Mr. LLOYD. I think we are familiar with the retailer-owned grocery houses. There is one of those in Utah.

Mr. BALLINGER. Does that not help to cure the situation you have been talking about? For instance, you have your buying corporation, would not that buying corporation necessarily maintain a warehouse, therefore tend to alleviate some of these things you are talking about?

Mr. LLOYD. The members of that buying group claim the fact that they are associated in that way helps them very materially, particularly in the case of decline where the warehouse stock is protected. I am not prepared to make a statement on it other than the members of that group feel it is very helpful to them in that respect. I think that represents to them, however, probably less than one tenth of the retail grocers of Utah.

Mr. BALLINGER. No further questions. (Witness excused.)

STATEMENT OF PARLEY W. HALE

Mr. BALLINGER. Give your name for the record.

Mr. HALE. Parley W. Hale, executive secretary of the Trade Commission of Utah.

Mr. BALLINGER. Mr. Hale, one of the subjects that this committee is exploring is this question of unfair practices and we are interested in the unfair practices act of States where, on the State level, they have attempted to prevent selling below cost. The committee's idea of exploring these various statutes is to see whether something should be done on the Federal level, whether the States' statutes can be implemented by Federal law, and whether the States' statutes are in themselves good.

Would you describe to the committee your unfair practice act here in Utah, and how it operates?

Mr. HALE. I may say at the outset of this discussion that I was advised only yesterday that I should take part herein. I have not prepared any statement, so what I give will be extemporaneous.

The legislature in 1937 passed the fair-trade laws of the State of Utah. We have what we call a Fair Trade Act and an Unfair Practices Act.

The Fair Trade Act permits the owner of an owned trade-mark item to establish minimum prices on his own brand of merchandise. We have in the State of Utah some 570 contracts filed by producers, of which 535 are operative. The 35 difference there consist of people who have gone out of business since they filed.

These fair trade contract prices possibly establish minimum resale prices on hundreds of thousands of items distributed in the State. Some distributor may establish his entire line, while another contract may establish the minimum price on one item.

Under the Unfair Practice Act of the State, it goes into discrimination in selling where the effect is paramount. It is not only the act of discrimination that makes it unlawful, it is the effect of the act. I believe this was written into the law because of the constitutionality feature.

We have another phase of the law in connection with cost selling. The Utah law establishes the legal sales price to a manufacturer, his cost of production, including raw material, overhead expenses, and

all costs, which, to the wholesaler, his replacement cost, or his invoice cost, whichever is lower, plus three-quarters of 1 percent for cartage. Mr. BALLINGER. You mean to say manufacturers cannot sell below cost? Do you make a cost study on the manufacturers?

Mr. HALE. That is, cost to the manufacturer; yes.

Mr. BALLINGER. You start at that point?

Mr. HALE. Yes.

Mr. BALLINGER. That is unusual. Other laws do not do that. Mr. HILL. Does that affect the farmers who truck their production in? Is he a manufacturer?

Mr. HALE. We have a little control. We have an agricultural Fair Trade Act that handles the farmers' produce on the market. The Fair Trade Act, as I am explaining here, has little control over that. It is difficult to pin a cost price on the farmer in our department. Mr. BALLINGER. How many accountants does your commission have here? I mean for this kind of work.

Mr. HALE. How many what?

Mr. BALLINGER. How many accountants.

Mr. HALE. I have only myself as executive secretary and one stenographer. That is the entire force of our enforcement body of the entire State. But we think we are doing a pretty good job of it. We take all the important papers from each locality, we watch all ads carefully. We cooperate very closely with industry. And in the event a competitor is violating what they feel is a fair-trade provision, they notify us and we immediately get in touch with them, and, if necessary, cite them. But we make periodic trips throughout the State and check several of the stores that are more prone to be violators, together with our paper advertisements and the reports entered by competitors. With all that, we feel we keep a pretty close check on the situation.

Mr. BALLINGER. What mark-up do you require for manufacturer to wholesaler?

Mr. HALE. No mark-up, just cost of production.

Mr. BALLINGER. You cannot sell below cost of production?

Mr. HALE. Yes. We have had very little to do with anything of that sort because there have not been any complaints about that.

Mr. STEVENSON. That speaks very well for the businessmen of this State. You do not need an army of snoopers. The businessmen are law abiding.

Mr. HALE. We feel we are sort of a clearing house up there. In the event of a violation they get in touch with us immediately. We have tried to work with industry and explain the situation and the fact they have been reported. We have had very few court cases on these violations in our State.

Mr. BALLINGER. Does the law require a mark-up from the wholesaler to the retailer?

Mr. HALE. Three-fourths of 1 percent, plus cartage.

Mr. BALLINGER. That is all?

Mr. HALE. That is all.

Mr. BALLINGER. Is there any required mark-up for the retailer? Mr. HALE. Yes. The retailer has to get his invoice cost or replacement cost plus 6 percent. This stops the below invoice cost selling.

Mr. BALLINGER. Why do you not require a fixed mark-up from wholesaler to retailer?

Mr. HALE. It is a fixed mark-up here.
Mr. BALLINGER. It is very much smaller.

Mr. HALE. It is smaller. The wholesaler, especially in a food store, will operate on 3 percent, where it will take at least 14 percent for a retail food distributor to operate. Either one of them is way below the cost of his merchandise plus the cost of his operation. The retailer possibly gets a little better break on the 16 percent, but at the same time, he can, if he wishes, sell at least 8 percent below his actual costplus operation. It does bridge the span between loss-leader selling and profitable mark-up.

When these laws were put into effect, we had many of the supermarkets and retailers selling 15, 20, 30, or 40 cents below their actual cost. In other words, they bought a can of coffee at 25 cents and sold it at 20 cents. The merchant who attempted to get a seasonable mark-up would sell it at 28 cents. There is an 8-cent spread. Under our 6-percent law, that 25-cent can of coffee cannot be sold at less than 27 cents, or 28 cents; then your customers are not led to believe that you are so far out of line in your prices. It makes it more reasonable for the retailer to compete with the larger operators.

Mr. BALLINGER. Would you send the committee a copy of your Unfair Trade Practices Act?

Mr. HALE. I have several copies here.

Mr. STEVENSON. They may be filed.

Now Mr. Dawson, would you like to question Mr. Hale and bring out some facts?

Mr. DAWSON. What I have to say is not necessarily directed to Mr. Hale as it is to the operation of the Fair Trade Practice Act. I happen to have an interest in a grocery business here. Mr. Hale was a small grocer before he was appointed to the post that he now occupies.

I concur in what he says that this act has operated very successfully, in my opinion, in this State. One of the reasons that it has is the fact that these independent grocers and other small-business people have a man here who has been in business himself and knows something about it. It acts as sort of a clearinghouse. It avoids the necessity of sending out a lot of investigators to be snooping around all the time. There is sort of a cooperative spirit here. It has worked very successfully for this reason. I think he has done a good job up there.

Mr. STEVENSON. That is all. (Witness excused.)

STATEMENT OF ISADORE R. MORRISON ON BEHALF OF NATIONAL ASSOCIATION OF INDIVIDUAL TIRE DEALERS

Mr. BALLINGER. State your name.

Mr. MORRISON. My name is I. R. Morrison. I am State director for the National Association of Independent Tire Dealers.

Mr. BALLINGER. Are you also in business, Mr. Morrison?

Mr. MORRISON. Yes. I am a car and tire dealer.

Mr. BALLINGER. What is the name of your business?
Mr. MORRISON. The Morrison Tire Co.

Mr. BALLINGER. How long have you been in that business?

Mr. MORRISON. Under that name since 1939.

Mr. HILL. Is that in Salt Lake?

Mr. MORRISON. Yes.

Mr. HILL. Here in town?

Mr. MORRISON. Yes, sir.

Mr. BALLINGER. As you know, Mr. Morrison, the committee is making a study and investigation of the monopolistic practices and unfair methods of competition. Do you have any problems in your industry that you could classify as unfair methods of competition or as monopolistic practices?

Mr. MORRISON. Yes, sir; we do have. Our complaint primarily is about the practices on the part of the rubber companies. In other words, we feel that we carry an inventory and they pretty much dictate our sales method.

Mr. BALLINGER. Could you amplify that and explain that to the committee in detail?

Mr. MORRISON. Just to give one phase of the situation, it is the practice of the rubber companies to enter into contracts with large users of rubber on what they term a national-account basis.

Mr. HILL. When you are speaking of rubber companies, you are talking about tire companies, too?

Mr. MORRISON. Yes, sir.

Mr. HILL. In other words, they are the same?

Mr. MORRISON. The tire companies I am talking of specifically.
Mr. BALLINGER. Proceed.

Mr. MORRISON. They sell at prices which either equal or are below our cost. We are eliminated entirely from those fields of business. We are called upon to carry an inventory and even service of these accounts on a basis which we in no respect like.

Mr. HILL. Have you refused to serve these accounts?

Mr. MORRISON. They cannot compel us to do so, but we feel that that should be legitimately a part of our business field.

Mr. HILL. Being in the farm-implement business, I can say that farm-implements manufacturing companies always sold directly to the State agricultural college, bypassing us entirely. If any troubles occurred with that implement, we serviced it. You are talking about the same thing I am talking about. I would like to know how to cure that problem, by law, or in any other way.

Mr. MORRISON. You are in a position to know whether or not that is possible.

Mr. HILL. I do not know. It has been going on for 25 years, to my knowledge.

Mr. BALLINGER. You are making a further complaint that big rubber companies sell at prices to the large buyers so you cannot sell to them?

Mr. MORRISON. Very often below our cost.

Mr. BALLINGER. Below the cost of the tires to you?

Mr. MORRISON. Yes. That is one question.

Mr. HILL. Are those tires delivered right here in this community by the big company?

Mr. MORRISON. Sometimes through a factory branch; sometimes a dealer delivers it.

Mr. BALLINGER. You do not have anything to do with the sale of that tire? You do not put your hands on it, it does not come through your warehouse, you do not touch it?

Mr. MORRISON. Sometimes yes and sometimes no.

Mr. BALLINGER. Both ways?

Mr. MORRISON. Yes, sir.

Mr. STEVENSON. And you get not profit on such transaction? Mr. MORRISON. There is a practice called a transfer billing whereby a large tire dealer is called upon to deliver a tire to a user. He bills the user, then transfers that billing to a rubber company on possibly 5 to possibly a 72 percent margin of profit.

Mr. BALLINGER. Any further practice you want to describe to the committee?

Mr. MORRISON. Well, then, we feel also that the selling practices of the rubber companies should be made public. In listening to the testimony of Mr. Lloyd, apparently the grocers know what their manufacturers are doing. We do not. My principal supplier, for example, sells the mail-order houses at a price we have no knowledge of whatever and on a basis of which we have no knowledge, but we know it is far below the price we are called upon to pay and an equivalent product to the best of our knowledge.

Mr. HILL. Is that mail-order house located right here?

Mr. MORRISON. Yes, sir.

Mr. HILL. If they sold to a large company and that tire needed repairing, they would send it over to you to repair it instead of sending it over to the mail-order house?

Mr. MORRISON. The mail-order house takes care of its own troubles. Mr. HILL. Does the tire company send any repair work to the mailorder house of the tires that they sell to large companies in this community?

Mr. MORRISON. No; they have this kind of a practice in that respect, if I understand your question. The mail-order house, or a so-called mass distributor, has a trouble department of his own. They might employ me to repair that tire, but that would be just a contractual relation between myself and the local company. I believe under their terms of sale--I will try to make myself more clear-they assume that responsibility themselves.

Mr. HILL. The mail-order house?

Mr. MORRISON. Yes.

Mr. BALLINGER. Do you sell to filling stations, Mr. Morrison?
Mr. MORRISON. Yes, sir.

Mr. BALLINGER. The committee has heard a lot of testimony that there is some trouble at the filling-station level of distribution. The committee has heard testimony from automobile parts manufacturers that they are finding it difficult to sell to filling stations because the sales policies of such stations are being dictated by the large companies. Do you have any observations to make?

Mr. MORRISON. Yes. I should like to do that. To the best of my knowledge, a leased service station which is owned by a company and leased to an operator, that operator is virtually compelled to sell a line of tires dictated by the oil company. Now, if he enters into a contract with the rubber company and buys his tires the same as any other