PRAYER WHEREFORE plaintiffs pray (1) that they have judgment against the defendants in the sum of $4,266,000; (2) that the defendants be enjoined from further carrying out the aforesaid unlawful combination and conspiracy; (3) that the defendants be required to take such steps as the Court may deem necessary and proper to dissipate the effects of the unlawful combination and conspiracy and to restore competition among the defendant companies in the sale of tires and tubes to dealers; (4) that plaintiffs recover the costs of this suit, including a reasonable attorney's fee; (5) that plaintiffs have such other and further relief as the Court may deem proper. COUNT II 19. The allegations in paragraphs 1 to 16, inclusive, of Count I hereof are hereby adopted by reference. OFFENSE CHARGED 20. In selling tires and tubes in the course of commerce among the several states and between the several states and the District of Columbia at prices agreed upon among the defendant companies, said companies are now, and have been for many years last past, violating Section 2 (a) of the Clayton Act (15 U. S. C. Sec. 13 (a)) by discriminating in price between different purchasers of a like grade and quality of tires and tubes sold in such commerce for use within the United States. The effect of such discrimination in price has been, and is now, to injure, destroy, and prevent competition between the defendant companies and independent dealers, including the plaintiff and assignor dealers, in the sale of tires and tubes in the aforesaid commerce, and to create and maintain a monopoly in the defendant companies of the distribution of tires and tubes in the aforesaid commerce to various users in the United States. 21. The defendant companies have pursued for many years, and are now pursuing, a uniform policy of causing tires and tubes made by them to be sold to certain users at prices substantially less than those charged other users purchasing a like grade and quality of tires and tubes. Said policy consists of requiring most users purchasing from independent dealers and many users purchasing from company stores of the defendant companies to pay prices for tires and tubes which are substantially higher than prices paid by preferred accounts purchasing a like grade and quality of tires and tubes of the defendant companies in the manner described in paragraphs 12 to 14, inclusive, hereof. Said differentials in price have been fixed and made uniform by the defendant companies pursuant to the aforesaid unlawful combination and conspiracy. 22. The defendant companies at all times recommend that dealers resell tires and tubes to most users at uniform list prices established by said companies and, to induce dealers to resell at said prices, follow the practice of selling to dealers in the course of interstate commerce at prices determined by deducting stipulated dealer discounts from said list prices. By means of the foregoing, the defendant companies control the levels of dealer resale prices and thereby compel dealers to, and they do, resell tires and tubes to most users at dealer resale prices equal to or near the list prices established by the defendant companies. The defendant companies operating company stores also sell a substantial volume of tires and tubes to users through said stores at prices equal to the aforesaid dealer resale prices. 23. Each of the defendant companies discriminates in price against users of tires and tubes paying dealer resale prices as aforesaid by soliciting and permitting preferred accounts to purchase tires and tubes of like grade and quality in the course of interstate commerce at prices substantially below dealer resale prices. Said discrimination in price occurs in all sales to preferred accounts made directly by the defendant companies as alleged in paragraphs 12 and 13 hereof. The defendant United States Rubber Company causes said discrimination in price to be made in all sales to preferred accounts transacted by dealers of said defendant as alleged in paragraph 14 hereof. 24. Prices to preferred accounts are reduced from dealer resale prices by the defendant companies by granting price concessions in varying forms to such accounts. Price concessions to most preferred accounts are allowed by the de fendant companies in the form of discounts from list prices equal to all or a part of the functional discount allowed by the defendant companies to dealers for reselling tires and tubes to users. By reason of such concessions, most preferred accounts regularly purchase tires and tubes of the defendant companies in the course of interstate commerce at prices equal to or slightly above said companies' prices to dealers and substantially below dealer resale prices. 25. Price concessions to motor-vehicle transportation companies are made by the defendant companies through the medium of so-called mileage-rental arrangements under which the defendant companies purport to lease tires and tubes to such transportation companies at stipulated rentals per mile of use. Said mileage-rental arrangements are used by the defendant companies to disguise transactions involving the sale of tires and tubes in the course of interstate commerce to such transportation companies at discriminatory prices. Tires and tubes leased by the defendant companies to such transportation companies are used and consumed by them as though purchased outright, but rentals paid for such use are substantially less than the sales value of the leased tires and tubes. INJURY TO PLAINTIFFS' BUSINESS 26. Immediate and direct effect of the defendant companies' discriminatory pricing policy has been, and is, to restrict and destroy competition between the defendant companies and independent dealers, including the plaintiff and assignor dealers, in the sale of tires and tubes to preferred accounts in the course of interstate commerce and, thereby, to create and maintain in the defendant companies a monopoly of the distribution of tires and tubes to such accounts. Price concessions granted by the defendant companies to preferred accounts have reduced prices of tires and tubes to them to levels so far below dealer resale prices as to make it unprofitable for dealers to compete with the defendant companies in the sale of tires and tubes to such accounts. Independent dealers, including the plaintiff and assignor dealers, are, therefore, either unable to resell tires and tubes to preferred accounts in competition with the defendant companies or are compelled to do so at prices affording dealers an inadequate return for their services. 27. The defendant companies have, by granting price concessions to them, induced numerous preferred accounts to discontinue purchasing tires and tubes from independent dealers, including the plaintiff and assignor dealers. As a consequence, such dealers have lost, and are now losing, large sums of money in earnings from the sale of tires and tubes to preferred accounts which have discontinued patronizing independent dealers because of the defendant companies' unlawful policy. 28. The defendant companies are continuing to carry out their unlawful policy of discriminating in price in sales of tires and tubes to users, and said policy threatens to cause further heavy financial losses to all members of NAITD on whose behalf this suit is brought and to drive numerous of said members out of business. These continuing violations of law by the defendant companies are causing irreparable injury to said members of NAITD in that their only remedy at law lies in the institution of multiple and successive damage actions which will not be adequate to redress said members for the losses suffered by them from said violations of law. PRAYER WHEREFORE plaintiffs pray (1) that the corporations named as defendants herein be enjoined from discriminating in price in sales of tires and tubes to users; (2) that said corporations be required to make such changes in their pricing policies as the Court may deem necessary and proper to restore competition between said corporations and dealers in the sale of tires and tubes to preferred accounts; (3) that the plaintiffs recover the costs of this suit, including a reasonable attorney's fee; (4) that the plaintiffs have such other and further relief as the Court may deem proper. MCFARLAND AND SELLERS, By GRANT W. KELLEHER, 1302 18th St. NW, Washington, D. C., Counsel for Plaintiffs. OCTOBER 1, 1948. DEMAND FOR JURY TRIAL The plaintiffs demand a jury trial of all issues in Count I hereof. MCFARLAND AND SELLERS, By GRANT W. KELLEHER, 1302 18th St. NW., Washington, D. C., Counsel for Plaintiffs. EXHIBIT A.-Plaintiff and assignor dealers' losses in earnings during the period from June 1, 1947, to July 31, 1948, inclusive Further, in this respect individual dealers are giving serious consideration to the institution of additional proceedings, one challenging the discrimination between oil companies and independent tire dealers and the force-line selling policies of the oil companies, through which practice millions of dollars of tire business has been taken away from dealers; the other to challenge the sale of tires through equipment and automobile manufacturers. Mr. BALLINGER. Challenge the sale, or the force sale? Mr. SHARKEY. The force sale. In conclusion, we believe present laws may be adequate; however, should further tests reveal loopholes, no delay should be countenanced in providing necessary amendments. We again say that vigorous and complete enforcement of the Robinson-Patman Act and other antitrust laws will do much to relieve the situation. If complete enforcement is being hampered by lack of funds, then we strongly urge sufficient appropriations. Mr. Chairman, we thank you very much for the privilege of making this statement before you. Mr. BALLINGER. Thank you for a fine paper, Mr. Sharkey. Mr. STEVENSON. Mr. Tyre Taylor? [No response.] [Brief recess.] Mr. BALLINGER. Mr. Taylor, general counsel of the National Association of Retail Grocers, the largest and oldest trade association in the United States, a very fine friend of the committee, who has certainly cooperated in this investigation—it is a pleasure to see Mr. Taylor, late or otherwise. Mr. STEVENSON. We are glad to have you, Mr. Taylor. STATEMENT OF TYRE TAYLOR, GENERAL COUNSEL, NATIONAL ASSOCIATION OF RETAIL GROCERS Mr. TAYLOR. Mr. Chairman and gentlemen of the committee, on behalf of the National Association of Retail Grocers and speaking for its membership of 69,000 independent merchants, I wish first to commend this committee and its distinguished chairman, the Honorable Walter Ploeser, for the generous opportunity it has afforded small business to explain its problems. The recent hearings which the committee conducted in 10 States has served to focus the attention of the Nation on the need for a sharper realization of the hazards that today beset small enterprise. These hearings were indeed an auspicious beginning for this investigation, which has already resulted in a lot of good, and will, we are confident, be instrumental in the enactment of much-needed legislation. It is also profoundly gratifying and reassuring that this study of unfair and monopolistic trade practices, begun when the Republicans were in a majority in Congress, will be continued with the Democrats in control. Congressman Patman's recent statement that the work of the committee has been bipartisan and that it will continue that way will meet with the 100-percent approval of every true friend of independent, small business. As a result of the committee's travels and its already extensive study of monopolistic and unfair trade practices and their effect on the small operator, I do not feel it necessary to restate in precise detail all the competitive practices which threaten the existence of independent grocers. You gentlemen have already heard many of our members, and their elected officers, describe their own experiences and the practices which are causing them the greatest concern. I wish therefore to devote the limited time at my disposal to several suggested amendments to the Robinson-Patman Act that will, we feel, help restore and protect the economic well-being of small retailers. I do not mean to ignore or depreciate the importance of the Sherman Act and the Clayton Act, but discussion of these alone would take all of my time here today; and, with the permission of the committee, I wish to postpone consideration of these statutes until some future date. In reviewing the testimony which independent grocers have presented to the committee, one complaint recurs over and over again. I refer to the fact that a very few large chain organizations, by virtue of their tremendous buying power, have been able to coerce and persuade suppliers to adopt sales practices which injure or completely destroy the ability of their smaller purchasers to compete in the market. In general, these practices fall into four categories of systematic discriminatory preferences, namely: (1) Quantity discounts which amount to more than the actual differences in cost of manufacture, sale, and delivery, or which are available to only a very few purchasers of overshadowing size; (2) advertising, display and promotional allowances which are not available on fair proportional terms to independent retailers, or which are given for services that are not performed, or which are wholly disproportional to the value of the services rendered; (3) cooperative merchandising payments and services given on terms and conditions that either disqualify the small retailer or prevent him from sharing in the benefits on a fair proportional basis; and (4) the giving of secret rebates and other types of valuable concessions. The methods which are used to extract these preferences from suppliers are a matter of public record. One method frequently used is the threat of withdrawal of patronage. Recalcitrant producers or suppliers who attempt to resist any demand for preferential treatment are placed on the "unsatisfactory list." In some cases the volume of sales lost as a result is so great that the producer or supplier is forced out of business. In other instances, where his business is more evenly distributed among his customers, the result very often means the dif ference between operating at a loss and operating at a profit. But even this does not exhaust the arsenal of weapons which mass buyers may use to impose their will on suppliers. For along with the threat of a boycott, there is the prospect-at least the possibility-that these buyers will invade the manufacturing field of anyone who does not come to terms. And once any supplier surrenders to this coercion there follows a chain reaction which forces his competitors to do likewise. The reasoning which underlies these vicious practices is that suppliers should be willing to sell to their largest customers at cost so as to increase their volume and thereby reduce their overhead, and secure their margin of profit from the remainder of the business done with small accounts at much higher prices. As it works in practice, the small buyers are-in effect-taxed by their suppliers for the purpose of enabling their larger competitors to purchase at or below cost. What this tax amounted to in the case of one large chain is revealed by the evidence in the A & P case. There we see the largest single source of profit for that chain consisted of "headquarters allowances" which in 1941 amounted to $6,400,011, or almost 25 percent of the total profit. This large sum of money was paid by suppliers to this one company in the form of advertising allowances, quantity discounts, and numerous types of discriminatory price preferences. There is hardly any doubt that this single source of profit enabled this chain to undercut the prices of its smaller competitors and therefore to curtail and destroy competition. In the light of these facts, there is no support for the contention that large mass buyers have not competed unfairly with their competitors, but have undersold them because of more efficient operation and better business practices. If that were true, we, under our competitive enterprise system, would have no standing before this committee in seeking legislative relief. It is not, we feel, the proper function of the antitrust laws to protect inefficient business. However, all business is entitled to compete in the market free from handicaps caused by monopolistic and unfair trade practices, and no one disposed to view the facts can assert that this right is adequately protected today. We, therefore, offer the following specific suggestions for strengthening the Robinson-Patman Act. 1. Define the word "purchase" to include indirect buyers. The act in its present form contains no definition of the term "purchaser." This is a serious omission since there is no word in the entire statute which is more important to its basic application. A discrimination, whether it be in price, in merchandising payments, or in services, must be between two or more purchasers. There is no question but that the word "purchaser" as used in the act is |