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one quarter to the other, the request for bids tripled in quarts of milk to the commissary.
Mr. Osmers. They must have gotten to like this stuff, Mr. Jackson.
Mr. Jackson. They might have gotten to like it, but I don't think they drink that much.
Mr. CHUDOFF. They may be bathing in it.
Mr. Jackson. Maybe, but we think-and I think we have a logical right to think—that somebody is letting that milk get into unauthorized sources.
Mr. FOUNTAIN. In other words, you think that approximately 10 percent of it is going to people who are not authorized to purchase it and that those sales are in competition with your local people?
Mr. JACKSON. I would say that would be a minimum. In fact, we have found, in some instances, that routes have come off as a result of the competition. People just call up and tell you, "Just cut my milk off. I'm getting milk from the post.”
Then you go and try to talk about that to the post and find out from the post, and the post doesn't know them. Of course, they are not authorized personnel.
What can we do?
Mr. Condon. I gather the major complaint is the sale to the unauthorized persons?
Mr. JACKSON. That is right.
Mr. Condon. I assume they buy the milk from neighboring States. I imagine they don't buy it from
Mr. Jackson. Now, we are not going to complain about that phase of the competition. That is our red wagon.
Mr. CONDON. That is-
The complaint we have is that unauthorized personnel, unauthorized people, are getting milk through Army installations, or military installations, and I don't think there is any way to stop it but get out of the business.
I think that is the way to stop it.
Mr. CONDON. I notice in your prepared statement here you refer to State sales taxes. Do they collect sales taxes on that milk at the commissaries?
Mr. Jackson. No, sir. No military establishment collects any sales taxes in Georgia.
Mr. Condon. That was my impression.
Mr. Jackson. And we know with this many quarts being sold we do have a direct sales tax loss that can be easily computed. There is no question about that.
Mr. OSMERS. Mr. Williams.
Mr. Osmers. Mr. Pilcher, the distinguished member from the State of Georgia.
Mr. Pilcher. It seems as though you have a wonderful sense of humor. Aren't you related to the Veep from Kentucky?
Mr. Jackson. No; I'm not. I have been accused of favoring him a great deal, and I think that is quite a distinct honor. Mr. OSMERS. We can't take a vote on that at this particular time. Mr. Hillelson, do you have any further questions? Mr. HILLELSON. There is just one.
These people that have discontinued their milk as a result of being able to get it through the post-have you turned their names in to any specific post commander?
Mr. JACKSON. That I would have to inquire and see, Mr. Hillelson. I don't know they have.
Mr. HILLELSON. It would seem to me you would have to be very specific in cases such as that?
Mr. Jackson. I can take that up with them and see if they have; but they did not tell me they specifically did.
Mr. HILLELSON. That is all.
Mr. OSMERS. I just want to ask three questions, and I am going to ask them of all the witnesses.
Do you feel Congress should establish some place in the executive department where business may state its case and the affected Government department may do the same on the subject of competitive activity?
Mr. CASTLE. Yes, sir.
Mr. Osmers. Do you feel that any Government department establishing a new business type activity should be made to prove its case somewhere in the executive department before they can start the activity?
Mr. Castle. Yes, sir; I do.
Mr. CASTLE. That is, assuming we don't put all Government business out.
Mr. OSMERS. No. We are talking about the business we are not in now.
Mr. CASTLE. Yes, sir.
Mr. Osmers. Before a new activity is started, that they be required, the Government department be required, to prove its case.
Mr. CASTLE. Yes.
Mr. OSMERS. And the third question is: Do you feel the executive should be made to report annually to Congress on this question?
Mr. CASTLE. Yes: I do.
Mr. JACKSON. May I make just one further observation, Mr. Osmers?
Mr. OSMERS. Yes, sir.
Mr. Jackson. I might say this: There are some phases of the Government that the Government is in that we can't complain about because some of my farmers would cut my throat if I did, and one of those is the question of REA. Had it not been for some simple method and some simplified method of distributing electricity, we couldn't have farmers in Georgia on a grade A basis because we wouldn't have any way to produce the milk.
We are not fussing about that type of activity. We are fussing about that type that comes in direct competition with private industry, in an unauthorized way, and not in an authorized way.
Mr. OSMERS. That is correct, and I would like to point out to you, and to Mr. Castle, the bills under discussion here do not deal with activities which have been established by Congress, laws which have been passed, such as REA, TVA.
Mr. CASTLE. Yes.
Mr. OsMERS. I know there are some violent opinions on that subject, on both sides, and that is a matter that will have to be dealt with by Congress through legislation directly affecting the activities mentioned.
We are happy to have your comment on REA, but the bills here under discussion would not affect it one way or another.
If there are no further questions, we will have the next witness.
STATEMENT OF JAMES E. JACKSON, EXECUTIVE DIRECTOR, GEORGIA DAIRY
Association, ATLANTA, GA. My name is James E. Jackson. I am the executive director of the Georgia Dairy Association with headquarters in Atlanta. Our members consist of dairy farmers, milk distributors and ice cream manufacturers from all parts of Georgia.
For several years the dairy industry in Georgia has been complaining of unfair competition of certain governmental agencies in the selling of fluid milk. The most prevalent complaint is that Army post commissaries buy milk, usually from out of the State of Georgia at a price much lower than the prevailing milk control board price and sell this milk to both Army and civilian personnel at the same price they buy it for.
We have several major installations that make this kind of dealing a practice, to-wit: Columbus, Fort Benning Commissary Augusta, Camp Gordon Commissary Savannah, Camp Stewart Commissary Savannah, Hunter Field Commissary Macon, Warner Robins Commissary Albany, Turner Field Commissary Atlanta, Fort McPherson Commissary Conley, Atlanta General Depot Commissary Atlanta, Ga.–Fort McPherson
The volume of sales to commissary for the current quarter is 300,000 quarts of sweet milk and 25,000 quarts of buttermilk. The selling price by the commissary for sweet milk is 15 cents per quart, in paper containers, while the prevailing market price is 26 cents. The selling price for buttermilk is 10 cents per quart or a loss of 7 cents per quart. The total loss to the dairy industry of Georgia is $34,750 per quarter or $139,000 per year. The loss in direct taxes, such as sales tax, to the State of Georgia, would be $4,170. The loss to the farmers of Georgia, on this basis would also be $72,000. Conley, Ga.--- Atlanta General Depot
The volume of commissary sales for the current quarter is at the rate of 110,000 quarts of sweet milk which is selling at 11 cents below the prevailing market price of $12,000 per quarter or $48,400 per year for sweet milk and $2,218.64 for buttermilk. The tax loss to the State would be $1,518.56. The loss to dairy farmers on this deal will approximate $26,400. Macon, Ga.-Warner Robins Depot
The volume of commissary sales for the current quarter approximates 16,000 quarts of sweet milk at 10 cents per quart below the prevailing market price resulting in a loss to the industry of $1,600 per quarter or $6,400 per year.
The direct tax loss to the State is $192 and the loss to the farmers of $3,840. Columbus, Ga.-Fort Benning
The volume of commissary sales for the current quarter is approximately 210,000 quarts of sweet milk which is selling at 8 to 9 cents per quart below the prevailing market price. This represents a loss of $16,800 per quarter or at the
rate of $67,200 annually to the industry. The farmers of Georgia, on this basis will lose $40,320. The loss in direct sales taxes alone will be $2,016. The Army personnel at this installation in Columbus area is approximately 35,000 which represent the increase from the closirg of Camp Rucker. It is interesting to note that the quantities of milk at this installation jumped from 34,000 quarts of homo milk in the second quarter 1954 to 120,000 for the third quarter. Plant sales in Columbus have dropped considerably to Army personnel and civilian personnel in Army areas. Albany, Ga.- Turner Field
The current commissary requirements are 86,000 quarts per quarter and the selling price is 9 cents per quart on glass and 10 cents per quart on paper, below the prevailing market price. This results in a loss to the dairy industry of Georgia of $31,360 and a loss to producers of $20,640. The direct sales tax to the State would be $940.80. The total Army personnel at this installation approximates 1,500 with civilian at about 200. Augusta, Ga.—Camp Gordon
The volume of commissary sales for the current quarter approximates 63,750 quarts and 13,750 half gallons. These sales represent an annual loss to the Industry of $58,500, and $28,680 to the farmers. The direct tax loss is $990. Savannah, Ga.-Camp Stewart
The volume of commissary sales for the current quarter approximates 36,000 quarts. This represents a loss to the industry, annually, of $11,520, to farmers of $6,912, and to the State in direct taxes of $345. Savannah, Ga.—Hunter Field
For the last quarter, commissary sales were 180,000 quarts. The plant losses on these sales were $60,800, the farmers loss $36,480, and the direct sales tax loss $1,824.
CONCLUSION It has developed over onths that the commissary business in all Army installations in Georgia, so far as milk is concerned, has increased in volume. Invariably where military personnel, and those authorized to buy their provisions at these commissaries, find they can buy milk at prices far below the prevailing market prices, they discontinue purchases from local milk processing plants.
It is further developed that in areas where Army personnel are concentrated in adjacent towns to camps that retail milk sales drop which indicates that some unauthorized civilians are buying milk through authorized sources.
It is estimated that the industry in Georgia has suffered a financial loss of $425,000 in gross sales; the farmers loss was $235,000, and the sales-tax loss to the State was $11,996. The loss of civilian trade is practically impossible to determine.
EXTRACTS OF COMMUNICATIONS New York.-All the milk dealers in the city have been hurt by the commissary at Griffith Air Force Base selling milk, as they do at cost, which is 17 cents or 6 cents lower than the retail price in this city. They also insist on glass bottles, but make no attempt to return them. Many of the Army personnel took our crates to carry the milk home and never returned them.
I also have customers, who have some of the Army personnel buy milk for them at the base thus taking this business away from my drivers. It is almost impossible to serve any new officers that move into Rome as they tell us they can get it cheaper at the base. The following is taken from a letter written us by an officer's wife_“No more milk, butter and eggs, J has just been made flight commander for base services, and they insist that we do all our buying through the base commissary. We are not at all happy about this."
Virginia.-On the peninsula surrounding Newport News, are located Langley Field, Fort Monroe and Fort Eustis as well as naval installations at Yorktown. All these posts have commissaries who advertise milk on bid and resell it to Government employees. As you know all milk prices in Virginia are controlled by the State milk commission who set minimum retail prices to all consumers except on Government posts.
The commissaries on the post often undersell the minimum prices by the milk commission by more than 50 percent. For instance during the second quarter Fort Eustis Commissary sold milk at 10 cents per quart when the minimum price by the State milk commission was 2472 cents. For the third quarter the com
missary price at Fort Eustis is 12 cents and the minimum prices of the State milk commission remains at 2442 cents.
Competition from commissaries is supposed to be confined to Government employees. However, the Government employees often buy milk at the low commissary price and resell to neighbors who are not employed by the Government.
The volume of business by the commissaries runs to about 20 percent of the volume of the entire area and seriously disturbs the controlled price by the State milk commission.
Alabama.-Selling policies of post exchanges and commissary at Maxwell Field are detrimental. Commissary sells dairy products to military personnel living on the post or in the city at practically contract price. Post exchanges usually sell on very small markup. Most disturbing factor about this practice lies in the fact that a large number of military families live in the city.
Pennsylvania.--Our area suffers loss of at least 1,000 quarts milk per day sales made by Valley Forge Army Hospital Commissary. Our minimum State milk control price is 23 cents a quart. Valley Forge Commissary milk is 16 cents a quart. Officers, enlisted men, other workers living off base, buy milk, dairy products for themselves and friends at commissary. This causes milk industry bad public relations as well as lost sales to these people.
South Dakota.-Government commissary at Ellsworth Air Base detrimental to all private business in Rapid City. Commissary price 16 cents per quart, price on routes and in stores 22 cents per quart.
Rhode Island.-Sales by commissaries in Rhode Island have affected the dairy business considerably; friends of servicemen also benefit by commissary cut price of 5 cents per quart. This gives the public the erroneous picture that the dairy business is very profitable.
Kentucky --Fort Campbell commissary retail milk prices 5 cents per quart below local grocery and dairy delivery prices. Half gallons 31 cents against our 41-cent price. Quarts 16 cents to our 21 cents. Value total considerable but amounts not available. We feel our prices are already low for good grade “A” products.
North Carolina.--Fort Bragg commissary retailing fluid milk 7 cents to 9 cents under prevailing price purchased from outside sources. Sales average 5,000 quarts daily.
North Carolina.-Under present system of competitive bidding for military contracts, the price for milk and milk products has been driven down to a ridiculously low price. Army camps in the Carolinas are buying milk for as low as 3 cents per half pint and 11 cents per quart and the post exchanges and commissaries are selling milk close to contract prices. These low prices are eventually passed on to dairy farmers who receive less than manufactured prices for grade “A” milk. Suggest that military should pay at most 10 percent below prevailing wholesale prices in the region where the Army posts are located. This would help dairy farmers and processors in all States where Armed Forces are maintained.
Tennessee.—Stewart Air Force Base, Smyrna, Tenn., and Fort Campbell, Clarksville, Tenn., are retailing quarts 5 cents less and half gallons 9% cents less on sweet milk and 172 cents less on quarts buttermilk to personnel on or off post. Our retail business affected in these areas considerably.
South Carolina.--This company has for some time experienced cut price retail milk selling policies at several Army and Air Force post exchanges particularly at Camp Jackson, Columbia, S. C., and the Air Force Base at Greenville, S. C., where civilians freely purchase milk from such exchanges at prices of 10 cents or more per quart below established retail home-delivered prices.
California.--There have been many specific instances where Government activity has operated to the detriment of independent business. These activities are located near populated areas and personnel could be adequately served by existing business. Some of the Government locations are as follows: Hamilton Field, Presidio of San Francisco, Alameda Naval Air Station, Moffett Field, Mare Island, Hunter Point. The major problem has been the selling of products from post exchanges to people who live away from the installation. The prices have been well below the prevailing price and have resulted in lost business to distributors operating in these areas.
Teras.—The selling policies of Carswell post exchange are detrimental to the retail milk business; prices are considerably below wholesale prices and have been the cause of having to eliminate several retail routes in the vicinity of this base.
South Carolina.—The naval commissary at Charleston is currently selling about 8,000 quarts of milk at 12 cents per quart as against 24 cents in the city. Ap