Mr. JEWELL. Ordinarily, for 1 year, but they can be canceled at any moment, tomorrow morning or in 30 days, anytime the boy scout can take his franchise up. Another thing I want to tell you is this: This is small business to you people in Washington, but the facts have been found by the Federal Trade Commission in 1939, where Ford sets up a capitalization of $13,000 for a dealership, which is entirely out of line. There are very few Ford dealerships or any other kind of dealership that has not got that many thousand dollars in parts. In the little city of Missoula, to show you what the business amounts to, there are $300,000 worth of parts. That is from a personal survey I made myself last week. There are a million dollars worth of buildings in that town belonging to dealers and many of them are paying rent. Mr. PATMAN. What size? Mr. JEWELL. Missoula. Mr. JEWELL. About 22,000. And shop equipment is another thing. Remember in many cases the shop equipment must be bought from whom the boy scout says, and the kind of equipment they want you to buv. Mr. PATMAN. What did you mean when you said there were a million dollars worth of buildings on which they are paying rent? Mr. JEWELL. On which many were paying rent. The men who own their own buildings have practically a million dollars invested. Then there are others. Mr. PATMAN. I thought you meant they lost them. Mr. JEWELL. A lot of them will lose their buildings who are building them today. Then the shop equipment is another thing you heard spoken of this morning. There is $137,000 worth of shop equipment in Missoula. When you start talking about shop equipment, that is really something. If you want to buy a motor analyzer today, it will cost you between $1,100 and $1,400 for the best and the best is none too good when it is your motor that is being analyzed. There are very few dealers in the State of Montana who sell over 100 units a year. In 1944, according to the testimony, Ford set up a capitalization of $13,000 for each dealership that sold 100 cars. Very few of them sell that many, but I defy you to go into almost any dealership, Ford or otherwise, in the State of Montana that has not almost that much in parts alone. In the little town down here by name of Polson, 1,200 people in it, the dealer there has $73,000 worth of parts. The people who own their own buildings have over a quarter of a million dollars invested, and there are $73,000 worth of equipment. That is what I am talking about. It is the pressure put upon these people. It is not only put upon them to buy Chrysler products, but pressure to buy advertising. I would suggest that an investigation be made as to the ownership of these advertising agencies because they are so enthusiastic in compelling these dealers to buy it. Why, if all of the advertising that they buy were put up in front of the building, the building would look like the front end of a fake fire sale. Let us refer to the International Harvester Co. Every time you come down the street you see one of those big advertisements and you can make up your mind that the International Harvester Co. made that man build it. I can cite you a case in Athridge, Mont., where they put all of their money into a building and today they are practically broke because they followed the advice and suggestions of the factory. Mr. BALLINGER. Is it your opinion that there is ample law existing to prevent these kind of practices? Mr. JEWELL. No; there is not any law, in my mind, that prevents them from using this coercion and the implied threat of cancellation of their contracts or of their franchises. We need a law to protect the dealer against the cancellation of his franchise. We had one introduced in the Eightieth Congress, S. 227, which contained a clause that would protect us against the cancellation of our franchise. It is known as the old independent tire-dealers bill, but on page 4, lines 16 to 25, there is a clause that would protect the dealer against this continual and insidious threat of cancellation of his franchise. Mr. PATMAN. I think George Burger got that up. Mr. JEWELL. Carl McFarland, the independent tire-dealers counsel, and the bill was introduced by Senator Murray of this State. Mr. BALLINGER. Would that bill solve it? Mr. JEWELL. I think so. Mr. BALLINGER. How would it solve the question? Mr. JEWELL. If a franchise has been in force a year, it then cannot be canceled without some compensation to the dealers for advertising, for good will, and all of that which has been established. That is a matter that would be necessary. There is one other matter I want to talk to you about. I want to read into the record a statement that was made by the Federal Trade Commission in document known as House Document 468, Seventysixth Congress, first session, published in 1940. These facts still exist, probably in a worse condition than they did then. The Commission finds that motor-vehicle manufacturers, and, by reason of their great power, especially General Motors Corp., Chrysler Corp., and Ford Motor Co., have ben and still are, imposing on their respective dealers, unfair and inequitable conditions of trade by requiring such dealers to accept and operate under, agreements that inadequately define the rights and obligations of the parties and are moreover, objectionable in respect to defect of mutualities that some dealers, in fact, report that they have been subjected to rigid inspections of premises and accounts, and to arbitrary requirements by their respective motor-vehicle manufacturers to accept for resale quantities of motor vehicles or other goods deemed excessive by the dealers, or to make investments in operating plants or equipment without adequate guaranty as to term of agreement or even supply of merchandise. That is true today. This poor DeSoto dealer, if he got his share of cars, would get one and one-tenth cars a month. These other people who are subjected to this treatment only registered 120 Packards in the whole State of Montana during the first 6 months of this year. Yet they expect him to build a $100,000 building. Mr. BALLINGER. What is the purpose of that? What do you read in it? Why would one want to destroy a man that way? What is the purpose of it? Mr. JEWELL. Dealers during the war operated their own business without any interference of any kind whatsoever from the factories. They hardly ever saw a factory representative, with the result that 83019-49-7 stood high in their public relations, higher than they ever stood before, and have ever stood since. The result was they were making money. The factory could not tell them what to do. Dealers are today, or most of them, in a very liquid condition, and the factory knows it, because every month they get the financial statements. If they can get that money so that it is a frozen asset they then will have this poor devil a slave, and he will have to stay in the business for them. When they force him out they throw it over to a man who is putting up a building or has one, and they get him into a jam. The reason is to get the men so that they will not be free and independent. Mr. BALLINGER. Like a person gets in debt to a company store? Mr. JEWELL. Yes. Mr. BALLINGER. He is always in debt. Mr. JEWELL. That is the position they are in. Mr. BALLINGER. That is your contention? Mr. JEWELL. That is my contention. That is one of the reasons why they want this change. Here is the suggestion of the Federal Trade Commission: In the opinion of the Commission, this inquiry has demonstrated that inequities exist in the terms of dealer agreements, and in certain manufacturers' treatment of dealers calling for remedial action. It is recommended that present unfair practices be abated to the end that dealers have (a) less restriction on the management of their own enterprise; (b) quota requirements and shipments of cars based upon mutual agreement (c) equitable liquidation in the event of contract termination by the manufacturers, (d) contracts definite as to the mutual rights and obligations of the manufacturers and the dealers, including specific provision that the contract will be continued for a definite term unless terminated by breach of reasonable conditions recited therein. That was filed in the Congress of the United States way back in 1940. There is no question but what those kind of laws should be enacted to protect the dealers of this State and of the United States. A short time ago Ford raised the prices of his cars from $75 to $125, but he left the gross discount the same as it was before. In other words, the dealers sold property for $75 to $125 more, but did not get any pay for it. It amounted to Ford to the sum of $60,000,000 a year. May I say this: That Ford did a good job of selling, and I found few dealers satisfied. One of them told me he got his discount and they could go to hell. "They are not going to tell me." That was in a small town. Another man told me that, "It is just a means of chiseling us out of some more." very The Ford dealers did not take action. It was General Motors, Chrysler, and the independent dealers that took the action through the National Automobile Dealers Association, so that when Ford came through with his second raise and the third one, the dealers got their discount that they were entitled to. It was the matter of a fight. A law should be passed that will correspond with the suggestions of the Federal Trade Commission in 1940 and the dealers of America, particularly of Montana, will be satisfied. Have you any questions to ask? Mr. PATMAN. No questions. (Witness excused.) Mr. JEWELL. Mr. Chairman, I should like to file a statement by Mr. George B. Schutte, Butte, Mont., president of the Montana Automobile Dealers Association, as follows: (The statement of Mr. Schutte is as follows:) STATEMENT OF GEORGE B. SCHULTTE, PRESIDENT, MONTANA AUTOMOBILE DEALERS ASSOCIATION, BUTTE, MONT. In 1939 concerns with 300 employees, or less, did 52 percent of the manufacturing; 1944 firms of this size did only 38 percent of the manufacturing. Therefore, there is a definite trend toward concentration which eventually results in a monopoly to the detriment of the public. Federal income taxes facilitate the concentration, for example: In other words, General Motors on its estimated net profit of $400,000,000 for 1948 will pay 38 percent, but the small corporation making $25,000 to $50,000 will pay 53 percent on that part of its net profit. Small businesses are often incorporated to give the owners an opportunity to develop a new business without risking all of their personal property, or to make it possible to start someone in a business of his own. If, after taking the risk, there is a dividend, the investor is subject to double taxation, and this surely discourages the establishment of new small business enterprises. If a business earning between $25,000 and $50,000 borrows money it must earn $1 to pay 47 cents on its debt. This does not encourage expansion on the part of small business; therefore, encourages monopoly on the part of big business. If you borrowed $50,000 you would have to earn a net of $103,000 to retire the debt. Furthermore, all taxes must be paid in cash, there is no consideration of the practical fact that when you earn a net profit a large part usually is reinvested in inventories, equipment, supplies, etc., which will not be accepted by the tax collector. COOPERATIVES These organizations should pay the same tax as any other organization conducting the same business. Double taxation would be no more detrimental to these organizations than it is to other small corporations. At present cooperatives have a tremendous tax advantage. RECOMMENDATION 1. Exemptions for repairs, improvements, or expansion. 2. Graduated rates up to $100,000 with the first $10,000 of net exempted and rates over $100,000 in excess of the present 38 percent, so the over-all yield to the Government would be higher than at present. 3. Eliminate the present monstrosity of charging 53 percent on the bracket between $25,000 and $50,000. If there is to be such a rate it should be on net profit over $100,000. stood high in their public relations, higher than they ever stood before, and have ever stood since. The result was they were making money. The factory could not tell them what to do. Dealers are today, or most of them, in a very liquid condition, and the factory knows it, because every month they get the financial statements. If they can get that money so that it is a frozen asset they then will have this poor devil a slave, and he will have to stay in the business for them. When they force him out they throw it over to a man who is putting up a building or has one, and they get him into a jam. The reason is to get the men so that they will not be free and independent. Mr. BALLINGER. Like a person gets in debt to a company store? Mr. JEWELL. Yes. Mr. BALLINGER. He is always in debt. Mr. JEWELL. That is the position they are in. Mr. BALLINGER. That is your contention? Mr. JEWELL. That is my contention. That is one of the reasons why they want this change. Here is the suggestion of the Federal Trade Commission: In the opinion of the Commission, this inquiry has demonstrated that inequities exist in the terms of dealer agreements, and in certain manufacturers' treatment of dealers calling for remedial action. It is recommended that present unfair practices be abated to the end that dealers have (a) less restriction on the management of their own enterprise; (b) quota requirements and shipments of cars based upon mutual agreement (c) equitable liquidation in the event of contract termination by the manufacturers, (d) contracts definite as to the mutual rights and obligations of the manufacturers and the dealers, including specific provision that the contract will be continued for a definite term unless terminated by breach of reasonable conditions recited therein. That was filed in the Congress of the United States way back in 1940. There is no question but what those kind of laws should be enacted to protect the dealers of this State and of the United States. A short time ago Ford raised the prices of his cars from $75 to $125, but he left the gross discount the same as it was before. In other words, the dealers sold property for $75 to $125 more, but did not get any pay for it. It amounted to Ford to the sum of $60,000,000 a year. May I say this: That Ford did a good job of selling, and I found very few dealers satisfied. One of them told me he got his discount and they could go to hell. "They are not going to tell me." That was in a small town. Another man told me that, "It is just a means of chiseling us out of some more." The Ford dealers did not take action. It was General Motors, Chrysler, and the independent dealers that took the action through the National Automobile Dealers Association, so that when Ford came through with his second raise and the third one, the dealers got their discount that they were entitled to. It was the matter of a fight. A law should be passed that will correspond with the suggestions of the Federal Trade Commission in 1940 and the dealers of America, particularly of Montana, will be satisfied. Have you any questions to ask? Mr. PATMAN. No questions. (Witness excused.) |