Hon. WRIGHT PATMAN, EXHIBIT E FEDERAL TRADE COMMISSION, OFFICE OF THE CHAIRMAN, Washington, February 12, 1946. Chairman, Select Committee on Small Business, House Office Building, Washington, D. C. DEAR CONGRESSMAN PATMAN: The following information is submitted in reply to your letter of February 1, 1946, concerning the concentration of business in the hands of the large soap manufacturers. The dominant companies in the industry are Procter & Gamble Co., Lever Bros. Co., and Colgate-Palmolive-Peet Co. The aggregate sales or soap and all other products by the three companies amounted to $369,326,130 in 1939 and $367,142,877 in 1940. These are the latest years for which the Commission has information from these companies because of the discontinuance of its series information from these companies of Industrial Corporation Reports in 1941, when the project was transferred to the Office of Price Administration. Procter & Gamble Co. reported that 64.8 percent of its sales for 1940 were for soap products, and Colgate-Palmolive-Peet Co. reported that 63.7 percent of its total sales for that year represented soap products. Lever Bros. Co. which controls the greater part of the soap and margarine industries of the British Empire, made no segregation of its soap sales in reporting its total United States sales. On the basis of these statistics, the soap sales of Procter & Gamble Co. and of Colgate-Palmolive-Peet Co. aggregated $177,913,000 in 1940. This amount represented 65 percent of the total value of soap produced for the industry in the amount of $274,906,029, as reported by the Bureau of the Census for the year 1939, the last year for which such statistics were reported. Including Lever Bros. Co. United States sales it is estimated that the soap sales in 1940 by the three dominant companies in the industry were approximately 88 percent of the total for the industry. By direction of the Commission, Sincerely yours, W. A. AYRES, Chairman. EXHIBIT F [From testimony of Congressman Celler before the House Small Business Committee, as recorded, H. Res. 64 of April 1946] * * * * I am before the Small Business Committee, and I take it that the Small Business Committee wants to protect the small-business men. * The first three companies, Lever Bros., Colgate-Palmolive-Peet, Procter & Gamble, make approximately 82 percent of all American soap The big three get over 80 percent while the little fellows get the leavings. There is an association called the American Association-the Association of American Soap and Glycerine Producers, Inc. It is a very strong organization. Its secretary, Mr. Edlund, is a very fine genteman-Mr. Roscoe Edlund. But what is that organization? It is just a front for the Big Three. Why do I say it is a front for the Big Three? It has a budget; that organization has a budget of $560,000. The Big Three contribute $500,000 of that $560,000. The Big Three thus have a mighty claim on that organization. It is small wonder, therefore, that the association is working day and night with all their agents in and out of the Department of Agriculture for the Big Three. ** They have given scant consideration to the little fellow. It has been a little-fellow-be-damned attitude. ** * Wrisley Soap Co., I believe the fourth largest soap manufacturing company in this country, working closely with the so-called Big Three. I dont attribute to Mr. Wrisely any wrongdoing; he doesn't have to do anything wrong. But there are many ways of killing a cat without killing it with a bullet.* When you are compelled to go to a man and sell your product the latter has a stranglehold on you. He can do any damned thing he pleases to you, any damned thing he pleases, with reference to conditions and price. They are cowed and coerced by these Big Three, even to the extent of compelling them to sell below ceiling price. These fat and grease renderers are afraid to come forward with complaints, either to you or the Department of Justice. The minute they raise their voices in protest, they are met with all manner and * kind of irritations set up by the Big Three * * And I say to you gentlemen, the more you go into this situation whereby the War Food Administration are underscoring and bolstering up this monopoly, the worse it is going to stink. I sound the warning now to all present and to the public, if our administration is in control over the next Congress, and I hope it will be and I think it will, I shall be chairman of the House Judiciary Committee, and I assure you gentlemen, as chairman of that Judiciary Committee, having control over legislation having for its purpose the destruction of monopoly I shall not remain silent or inactive, but I shall vigorously pursue this matter. Mr. STEVENSON. We thank you. We will recess until 2:15. (Whereupon at 1 p. m. the hearing recessed until 2:15 p. m. the same day.) AFTERNOON SESSION (Whereupon, at the expiration of the noon recess, hearing in the above-entitled matter was resumed.) Mr. PATMAN. The committee will please come to order. At the request of Chairman Stevenson, I am calling the committee to order at this time. Call your first witness. STATEMENT OF CLARENCE DRAGERT Mr. FORISTEL. State your name. Mr. DRAGERT. My name is Clarence Dragert. Mr. FORISTEL. What is your business? Mr. DRAGERT. C. H. Dragert Co., in the paint business, sir. Mr. FORISTEL. Proceed. Mr. DRAGERT. I just wanted to give my testimony in respect to some conditions or difficulties that have been going on for a long time, but seem to be getting worse. In calling on an oil-well-supply company you are very definitely told when you come in that the door is closed to you, because they have to give their business to paint companies that are owned by the oil companies, such as Socony Paint over here in Beaumont, owned by Magnolia. You might say: Well, then, go somewhere else and sell your stuff, which, of course we can do. But the pressure is put on in two different ways. One is when the supply company calls on an oil company to sell them some oil-well supplies. Somehow or other these purchasing agents have all the records of everything that is bought from the oil companies. They will pull out a file and say: "Well, your supply company A run so many automobiles. They bought so much from us last year. Here is the record on supply company B, your competitor, he runs so many automobiles, and he bought three times as much gas from us last year, he bought so much paint from us last year. You bought half as much, we cannot therefore give you any business." In the case of ourselves, we did some business with the supply companies during the war. They could not get paint anywhere else. but they were very honest with us. They said "we will buy some of this material from you now, but as quick as the war is over, in spite of what your deal is or how good your merchandise is, it does not count; we will have to buy from the fellow who has a paint company and who is also our customer. That squeeze will be put on. It will be put on hard and you will be out." Which is fair enough as far as this individual is concerned. We do not know whether you can do anything about a condition like that or not. Mr. FORISTEL. That is brought about by integration; is it not? I have heard it said by some people that sometimes there are meetings held at, for instance, a place like Atlantic City, by the presidents of oil companies, steel companies, and so forth. They have their paint divisions. They will sit down and hash this thing over. "You, Bill, how come you have not bought as much paint from us as you used to? I want that back." And the next day it is back. Mr. PATMAN. Reciprocal trade. Mr. DRAGERT. Yes; that is about all the testimony I have. If you have any more questions, Mr. Muline, who travels for me, has run up against some other and more detailed things which he can tell about. you Mr. PATMAN. All right. We would like to hear from him, please. (Witness excused.) STATEMENT OF C. L. MULINE Mr. FORISTEL. State your name. Mr. MULINE. C. L. Muline. Mr. FORISTEL. You may proceed. Mr. MULINE. As Mr. Dragert said, I am his field representative. I go into a gas-producing and distributing system soliciting the paint business, and I am told Magnolia or Humble or Sinclair have paint factories, they buy our gas and when we sign a contract, we have to take this gas and sell this gas. Within a few days, a very few days, the paint representative is in with a copy of the contract and he says, "You are going to have to buy our paint, boys, or we are not going to buy your stuff," or words to that effect. You go into a refinery. I have one particular refinery in mind, a very recent case, in fact, in the last 2 weeks, where that particular squeeze was put on. An oil company owning a paint-manufacturing business buys gasoline from them. Incidentally, it is a little, independent refinery. The gasoline is going out here into that corner station under a major company's brand name. The paint man comes in and says, "Well, you do not particularly need this refinery painted up, but you had better buy your paint now." The proposition that they put up to him is no advantage to buy the paint from them because they could buy it from us or a half-dozen independent manufacturers; they could buy it from Mr. Kuhn over there for at least the same price and probably less. So there is no definite advantage. But the inference is left, very definitely, with this refinery up there: "If you do not buy a thousand dollars or $1,200 worth of paint, which is required to paint this particular refinery, we will cancel the contract. You will have to hunt for some other place to sell your gasoline." Well, in this particular case these people are pretty well fixed. They have made some money during the war. They said, "We do not have to sell your company gasoline, anyway. We can tear this contract up. We are going to buy our paint where we damn please." They bought it. I sold it. So that is out of the window. I know of an independent oil producer where a certain pipe-line company, which is a subsidiary of a major oil company, buys their own oil lines. I was in their warehouse within the last 40 days at their headquarters, and I saw a half carload of paint from one of the oil companies. I said, "What are you doing with that over there?" He said, "I had to buy it." "Why?" "They will take our pipe-line connections away from us." I says, "All right." That has happened in numerous cases. I could sit here the rest of the afternoon and recite similar or comparable instances. But here is the pay-off: I have a very warm, personal friend up in Oklahoma who is in the outdoor advertising business. He has, Ì would say, 1,000 important boards along the highways of Oklahoma and the Panhandle of Texas, as well as over in Missouri and Arkansas. He sells Magnolia a contract for a few of the boards, advertising Mobile oil, the Flying Horse Power, and so forth. The same day that the contract came back, signed by Magnolia, to him in the same mail comes a price list of Socony-Vacuum paint. The following day in walks the Socony-Vacuum salesman with a copy of the contract in his pocket. "You got this contract. You are going to have to use all of our paints." Prior to that, why, this particular advertising man was buying paints from a half dozen different concerns at considerably less money and getting considerably better merchandise. They were putting him under the squeeze play. This squeeze play is going on in more ways than one. I think Mr. Kuhn's men, if they were watching for it, would tell you the same thing I am telling you. They have walked into it every day. Mr. FORISTEL. What do you suggest that the Congress do to break up such a thing? Mr. MULINE. I think we have a law on the statute books. That was brought out particularly this morning in this meeting. I think the Federal Trade Commission, if they were informed or coerced a little, they would probably clear up some of this. I think that would come under the classification of fair trade-or unfair trade under the Fair Trade Act. I am reminded that not many years ago they boasted of taking the grain business and the food-packing business away from the major packers. I am reminded of some other cases where the Federal Trade Commission has issued cease-and-desist orders, and they have been opera tive. On the other hand, I know of some cease-and-desist orders that have not been in effect. They have not been paid any attention to. But if a determined effort was made by the Federal Trade Commission or the Justice Department they could break these things up. We are not kicking from a competitive standpoint. We are looking at it from a little different angle. If it is fair competition and I can go out and buck Mr. Kuhn' men over here and I can outsell Mr. Kuhn's man, that is all right. If he outsells me, that is all right, too. But when you come out here and you bump your head against a stone wall, that is another thing. You are not finding it in the oil industry alone. I can find it in other industries. They are doing the same thing. One of the major oil companies is putting in an order forcing their filling-station operators to put a line of paint in. Mr. FORISTEL. We have heard those complaints at other places. Mr. MULINE. Yes. We do not care, though. We will put ours in there, too. They are going to watch us. We will be putting ours in there. We will make an effort, anyhow, but we think that is a little unfair. We think it is coercion. I believe if the laws were invoked we would stop a lot of these things. As far as the paint business is concerned, I think that is all I have to say, but I do have one other observation: These same oil companies are gathering up chemical companies both in the industrial field and in a proprietary way in distant fields. They are getting too big. One of these days there is going to be, like the gentleman over there with his soap said, three, four, five, six, or seven people who will control the chemical industry of the United States, and probably the world. I think it should be divorced, completely cleaned out and stopped, because if we do not do that, they are going to ruin our economy. That is my observation, anyhow. I am wondering if this committee has the power to put pressure on the Federal Trade Commission and the Department of Justice to take action on some of these things. Mr. FORISTEL. Have you made a complaint at all? Mr. MULINE. We are making our complaint right now. This is the first opportunity we have had. Mr. FORISTEL. We would like to have that in writing as well as in testimony. Mr. PATMAN. We would like to have that over your signature. Mr. PATMAN. Specify one, two, three, or four, as many as you can. give you a dozen names right now, if you would like them. to. Mr. FORISTEL. We would like to have them in a letter, please. Mr. FORISTEL. We will accept this as your general complaint. It is a serious evil, we realize that, and if a few large concerns can trade that way we will not have any more than a few large concerns. Mr. MULINE. One of these large oil companies' subsidiary has made a determined effort to kick us out of business. They have not been successful. Mr. FORISTEL. Thank you. (Witness excused.) Mr. DRAGERT. Would you like to hear some of the other paint companies who have the same experience? Mr. PATMAN. Yes; we would like to hear from them; that is right. Mr. DRAGERT. They have all had the same experience, you see. |