Foreign Relations of the United States, 1949, The Far East and Australasia, Volume VII, Part 2

740.00119 Control (Japan)/1–2549

Memorandum by the Chief of the Division of Northeast Asian Affairs ( Bishop ) to the Deputy Director of the Office of Far Eastern Affairs ( Allison )

[ Washington ,] January 25, 1949.

In the first of the attached two reports,¹ received from O for comment, Mr. Walter R. Hutchinson, member of the Deconcentration Review Board on TDY in Washington, summarizes the activities of the DRB and the deconcentration program in general (pages 1–13), further summarizes the same material in nine Conclusions (pages 12 and 13), and offers a number of rather important Recommendations (pages 14 and 15). The DRB’s “Basic Interpretation of Authority” (final terms of reference) are enclosed as Exhibit 3.

Mr. Hutchinson makes substantially the same points in his general summary that he did at the meeting, in Mr. Saltzman’s office a month or so ago:

(a) That the DRB on its arrival found that concerns were being automatically and arbitrarily designated excessive concentrations if their organizational structure was held to violate one or more of a set of standards drawn up by the Anti-Trust Division, irrespective of whether the concern could be shown actually to be impairing competition or not and without opportunity for it to present evidence that it was not an excessive concentration within the terms of the law.

(b) That for this and other reasons “the Board found that the implementation and enforcement of the deconcentration law was being carried out without complete compliance with the intent of Allied and Occupation Policy.…”²

(c) That after enunciation of the Board’s “four principles” liberalizing deconcentration procedures and criteria, the Holding Company Liquidation Commission found it impossible to apply the four principles objectively to individual cases because of its decisions being “overruled” by the Anti-Trust Division, whose views the HCLC still felt itself bound to respect. The DRB succeeded in getting General Marquat³ to order the Anti-Trust Division to cease this interference.

(d) That the Board, having been requested by SCAP to give its opinion in the matter, recommended that the five largest commercial banks in Japan “not be broken up, but that they be remanded to the Fair Trade Commission for effective application of the Japanese Anti-Trust Law.”

Mr. Hutchinson’s recommendations are, briefly:

1. That the Anti-Trust Division be restricted “to implementing and administering policy as announced or interpreted by the higher appropriate echelon,” and that it “be instructed to implement and expedite, without any delay, the decisions of the DRB as approved by SCAP”.

2. That companies released from designation under the Excessive Concentrations Law be immediately processed to conclusion under other applicable laws.

3. That a competent Anti-Trust lawyer from the U.S. be assigned to the Chief of ESS with full authority to review and recommend any necessary amendments to the “Law Relating to the Prohibition of Private Monopolies and Methods for Preserving Fair Trade”. Mr. Hutchinson explains in his second report, dealing specifically with this problem, that the DRB’s experience with the application of this law indicated that certain provisions and language in it “go far beyond a reasonable program for the elimination and prohibition of monopolies and combinations in restraint of trade.…”⁴

4. That establishment of a new Japanese Corporation Law and Reorganization (bankruptcy) Law be completed, with the benefit of the advice of the above-mentioned lawyer.

5. That “all necessary steps be immediately taken to reestablish and reopen a properly controlled and regulated stock exchange.”

6. That an immediate survey be made of all securities and their amounts held by Japanese governmental agencies and that “as early action as possible, consistent with sound economic recovery, be taken to complete their liquidation and distribution into the hands of the public.”

It is understood that Mr. Draper⁵ has already cabled General MacArthur for his views on the proposal to have a U.S. lawyer review the Monopoly and Fair Trade Law, and that General MacArthur has replied that he has “no objection”. If you approve NA will prepare and submit to O for coordination with other interested Offices a letter from Mr. Saltzman to Mr. Draper expressing the Department’s support for Mr. Hutchinson’s recommendations.⁶

M[ax] W. B[ishop]

1. January 3, 1949 and November 26, 1948. not printed.
2. Omission as indicated in the source text.
3. Maj. Gen. William F. Marquat, Chief, Economic and Scientific Section, SCAP Headquarters, Tokyo.
4. Omission as indicated in the source text.
5. William H. Draper, Jr., Under Secretary of the Army.
6. Marginal notation by Mr. Allison: “OK please do JMA”.