It has been a great pleasure to be here and to have enjoyed your city. You can be sure this committee is carrying out to the best of its ability the instructions of the Congress that it serve the small-business men. In that respect we are prejudiced and we are directed to be prejudiced. Our interest is your interest.

Mr. STEFAN. Before we continue, I have something to say in connection with the Antitrust Section of the Department of Justice. Much has been said about the Antitrust Division.

For the information of Mr. Kavan who just testified I will say that Mr. Walter Ploeser, chairman of the Small Business Committee, is also a member of the Committee on Appropriations and is chairman of the subcommittee which makes appropriations for Government corporations. He is also a member of the committee which makes appropriations for the Navy. I am chairman of the committee which makes appropriations for the Department of Justice and the Department of Commerce. I have therefore been thrown into very close contact with the activities of the Small Business Committee.

For your information, may I say that the members of the Small Business Committee have been very helpful to the subcommittee on appropriations for the Department of Justice and especially for the Antitrust Division, because it has been charged frequently that perhaps the Congress of the United States has not appropriated sufficient funds for the Antitrust Division and for that reason it has been impotent. Because of Mr. Ploeser's interest in the appropriations for the Antitrust Division, our committee has increased over and above what was allowed the Antitrust Division by the Budget Bureau and the President of the United States the appropriations for this Division. It appropriated above what was allowed to them and this year the budget for the Antitrust Division is considerably higher than what was given to them originally by the Budget Bureau and the President.

For that reason there is no possibility or there should be no possibility that the Appropriations Committee be criticized so far as sufficient funds are concerned for the Antitrust Division of the Department of Justice.

There has been some statement made, and perhaps rightly so, that the Sherman antitrust law does not go far enough, insofar as price fixing is concerned, and suggestions have been made frequently that amendments be offered in the House and Senate to the antitrust laws in order to meet those problems which you have brought to the attention of the committee today. However, very definitely sufficient funds have been provided for the Antitrust Division and only recently I was informed by the Department of Justice that the Antitrust Division will be expanded, a branch office will be located somewhere in the Middle West in the near future in order that it may be closer to you small-business men when you want some definite and more direct information.

I believe, Mr. Kavan, your suggestion that some changes in the law be made to meet your problem will be met at the next session of the Congress. I hope that explains some of the matters that have been in your mind.

(After the hearing, the committee received the following letter from Mr. Kavan, dated September 17, 1948:)

INDEPENDENT GROCERS AND MEAT DEALERS OF OMAHA,

Mr. WILLIS J. BALLINGER,
House Small Business Committee,

Omaha 2, Nebr., September 17, 1948.

Washington, D. C.

DEAR MR. BALLINGER: In my report for the committee when they were here in Omaha, I evidently failed to support the need of an amendment to the present laws to properly and fully define "meeting competition in good faith." The point that I wanted to raise is—can you legally sell merchandise at less than cost under the present laws in order to meet a competitor's price and be within that section of the law as meeting competition in good faith. Safeway Stores under their price policy were meeting competitors' prices knowing that such sales were below cost. Would greatly appreciate having the above inserted into the record in the proper place.

Thanking you and your committee very kindly for the courtesies shown and in the manner in which this hearing was conducted, we are,

Sincerely yours,

INDEPENDENT GROCERS AND MEAT DEALERS,
LOUIS KAVAN, Secretary.

Mr. Ballinger will call the next witness.

Mr. BALLINGER. Whom do you represent?

Mr. GREENBERG. I am president, Independent Grocers Association. Mr. BALLINGER. You are head of a business also?

Mr. GREENBERG. Yes, sir.

Mr. BALLINGER. What is the name of that business?

Mr. GREENBERG. The Phillips Department Store.

Mr. BALLINGER. Do you have any statement that you wish to make to the committee?

Mr. GREENBERG. Yes. I am appearing here before the committee regarding a practice that has been in effect for many, many years, that has confronted the small-business man, of which I am one.

We have been confronted with the practice of manufacturers, large manufacturers, in the country providing a means of advertising or cooperating with retailers in advertising. Most retailers cooperate with the manufacturers and accept an advertising allowance, but in so doing the large manufacturer makes it possible for the large buyer, the quantity buyer, to be in a much more favorable position than the small buyer or the one unit buyer. The man who is buying for one store is definitely at a disadvantage because of his limited possibilities in quantity, who in turn can buy only what he needs, and this quantity because of the per case allowance only covers the actual cost of his advertising or sometimes not even that. But in the case of the large buyer, or the multiple unit buyer, because of his large purchases he is only required to use the same amount of advertising as the small buyer, but he in turn has a large balance left over after he spends his money for advertising, which goes toward reducing the cost of his merchandise. As an actuality, it is a rebate to the large buyer and it puts the small buyer at a great disadvantage.

Mr. BALLINGER. That is a discriminatory allowance to the big buver?

Mr. GREENBERG. It is on the same basis exactly as the small buyer, but it is not based on the cost per unit or the cost per line that the advertiser uses, but is based on the number of ads that the advertiser

uses. Each man, regardless of whether he is a large or small buyer, is required to buy the same amount of advertising, but his return in allowance from the manufacturer is based on the number of cases he purchases during the year. So that if the man bought only 100 cases and he received 15 cents per case, he would receive $15 for the same number of ads as the man who bought a thousand cases who would only be required to do the same amount of advertising. He would have a big balance left over at the end of the year that he can use toward reducing his cost.

We know that the corporate chains use that as a means of reducing the cost of their merchandise. They comply with the requirements of the national manufacturers and run the number of ads specified, and in turn get a large rebate at the end of the year. That is not an advertising allowance. That is a rebate, a reduction in price that the small man is not able to get.

Mr. BALLINGER. Do you mean to say when you buy 10 times what the other man buys and you have 10 times more to sell, you are only supposed to advertise the same amount?

Mr. GREENBERG. That is true.

Mr. BALLINGER. According to what theory, what rule?

Mr. GREENBERG. That is part of the advertising agreements set up by the manufacturers. They are not interested at all in how much the individual advertiser spends in dollars and cents. You are not required to say, "I have spent $100," or $10 in advertising, and in direct ratio to the amount of money I spent you are going to pay me back.

The only thing I am required to do is to run so many line ads or so many inches per year. It makes no difference if the man is a thousand-case buyer or a hundred-case buyer, his requirements are exactly the same. That is definitely discriminatory.

Mr. BALLINGER. Your theory is if a man buys 10 times as much as another man, he should not get any more consideration?

Mr. GREENBERG. He should be required to spend more money, or he should not receive any more than the small man. He should be paid for whatever advertising he does.

Mr. BALLINGER. Your theory is that he does the same amount of advertising as the little fellow and pockets the difference?

Mr. GREENBERG. Yes, sir.

Mr. BALLINGER. And uses that for cutting prices and other things? Mr. GREENBERG. That is exactly what happened.

Mr. BALLINGER. That is a good point.

Mr. GREENBERG. We have often also in advertising found that these corporate chains have advertised merchandise that they do not actually have on hand. Their intention may be to have that on hand-that is questionable. We will give them the benefit of that doubt. But we have oftentimes found a number of their units will never have on hand the merchandise that is run in the ads. They may have it in certain of their units. Many times they do not have the units to back up their advertising.

Mr. BALLINGER. Mr. Foristel calls the attention of the committee to the fact that under the Robinson-Patman Act a buyer cannot receive advertising allowances which he does not use for advertising. Mr. GREENBERG. But he is.

Mr. BALLINGER. If you know that to be the case you ought to make a complaint to the Federal Trade Commission.

Mr. GREENBERG. He is very definitely receiving more. That also goes back to the small man and the smaller man.

Mr. BALLINGER. Your point is already covered by the law. Anybody who is given money for advertising and does not use it for advertising is violating the Robinson-Patman Act.

Mr. GREENBERG. If he does not use all of the money he receives? Mr. BALLINGER. If he does not spend all of the money for advertising purposes, for those purposes which he received it for. He cannot take that as a discount.

Mr. FORISTEL. If you have any absolute evidence of that, turn it over to the Federal Trade Commission, naming the companies who are not spending it and who are receiving unfair advertising rebates. There is a remedy.

Mr. GREENBERG. We only have as evidence the advertising policies of the national manufacturers.

Mr. BALLINGER. If you can prove those policies to be as faulty as you say they are, then you have a just complaint.

Mr. GREENBERG. We know they are in practice today. We have never seen the checks received by the corporate chains for their rebates or for the advertising allowance.

Mr. BALLINGER. What makes you think they are keeping part of it back?

Mr. GREENBERG. Who?

Mr. BALLINGER. The fellow who receives money for advertising and uses only a part of the money for advertising and pockets the rest. Mr. GREENBERG. He must. He receives this money he pockets. He does not spend it all for advertising because he is not required by the national manufacturer to do that.

Mr. BALLINGER. He is not required?

Mr. GREENBERG. He is not required.

Mr. BALLINGER. He is required by law to do so.

Mr. GREENBERG. He is not required by the national manufacturer. Mr. BALLINGER. The contract itself says that.

Mr. GREENBERG. He is not required to use any specific dollars and cents for advertising. He is only required to use so many specific inches. If he complies with that he receives his rebate.

Mr. BALLINGER. You must have some idea of the cost. There is a difference, is there not?

Mr. GREENBERG. As a matter of fact, it happens to be that the corporate chain has an advantage in a lower cost of advertising than even the small advertiser because of his greater amount of advertising, for which he receives a lower rate per inch. As a result his cost for so many inches per year represents actually less than the small man.

Mr. BALLINGER. You said he does exactly the same amount of advertising.

Mr. GREENBERG. But it costs him less because of his greater quantity in advertising and the lower rate he receives from the newspaper. Mr. BALLINGER. If he has the same amount of advertising he does not have any greater volume, does he?

Mr. GREENBERG. He incorporates this cooperative advertising in his advertising as a whole. It definitely puts the small retailer at a

disadvantage. If it is true that this is provided for in the RobinsonPatman bill, how can we go about correcting it?

Mr. FORISTEL. Your form for relief is the Federal Trade Commission. Write a letter to them stating the facts. That is all you need to do to take advantage of the relief afforded you by the law.

Mr. GREENBERG. We will follow that procedure and see what the outcome is.

Mr. BALLINGER. On the other hand, do not be discouraged if you do not get results, because we are getting a lot of testimony that things do not move as rapidly as they should with respect to enforcement agencies. That is one of the things we are looking into now.

Mr. GREENBERG. You see, by receiving this additional money it goes to offset their other costs of advertising. That is what it amounts to. It reduces their entire cost of doing business.

Mr. BALLINGER. Is that all?

Mr. GREENBERG. That is all.
Mr. STEFAN. Thank you.

(Witness excused.)

Mr. STEFAN. Mr. Buffett will now preside.

Mr. BUFFET. Call your witness.

TESTIMONY OF FRANK BOSANEK

(The witness was duly sworn and testified as follows:)

Mr. BALLINGER. State your name.

Mr. BOSANEK. Frank Bosanek.

Mr. BALLINGER. Do you have a business?

Mr. BOSANEK. I am a retail grocer, one of those small boys.
Mr. BALLINGER. A partnership?

Mr. BOSANEK. Individual. I am located at 5140 South Twentyfourth, Omaha.

Mr. BUFFETT. This gentleman runs one of the best grocery stores in this part of the country and I am an old hand at the grocery business. Mr. BALLINGER. Do you have a statement you wish to make to the committee?

Mr. BOSANEK. Yes, I have.

Mr. BALLINGER. You may proceed.

Mr. BOSANEK. I have something I wish to bring to the attention of this committee. I imagine it is one of those things you have heard before, but, nevertheless, these are some of the things that are working against the better interests of the individual merchants, such as myself, and some of those things that come up in connection with price policies.

very

We had something happen here just a short while back that was detrimental and kind of raised my ire. That is the discounts of the soap companies. For some time we have been buying soap here on what we call a direct basis from these soap companies, Proctor & Gamble, Lever Bros., and so forth. We got the soap, 70 or 85 cases, delivered to my store. There was a 50 cents per case decline before the bill even came in. This 50 cents a case decline is something more than we make in profit anyway from selling a case of soap. In other words, we lost money.

When I called this to the attention of the soap companies they immediately told me, "Well, it is too bad. It is one of those things.