MONOPOLISTIC AND UNFAIR TRADE PRACTICES

MONDAY, SEPTEMBER 27, 1948

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE No. 2 OF THE SELECT COMMITTEE ON SMALL BUSINESS, South Bend, Ind.

The subcommittee met in the Federal Courthouse Building, South Bend, Ind., at 10 a. m., the Honorable Walter Ploeser (chairman), presiding.

Present: Representatives Ploeser (chairman), Grant, and Hardy. Also Present: James W. Foristel, Executive Director and Willis J. Ballinger, Economic Counsel.

Chairman PLOESER. The committee will come to order.

Ladies and gentlemen, I think I should explain for the benefit of everyone here that this is one of a series of hearings being conducted by the Committee on Small Business of the House of Representatives on the subject of unfair trade practices and monopolistic tendencies that may be injurious to our economy and particularly to small business. The committee began these hearings in the State of Montana, continued them in Wyoming, Utah, Nebraska, Minnesota, and Wisconsin. This will be the only Indiana hearing. From here, the committee goes to Kentucky, then on to Oklahoma and Texas.

We are hopeful that we can gather sufficient information so that in this current year of the committee's work with the next Congress we may be able to make an intelligent report to the Congress; First, on whether or not the present antitrust laws are sufficient; and second, whether if they should not be considered adequate, what might be done to strengthen them.

It is the duty of this committee, specifically designated by law, to work on behalf of small business. Just when small business begins is rather difficult. There have been many definitions. We are inclined to believe that it takes into its field all business which is independently cperated, and that size is more or less comparative. What may be small business in one field may seem like large business in another field.

So we draw on line of differentiation between where smallness stops and bigness begins. That is rather difficult to do. We do feel it is our praticular job, a prejudice job, if you please, to fight the small-business man's battle within the limits of our capacity and ability.

We are instructed by law to do that. We have tried to carry that task forward and hope that we can make a real contribtuion to our economy.

I want to introduce the gentlemen who are with the committee this morning.

He

On my right is Mr. Porter Hardy, Jr., of Virginia. May I say that he is the newest member of the committee, not quite 1 month old as a member. He succeeds Estes Kefauver of Tennessee who resigned from the committee after his nomination for the United States Senate. On my left and to the front is Robert A. Grant, of this district in Indiana, who has been a particular friend to this committee. is a member of the great Ways and Means Committee in the House of Representatives. As you may well recognize, we need friends occasionally on the Ways and Means Committee, because that committee handles the tax problems of the Nation. Small business, unfortunately, does have a perpetual problem in the field of taxes. Mr. Grant has been, in a sense, an auxiliary member of this committee in that we have been able to bother him over the years as a member of the Ways and Means Committee to give us aid.

On my left is Mr. Foristel, who is executive director of the committee, and on my right is Mr. Willis Ballinger, economic counsel of the committee and in charge of this particular study. Over on my right is Mr. Leo Cullinane, special investigator of the city.

Those of you who get to Washington occasionally may know Mr. Milberg, who sits in front of us, a crack reporter of the House of Representatives. He goes along with our committee, I think, to keep in condition for the more arduous winter season.

It is a pleasure to be here and we appreciate your hospitality which began on Saturday. Whether you were for Purdue or for Notre Dame, it was a great game.

Mr. Ballinger, you may proceed.

Mr. BALLINGER. Mr. Grant has a statement which he would like to present to the committee.

STATEMENT OF ROBERT A. GRANT, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF INDIANA

Mr. GRANT. Mr. Chairman and my friends of the Middle West, all of whom are interested in the problems of small business. I understand we have a very heavy schedule for today, so for my part I will be very brief. At the outset, I do want to say I am happy to welcome this Committee on Small Business of the Huose of Representatives to South Bend. Chairman Ploeser is one of my closest friends in Congress, and for a long time I have greatly admired his ability.

This committee comes to my city engaged in one of the most important investigations and studies ever undertaken, in my opinion, by a committee of Congress.

Millions of Americans are justifiably alarmed by the activities of Communists in America. Another committee of the House has done a courageous job in opening the eyes of our people to their infiltration into the Federal Government, their destructive designs on our freedom and our way of life. But, turning a spotlight on Communists in America, disclosing their private and public lairs in business, labor unions, and important posts of Government, is only a part of the battle to keep America safe from the agents of a foreign power. Another job must also be done.

Capitalism in the United States must continue to furnish the American people with such a high standard of living that they cannot pos

sibly be tempted by dangerous agitators who seek to sell them under all kinds of misrepresentation and lies, on an econoimc order in which liberty cannot possibly exist, and in which the Russian people themselves have not been able to create a decent standard of living.

Now, capitalism in America has been getting into trouble. The root of this trouble has been the spread of monopolistic practices and other unfair methods of competition in all sectors of the economy. The effect of these practices is to throttle production down and diminish the capacity of the system to supply our people with plenty through the important medium of individual initiative. Individual initiatve is the heart of the American way of life-it is the essence and basis of liberty-because where Government seeks, as it has in Europe in the twentieth century, to rule business and plan the economic life of people, the result has been dictatorship and Gestapoes, wars for the aggrandizement of despots and the impoverishment of the people.

In America at the present hour much of our record-breaking production is due to huge Government spending. We are living off billions of dollars for aid to Europe, aid to the veterans, the rearmament of the Nation, and the balance left of war savings. We cannot continue to live off of Government spending and debt. We must return to a sound economy in which private business will be able, on its own income power, to provide our people with a high and rising standard of living without financial assistance from the Government. But, if we do not keep the avenues of trade free from monopolistic and other unfair methods of competition, which embitter the victims, and engender a loss of faith in free enterprise, capitalism in America may not survive. This is the supreme challenge for us today. So, it becomes of the greatest importance that the Congress know what is going on in the economy, to what degree the antitrust laws have failed, and monopoly replaced competition.

For those laws have failed, and if our capitalistic economy is being artificially prevented from functioning or working to give the people the highest standard of living of which it is capable, what must be done to make the antitrust laws effective, and to dissolve the private and the governmental fetters that have been placed on free enterprise? Antitrust laws have been on the statute books of the Nation for nearly six decades. These laws were intended by Congress to protect and preserve free enterprise in business-to keep free enterprise sound and healthy as the basic method for providing prosperity and maintaining freedom to our people. As such, the antitrust laws are the bulwark of the Republic.

I am, therefore, wholly in sympathy with the present inquiry of the House Small Business Committee. I hope it does its job well and fearlessly. I expect that it will send to the Congress after January, one of the most important, illuminating, and constructive reports ever to be received by that body, on one of the most critical problems ever to confront the Nation.

The work of the committee is of vital interest to every citizen of our great Nation who enjoys and cherishes freedom.

Chairman PLOESER. We thank you, Mr. Grant.

Mr. BALLINGER. Miss Kathryn Casey.

Chairman PLOESER. May I say to the witnesses that we have quite a long list for the day. This is the only day that the committee will sit

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in South Bend, so that we would appreciate it if you will not stretch your testimony out unnecessarily. We want you all to have ample time to say what you wish to say, but let us cooperate and try to expedite the hearing as much as possible.

STATEMENT OF MISS KATHRYN CASEY ON BEHALF OF THE INTERNATIONAL APPLE ASSOCIATION

Mr. BALLINGER. Give your full name for the record.

Miss CASEY. My name is Kathryn Casey. I am assistant secretary and counsel for the International Apple Association, with my office in Washington, D. C.

The association is a nonprofit trade association with a membership of approximately 1,600, located in all the important producing sections and distributing markets of the United States. It is composed of the leading apple and pear shipping organizations, individual shippers and firms, growers, cooperative associations, wholesale dealers, distributors and exporters and importers. Its membership also extends to foreign countries, including Canada, Great Britain, all continental Europe, Africa, South America, and Australia. It represents, through its membership, between 85 and 95 percent of the commercial production and distribution of apples and pears.

The members of our association are in every sense of the word small business, in addition to being tied to what is essentially the backbone of this Nation's economy-agriculture. Many people are under the erroneous impression that during the past decade all farmers have become millionaires, a delusion based on certain figures issued as to farm income during that time, which might, if analyzed, indicate that most of net income has been on the part of farmers engaged in grain and cattle raising which distorts the picture as regards the balance of agriculture-I know of no orchardists, for instance, who have become fabulously wealthy during that period.

The second factor to be considered, particularly about the fruit and vegetable grower, is that while percentagewise net farmer income has not quite doubled since 1929, in that year an analysis of figures of the United States Department of Agriculture shows that gross farm income was $2,198-cash receipts per farm $1,796, and average income per farm owner and worker was $745.

For the year 1946, the last year for which this information is available, the average income per farm worker was $1,886. For comparison, let me say that last year the average income of the railroad employee was $3,068. Congress has recognized this disparity between the farmer and other segments of our economy by enacting measures designed to equalize the burden. Unfortunately, however, in some instances the agencies charged with carrying out the congressional program have, by erroneous interpretation, substantially limited or completely nullified the intended exemptions. These inaccurate administrative rulings will, if continued, do irreparable damage to a substantial part of the fruit and vegetable industry of this country. In order to show this committee what has already happened as a result of what appears to be deliberate sabotage of congressional intention and provision, it will be necessary for me to go into some detail on both the legislative

exemption and the rulings made under them. I shall, however, be as brief as possible to avoid unduly burdening this record.

I hesitated to ask time of this committee to present these problems, since your hearings are to consider unfair trade practices which adversely affect small business, but at the same time these are practices of what is essentially the biggest business in the country-the United States Government-sharp practices which some agencies of that Government have developed in an effort to enlarge the scope of their authority beyond that given them by Congress.

One of the measures affecting us is the Motor Transportation Act, passed in 1935, to place motor carriers under regulation. At the time it was under consideration there was quite a bit of testimony about the farmer who used trucks to carry his production to market and it was the attitude on the part of both the subcommittee and the full committee which held hearings on the proposed legislation that nothing should be done that would interfere with that procedure. As a result, when the bill was finally passed by both Houses of Congress, it contained the following language, in section 303 (b):

Vehicles excepted from operation of law. Nothing in this chapter, except the provisions of section 304 relative to qualifications and maximum hours of service employees and safety of operation or standards of equipment, shall be construed to include * ** (6) motor vehicles used in carrying property consisting of ordinary livestock, fish (including shellfish), or agricultural commodities (not including manufactured products thereof), if such motor vehicles are not used in carrying any other property or passengers, for compensation. * * *

I shall not attempt to outline entirely the legislative history that relates to the inclusion of this clause in the bill but there was considerable debate and discussion, both in the committees and on the floor of Congress as to what was intended to be covered by this language. Our association, which participated actively in drafting and incorporating this clause, thought that the lanugage was sufficiently plain that no controversy over its application could arise.

In the debate on the floor of the House the word "manufactured" was substituted for the word "processed" which had originally been used simply to remove any doubt as to the meaning of the clause, since some question had arisen as to whether ginning of cotton would constitute sufficient processing to make cotton in bales other than an agricultural commodity.

During the period since enactment of the Motor Transportation Act, which is incorporated in the United States Code as chapter 8, part II: Motor Carriers, the Interstate Commerce Commission has formally and informally ruled on the applicability of the exemption. As the result of these rulings, the word "manufactured" is stretched to include some rather far-fetched definitions. Disregarding for the moment the dictionary definition of the word "manufacture," there has been on the books for many years a Supreme Court definition of manufacture, handed down in a tariff case involving cork (Anheiser-Busch Association v. U. S. S., 207 S. U. 556) in which the Court said:

Manufacture implies a change, but every change is not manufacture, and yet every change in an article is the result of treatment, labor, and manipulation. * There must be transformation; a new and different article must emerge "having a distinctive name, character or use."