a defendant even if later
acquitted, those are discussed in our testimony.
There are four basic sanctions that could dissuade antitrust crime.
Imprisonment, criminal fines, treble damages, and loss of good will.
Each of these is discussed in some detail in the testimony as well
as the frequent settlement of criminal cases by so-called no contest
pleas, and the necessity to change that pattern in a number of ways,
* Loevlnser, "The New Frontier in Antitrust," 39 Texas L. Rev. 865, S66 (1961).
one of which has been a bill pending before the Senate Antitrust
Committee for a number of years.
I would like to conclude with the summary that the net of sanc-
tions that aim to deter antitrust criminality do not outweigh the
possible benefits to the violator. The meager fines imposed and even
treble damage -payments become merely costs of doing business.
Based on six case studies, a study by the Law Department of New
York City concluded, "Indictment by a Federal grand jury, punish-
ment inflicted through criminal action, the payment of trebled dam-
ages resulting from civil trials, all legal costs incurred in the proc-
ess, none of these nor any comhination. of them succeeds today in
denying the price fixer a profit realization at least double a normal
levedy (emphasis supplied)
These views are corroborated by other interested authorities as
well as other observers.
I think a combination of new measures would ease antitrust
crimes. All are predicated on the obvious fact that this genre of
crime, that such violations are neither spontaneous nor ad hoc but
are carefully planned out by clever people weighing the benefits and
the risks. It is with just such calculating individuals that strong
penalties can be successful deterrents.
Most importantly, antitrust crime must be brought within the pur-
view of the proposed revisions to title 18. Given the prevalence and
costs of antitrust illegality it should be a class C felony, thereby in-
voking related sections of the code regarding probation, the parole
component, imprisonment, fines, and disqualification from exorcising
organization functions. For those who presently scoff at antitrust
crimes as merely a misdemeanor, this incorporation would properly
stress the seriousness of such offenses. A class C felony would treat
antitrust crime as it treats securities violations, section 1772, an an-
alogous business crime, and the mechanism of incorporation can be
simply accomplished. Section 1774, antitrust violations. "A person is
guilty of a class C felony if he knowingly does anything declared
per se unlawful in 15 U.S.C. 1." Only the so-called per se Sherman
Act would be included, those which have been so clearly held crimi-
nal by courts as potential violators have adequate forewarning. A
special supplemental section could precisely define, based 0]i existing
judicial precedent, such per se offenses as price fixing, territorial di-
visions of markets, certifying arrangements, certain group boycotts,
and the like.
I have a number of other recommendations which are in the con-
clusion of the testimony. But at this point I would like very briefly
to have Mr. Silbergeld discuss a section in the proposed code which
astonished me no end when I read it because I could not see how it
could be approved by anybody with a semblance of knowledge of
our Constitution. I would like him very briefly to discuss section
Mr. Silbergeld. Mr. Chairman, this begins at page 9 of the second
portion of the prepared testimony and comments which are attached.
Senator Hruska. Second part ?
INIr. Silbergeld. The second page 9. the portion which is attached
after Mr. Nader's prepared comments. It involves section 1617,
which in my view is extremely overbroad. Basically the section says
that, among other things, making any threat to disclose a fact,
whether or not true, in order to influence the conduct of another
person would be made a crime. By removing the requirement that
this be done in order to extort or blackmail money or something else
of value, and by reaching into any attempt to influence the conduct
of another by disclosing even the truth, it encroaches seriously into
areas that I believe under the doctrines of the first amendment are
For instance, we all know that the Environmental Protection
Agency does not have the resources to prosecute in court and devote
that kind of manpower to every polluter in the country. And yet, if
the Administrator or one of his staff members were to call up a cor-
porate or municipal polluter and say, in order to obtain compliance
with their standards. "We will have to sue if you do not obey in
three weeks," the Administrator or his assistant would be in crimi-
nal violation of the proposed new code.
If a housewife were taken by a "bait and switch" ad by a national
advertiser in commerce and she called up the manager of the local
store or the vice president of the corporation, and said, "If those
kinds of advertisements do not stop and if I do not get my mone}^
back I am going to complain to the Federal Trade Commission,"
that housewife would be in violation of this provision of the crimi-
nal code. There are several other
Mr. Blaket. INIay I ask you a question at this point? Would you
address vourself to the implications of the defense set out in section
Mr. SiLBEEGELD. Ycs ; certainly, the provision in that section
would permit a defense of good purpose.
Mr. Blakey. Which would cover both of the two situations you
just outlined, isn't that correct?
Mr. SiLP.ERGELD. That is true, but it would â€” assuming that prose-
cutorial discretion were exercised against those persons, it would
require the persons involved to come into court â€” quite possible, fre-
Mr. Blakey. If the prosecution Avas basically in bad faith he
could require you to stand trial under an extortion statute in either
of the situations you outlined, couldn't he ?
JNIr. SiLBERGELD. I do uot believc so because under the existing pro-
vision of the United States Code it is required that the threat to dis-
close the information be made to obtain money or something else of
value, whereas here we are simply talking about the give and take of
trying to influence conduct â€” I assume that means money that one is
not entitled to. An attempt to get your own money back from a
businessman from whom you have made a purchase would not be
covered under the present provisions.
Senator Hruska. Would you think that paragraph 2 entitled
"Defense" would be very much in the awareness of a prosecutor in
his exercise of prosecutorial discretion ?
Mr. SiLBERGELD. Well, I would hope so, Mr. Chairman, but that is
not always the case and there is a line of cases decided by the
Supreme Court beginning with ^'peiser v. Randall ^ and concluding
^Speiser v. Randall, 357 U.S. 513 (1958).
witli S?iv'/h V. California ~ where that was not foremost in the mind
of the prosecutor. Those cases say that in the area protected as "free
speech," you cannot shift to the defendant the burden of proving
that his exercise of free speech was justified.
jNIr. Blaket. This particuhir provision is modeled, it is my under-
standing, on the Model Penal Code ^ and has been reflected in the
law of a number of States that have recently adopted penal codes. I
wonder if you have any indication that this kind of prosecutor abuse
has occurred in those States ?
^Ir. SiLBERGELD. No ; I do not. But, as the chairman says, those
have not been in effect long enough to see what will happen under
them, and if we are looking at a code kind of system, then what we
want to do is trj- and draw the code
]Mr. Blaket. Have you done any research in similar coercion
offenses under present State law to determine w-hether that same
problem has occurred under those ?
;Mr. SiLBERGELD. lu tcrms of what prosecutions have been brought,
no, I have not. However. I point out
]Mr. Blaket. I take it, then, your testimony is basically an estima-
tion of what might happen if prosecutors were not all they shoul'^
Mr. SiLBERGELD. Not Only that, it is more than that. We do have
the experience of the whole line of cases under the first amendment
decided by the Supreme Court, including the line I have cited, in
which prosecutions for activities in the area of expression which are
protected and which do have such a defense in the statutes on wliich
prosecution is based have been â€” we do have that experience. Those
prosecutions have been brought and had to go all the way to the
Supreme Court to establish that the State cannot shift that burden to
the person exercising his rights. So we do have that experience.
]\Ir. N"ader. You might also want to look at the experience in some
countries of Western Europe which have similar limitations. Any-
body who has traveled to Western Europe and seen the lack of ade-
ciuate free speech protection for specific criticism and the kind of
tradition that this country has permitted for almost 200 years can
only treat this provision with grave seriousness.
In Europe, for example, social criticism of government, criticism
of corporations and their officials in some civil law countries, is
severely restricted because of the case with which the law permits
the burden of proof to be shifted on to the advocate of free speech.
In summary, I can say quite unciualifiedly, Mr. Chairman, this bill
will never get through Congress unless this section is radically
changed. That is how serious it is in terms of repudiation of consti-
tutional provisions in the United States. That is how serious an
inhibition it is and that is how seriously it will reduce what we like
to be proud of in this country in terms of free public criticism and
expression which has been extended by the Supreme Court in such
cases as the Sullwan'^ case in civil areas, the freedom of expression
that has made this country strong and always willing to examine
itself and its institutions compared to other relatively free countries,
2 361 U.S. 147 (1959).
3 Â§ 12.5 Model Penal Code, American Law Institute (1962i).
1 yew York Times Co. V. SuUivan, 376 U.S. 254. 270 (1964).
by our own standards, such as Great Britain, France, West Ger-
many, and other civil law countries.
Mr. SiLBERGELD. Mr. Chairman, I might just add that the defense
may not obviate the chilling effect which is unconstitutional under
the line of cases beginning with DomhroicsM v. Pfsterr Any person
aware of such a statute would realize the possibilities of prosecu-
tion; the fact that he had a good defense may deter him. may not
encourage him to exercise his lights. That kind of effect is unconsti-
tutional under the Domhi'oicski case and the line of cases which
Senator Hrl^ska. Very well. Have you concluded?
]Mr. Nader. Yes, sir.
Senator Hruska. Mr. Nader, I have one question. You have sug-
gested that the new code bring antitrust violations within its scope.
Now, then, the American Civil Liberties Union has suggested that
the new code should sharply narrow the scope of present conspiracy
law. Do you think we could have an effective antitrust prosecution
without a strong law of conspiracy?
]Mr. Nader. Let me have Mr. Green replv, jNIr. Chairman, if vou
Mr. Green. No; I do not think so, Mr. Chairman. In antitrust
law, often the prosecution lacks the conduct and documentation nec-
essary to show the successful completion of a crime. Often it has to
be established inferentially, by meetings, by telephone communica-
tions, because in my view economic crime, as antitrust is, is different
from the kind of crime that ACLU is talking about â€” e.g., the con-
spiracy counts in the political defendant cases that are now pending
across the country. If conspiracy were taken out of the antitrust
crime, and given what I see is the inadequate resources of the anti-
trust division, then I think antitrust prosecution, which now aver-
ages approximately 12 cases a year in the past decade, would sink to
just about a handful. If that were done, then antitrust crime, which
we have discussed here today as prevalent, would increase by simply
Again, I would try to draw distinctions, since I do not think the
ACLU did, because I do not believe antitrust crime was in their
mind when they made that statement, a statement w^hicli I have not
read. I think one should try to draw a distinction between corporate
economic crime we are discussing today and the kind of political
crime people are being prosecuted for today in the United States
where the use of conspiracy has been very facile and overbroad.
Senator Hruska. Well, of course, political conspiracy is one thing.
Economic conspiracy is another. But antitrust is not the only ground
of economic conspiracy. There are others.
Would you include other economic conspiracies in that category
where you seek to broaden the scope of the law in this respect or are
you limiting it only to antitrust ?
Mr. Green. No; we are not limiting it only to antitrust and we
are not broadening the scope of the law. The scope of the penalty is
what we are seeking to broaden b}^ incorporating antitrust crime,
which is now a misdemeanor, into the code as a felony. Again, in my
~ Domlrowski v. Pfister, 380 U.S. 479 (1965).
view, free speecli and tlie Bill of Kiohts are constitutionally consid-
ered preferred freedoms. One has to be more attentive to any whit-
tlintr away of them. Economic crime is not so constitutionally con-
sidered, not that one can then do away with due process rights when
somebody is indicted for a crime involving; property, but I think one
can make a constitutional distinction, especially given, and this I
tliink is the key point, the history of antitrust prosecution where
judires have imposed fines of only a fraction of the already minimal
$50,000 Sherman Act fine and judges in the 82-year history of the
Sherman Act have sent businessmen to jail but three times; this
tells me not only is there a constitutional distinction between of-
fenses involving: free speech and economic crime but we have to be
especially attentive to making a penalty that much more severe in
crimes involving; white collar offenders.
Senator Hri'ska. Thank you very much.
Senator Hart, have you any questions of our witnesses?
Senator Hart. Thank you, Mr. Chairman. I appreciate your fili-
bustering perhaps in a g;ood cause.
A few questions. Although the temptation is strong to abuse the
Chair's time limitation, because the testimony that was prepared,
and which has been ordered printed in the record, is the sort of lec-
ture to which all of us in this country should be exposed fre-
quently, because we have yet to develop a sense of outrage toward
board room crime i-emotely approaching the outrage that is voiced
when there is abuse by a welfare recipient of food stamps.
You mention, ]Mr. Nader, on page 9 of your statement that a nolo
contendere plea should be conditioned on the approval of the Gov-
Xow, as I understand it, under existing procedure the district
judge alone has the discretion to accept or deny a nolo plea what-
ever the attitude of the Government may be.
Would you develop a little your I'easoning on your objection to
this being purely discretionary?
Mr. Green. Originally the nolo plea was within the discretion of
the Government or court to benefit a defendant. It has become some-
thing of an automatic right, a giving away judges have invoked. In
the decade from the mid-fifties to the mid-sixties, in 96 percent of
the cases where the Government opposed a nolo plea in antitrust
cases, judges approved of it nevertheless. Although a nolo plea is
not supposed to lead to lesser sanctions imposed by a judge, it invar-
iably does. Also, nolo does not ring in the public's mind as guilty.
Also, nolo does not attach prima facie liability in later civil suits.
All of this has led to approximately 80 percent of all criminal cases
being ended by acceptance of a nolo plea which has led, as I indi-
cated, to these lesser penalties which in turn has whittled away anti-
Second, judges often have an incentive to accept nolo pleas; we
know district courts of the United States are very over-burdened
with cases, and in antitrust cases â€” often difficult cases and very com-
plexâ€”they are induced to accept a nolo plea rather than forcing a
defendant to accept a guilty plea or, worse, insist on a trial which
would then burden the courts.
57-868 â€” 72 â€” pt. 3 2
In fact, in a few cases where a judge did not accept a nolo plea
and insisted on either a guilty plea or a trial, the defendant did
capitulate and pled guilty. Therefore, to refurbish the teeth in anti-
trust crime, we are suggesting that the Government should be
copartner in deciding whether or not the defendant should have the
right to plead nolo, or whether it should have its day in court or
plead guilty â€” and have the sanctions which the Sherman Act
intended to follow, be followed.
Senator Hart. Well, do 3^ou feel that a hearing procedure might
be developed or should be developed before the entry of nolo so that
the â€” you would have some basis on which to determine the relative
contribution to the public interest of accepting the plea of nolo as
opposed to going forward ?
Sir. Gkeex. Yes ; that could be developed.
Senator Hart. It would seem to me that whether or not the court
itself would have a fuller understanding as a result of such a j^ro-
ceeding, at least the public would have a better opportunit}^ to eval-
uate, make its own judgment, and not w^onder what had happened.
Mr. Green. Yes; I would agree. Nolo, which we are using as a
code word for "no contest plea," is little understood by people in the
field, no less the public, and anything, in my view, which would fur-
ther educate the public about, as you call it, board room crime, and
its resolution in courts, I think would be of great benefit.
Senator Hart. You recommend moving certain per se antitrust
violations into title 18 and we have also heard about the budgetary
limitations that lessen the ability of the Antitrust Division to
enforce existing antitrust laws.
Is it fair to assume that enactment of proposed title 18 would
require a significant increase in manpower, both with respect to the
Antitrust Division, if your suggestion was adopted, and also in the
U.S. attorney's offices across the country ?
Mr. Greex. It would not demand an increased budget, I do not
think. At the very least, the same number of cases could be filed
away, but if filed successfully, what we are hoping is that greater
penalties and consistent penalties would attach.
Now, the code has provisions on pardoning and parole and dis-
qualification from organizational office. Section 3007 permits acl-
vertising or informing the victims or those affected by a crime of its
occurrence. These would attach to antitrust crime wliereas previously
they have never so attached. That does not mean you need an increased
budget. When successful it just means that more consistent and
relevant penalties would be imposed. At the same time, we think
there should be, as Mr. Nader indicated in his prepared statement, an
increased budget because right now the monitoring and the prosecution
of antitrust crime is very ad hoc, given the few resources.
Mr. ]McLaren a few years ago announced that his department was
utilizing computer analysis, monitoring the prices in the various
locales, against what they thought the competitive norm should be,
to try and see if there were antitrust violations that they had not
detected by normal grand jury methods. I do not know the results of
that. It would be interesting if the Department of Justice could
answer that question and see whether they think they need more
monev to more effectively prosecute antitrust crime.
Senator Hart. Just two other questions, iNIr. Cluiirman.
Wliat about the per se violations of antitrust wliere there is not
any doubt in anybody's mind that if you engage in such a practice
you are in viohition of the hiw and it is a criminal violation â€” for
example. Sitting around and carving up a market through code
words, exchanging either in explicit words or through code symbols
unchu'standings that enable prices and bids to be fixed. What about
making those offenses class C felonies? Would that not more clearly
indicate to the Justice Department that it is in this area that they
should increase their allocation of their resources, make clear to the
public that this is not just a case of a "boys Avill be boys," or "we
have always had it. what is so bad about it.'' Wouldn't this make
those against whom it is directed aware of its seriousness?
INIr. Nader. I think. Senator
Senator Hart. This is an abuse, a serious abuse.
Mr. Nader. Yes; and what the courts have called the per se viola-
tions. I think on page 8 that recommendation is made.
Senator Hart. I missed it. Do you make any â€” do you suggest in
addition, then, that â€” I do not know how you quite do this, but the
business of â€” at the end of a long and costly prosecutorial effort,
there is a conviction, very serious offenses that have imposed very
heavy burdens on the consumer. The odds are 10, 20 or 100 to 1 that
the only fellow that will be found guilty is something called Corpo-
ration X and there are no jails into which you can put that, and
nobody is denied normal sex life or put in with hardened criminals
or anytliing else.
How can we increase tlie likelihood that the people who actually
fix the prices or rig the bids get put away? We put away all those
fellows that forge papers and rob banks. That imposes some cost on
the American consumer, but not quite as much as rigging bids for
]Nfr. Xader. I think certainly one way is to continually inform the
public of the prevalence and impact of these antitrust crimes in
terms of shearing away the value of their income and impairing
their health and safety as well as the corruption of the governmen-
tal process, particularly at the local level where you have rigged
bids in government procurement.
The process of seriousness which a society treats a crime in actual
enforcement practice as contrasted with statutory declaration is a
function of people's awareness of the impact it has on them, and as
you know more than anyone else. Senator, the flow of information to
the public about antitrust crime has been very minimal and largely
from the Senate Antitrust Committee in the last 10 years.
Almost by definition antitrust crime in its conception and its
administration is out of sight of the ordinary citizen. It is secretive.
It is surrounded b}' symbols of respectability and abstractions that
do not relate to every day activity. And it takes, I think, responsible
government as w^ell as responsible businessmen who blow the whistle
on their criminally behaving competitors to get this viewpoint
I would only wish that for every 10 speeches before chambers of
commerce extolling the free enterprise system one speech would
focus on the prevalence of antitrust violations by many of the blue
chip corporations ill tlie land which serves to inidermine that system
very, very strenuously.
Mr. Green. I would just like to add to that. Once that public edu-
cation effort succeeds or is attempted, hopefully in turn it will aifect
judges too, who have exercised their discretion to suspend sentences
even after imposed by a court ; when you ask how can these criminal
violators be put away, ultimately it resides in the judgment of a
judge whether or not to incarcerate or suspend and, as I indicated,
with incredible infrequency have corporate antitrust violators ever
seen jail, and then even when they have, it lias been for 30 days at a
So I think one has to educate not only the public about the extent
and cost of the crime but one has to educate judges about the extent
and cost of this crime.
Mr. Nader. That, of course, feeds back in the Justice Department's
initial commencement of a suit. For example, during the grand
jury investigation of the auto smog conspiracy, the Justice Depart-
ment was trying to decide whether to bring a criminal case or civil
case and they decided to bring a civil case because their past experi-
ence has been that judges, particularly those in Los Angeles where
the case was going to be brought, were very, very reluctant to do
anything more than slap the wrists of the corporate defendants in
So, instead, in January 1969 they charged the four domestic auto