of new competition in the industry. However, it should be noted that the principal new entrants are chiefly large corporations, well established in other fields of activity. Business Week magazine has summarized the situation as follows: "Bendix had an almost exclusive grip on the automatic washing machine, glamour postwar appliance. Bendix had come out with the first automatic washer in 1937. Other manufacturers were slow to follow; they barely had their plans under way to put out competitive machines when the war stopped them. Since then, they have bogged down under materials shortages and production delays. "But last week it looked as though Bendix's field day was finally over. Competition is on the way; at least 12 more companies are ready to come out with new models to challenge Bendix's position. Whether they make a real dent in the demand this year depends largely on how much steel they are able to wangle." " Actually the major new producers of automatic washing machines include General Electric, Frigidaire (General Motors subsidiary), and Sears, Roebuck, with its private brand Kenmore, while it is predicted that others (including the Norge Division of Borg-Warner) will soon enter the field. Finally, it is of interest to note that General Mills, the country's largest flourmilling concern, has entered the electrical-appliance industry through the "back door" by first producing an electric iron and then a pressure cooker to be followed, according to a recent announcement, by the production of automatic toasters and food mixers, in order to further diversify its activities. Radios.-Radio- and television-set manufacturers broke all production records in 1947. Large companies (such as General Electric and RCA, which, incidentally, received one-fourth of the wartime radio contracts), as well as smaller companies, are engaged in this field. The principal problem faced by the industry, however, is whether the current demand will be sustained. Moreover, as demand shifts over to television, the field may well be dominated to an increasing extent by large firms. Although no recent figures are available indicating shifts in the concentration of production of various types of radio apparatus, the serious survival problem facing the small companies is suggested by the following comment of Business Week: "As demand for the standard sets drops off, the small companies will feel the pinch first. Many of the small radio makers folded in 1947's competitive market, and more are sure to follow this year." 12 NONELECTRICAL MACHINERY Agricultural machinery.-The agricultural-machinery industry has been highly concentrated for many years, as evidenced in the findings of numerous and recurring Federal Trade Commission investigations and reports, the most recent of which (Report of the Federal Trade Commission on the Manufacture and Distribution of Farm Implements) has just been issued. Although the dominance by one company-International Harvester-has been reduced since the early 1900's, concentration as measured by the Big Three, Big Five, or Big Six is still substantial. In 1940, concentration, as indicated by total sales, showed International Harvester far in the lead: 1 Sales by the big companies of items other than farm machines and parts excluded; for example, motortrucks (even for farm use), steel, and binder twine are excluded from International sales. Source: Hearings on H. R. 2357, September 20, 1945. The largest three companies-International Harvester, Deere, and AllisChalmers together accounted for 67 percent, and the Big Six for 80 percent, of the business in that year. Concentration was even more pronounced in the case of individual products. International Harvester and Deere together produced, for example, from 60 to 89 percent of corn, grain, and rice binders; horse and tractor corn planters (two-row) and mowers; tractor drawn or mounted cultivators; all-purpose wheel-type tractors; and hay loaders.13 Concentration in the industry has been in large part the product of mergers, which appear to be continuing, as is evidenced by the consolidation in 1944 of Oliver Corp. and the Cleveland Tractor Corp. This acquisition added a complete line of crawler-type tractors for farm and industrial purposes to Oliver's lines, which already included such farm implements as tillage tools, seeding machinery, harvesting and threshing machinery, wheel-type tractors, hay-and-straw balers, and soil- and crop-improvement tools. In 1946 International Harvester extended its line by acquiring a manufacturer of a newly developed beet harvester, and in the same year bought up an aluminum foundry, thereby strengthening its supply position. Construction machinery and equipment.-This industry is characterized by the existence of a few rather large concerns dominating particular lines. BucyrusErie, for example, a leading producer of excavators, has been estimated to lead its nearest competitor by at least one-third." Joy Manufacturing Co. is clearly the leading firm in the field of mining machinery; and Garwood Industries, with a fairly diversified line of construction machinery, including winches, hoists, etc., is an extremely important factor in its particular spheres of activity. The most outstanding example in this field of postwar expansion based on mergers is provided by the Joy Manufacturing Co. Almost exclusively as a result of its recent merger activity, this company has become the country's leading producer of mining machinery, reaching a total volume of sales in 1947 of about 50 million dollars, placing it about on a par with such leaders in the heavyconstruction machinery field as Bucyrus-Erie. Included in Joy's myriad acquisitions were the patents to a new mining machine which, it has been said, promises "to revolutionize the mining industry and make mere button pushers out of miners." 15 Machine tools and accessories.-Although small firms have always been numerous in the field, there are several fairly large concerns producing most types of tools; and concentration, owing partly to specialization, has been surprisingly high. Of some 120 different types of machine tools and accessories for which data were available in the prewar period (1937), almost half (53) were produced exclusively by only 4 companies or less. In almost all cases, four or fewer companies accounted for at least 75 percent of total United States production. 16 One machine-tool company, Van Norman Co., has about doubled its size, largely through acquisitions in the past 6 years, the most important of its purchases being the Morse Twist Drill & Machine Co., a maker of specialized tools. Other tool makers bought out suppliers of rough metals (e. g., Acme Aluminum Alloys, Inc., which acquired a small aluminum smelter and also a producer of rare metals and chemicals), while some of the larger automatic-tool makers bought small companies whose products supplemented their own. Other nonelectrical machinery.-Among the other fields in the non-electricalmachinery field are engines and turbines, special-industry machinery (such as food-products machinery, textile machinery, and woodworking machinery), general industrial machinery (such as pumps, air compressors; conveyors and similar equipment for installation in factories; mechanical power-transmission equipment), and office and store machines and devices. Although it is not possible within the limits of this statement to describe in detail the level of concentration in these various fields, a few general observations may be made. In some of those industries, such as woodworking machinery, operations are typically small scale in character, although a considerable degree of concentration is often found even in these areas. On the other hand, some fields, such as office machinery, have traditionally been concentrated in the hands of a few companies. International Business Machines Corp. and Remington Rand, Inc., for example, control the production of electric accounting machines. In the production of standard typewriters, there are only eight companies, and the largest four account for 90 percent of the output. In the production of canning machinery, the Food Machinery Corp. is clearly in the lead, supplying, according to one estimate " some 85 percent of all 13 Based on data for 1936. 14 Fortune Magazine, August 1939. 15 Time. April 5, 1948. 16 TNEC Monograph No. 27, The Structure of Industry, pp. 473–477. 17 Barron's April 3, 1944, p. 9. canning machinery in the United States, generally leasing rather than selling this equipment. The New Departure Division of General Motors accounts for more than 50 percent of the domestic production of ball bearings. In taper bearings, concentration is even more pronounced, with Timken producing about four-fifths of the output. The extent to which the largest four companies in certain of these fields were responsible for the bulk of the shipments in 1945 is indicated below: Steam engines and turbines__ Internal-combustion engines, excluding aircraft and motor vehicles__ Textile machinery---. Mining machinery and equipment_ CHEMICALS AND ALLIED PRODUCTS Percent 85 43 35 Industrial chemicals. The production of industrial chemicals is highly centralized in the hands of three giant concerns: E. I. du Pont de Nemours, Allied Chemical & Dye, and Union Carbon & Carbide. Unlike Du Pont and Union Carbide, which produce a wide variety of different products, Allied Chemical & Dye confines its operations largely to the production of heavy chemicals, producing no plastics, rayons, lacquer, film, explosives, medicinals, aliphatic chemicals, or solvents. In contrast, Du Pont plays a leading role in rayon, nylon, plastics, auto antifreeze, and a wide variety of inorganic and organic chemicals, while Union Carbide has branched out from its major products of ferroalloys and carbide and its derivatives (principally acetylene gas) into the manufacture of other industrial gases, notably oxygen. Historically, these large producers, while expanding into related fields, have to a certain extent followed a policy of recognizing special spheres of influence. Thus, among the leaders, Du Pont alone produces cellophane and nylon; in explosives and synthetic ammonia, leading rivals are few-Hercules, Atlas, and American Cyanamid in the former and Allied Chemical & Dye and Dow in the latter. On the other hand, Du Pont has refrained from selling alkalies, ferroalloys, or coal-tar crudes and does not produce fertilizers in quantity, even though it is a major supplier of synthetic ammonia, one of the basic raw materials.18 When examined from the point of view of individual products, the degree of concentration in industrial chemicals is little short of extraordinary. Thus in 1945, out of 238 general chemical products surveyed, in the case of 102 the entire output was accounted for by 4 or fewer companies. One-fifth of these 102 products were produced by 1 concern, and almost two-thirds were made by 2 companies. Of the 136 products made by more than 4 firms, nearly threefourths were produced under conditions where 4 companies accounted for 70 percent or more of their entire production. Soap.-Besides the industrial basic chemicals, the chemical industry includes such consumer products as soaps and drugs. In soap production, the leading firms include such old-line establishments as Procter & Gamble, Colgate-Palmolive-Peet Co., and Lever Bros., the American subsidiary of the British firm of Lever Bros. & Unilevel, Ltd. The three largest producers of soap products before the war were reported to control about 80 percent of the business, divided approximately as follows: " Procter & Gamble Colgate-Palmolive-Pete Co. Percent 40 9220 Another 10 percent, it was estimated, was produced by Armour & Co., Swift & Co., and the Manhattan Soap Co., while the remaining 10 percent was spread among about 1,200 producers. Drugs.-Like most other branches of the chemicals industry, the manufacture of drugs, medicines, and related products is highly concentrated, most of the leading corporations having gained their positions through mergers and acquisi 18 For fuller discussion of this topic, see Stocking and Watkins, Cartels in Action, the Twentieth-Century Fund, 1947, pp. 386–392. 10 Fortune, April 1939. tions, frequently maintaining their status through cartels, patent and trade-mark agreements. Five of the Nation's eleven largest drug corporations-Rexall Drug, Inc., Bristol-Myers Co., American Home Products, Sterling Drug, Inc., and Vick Chemical Co.-stem from the so-called Sterling group. In 1942, these five companies together accounted for 29 percent of the total sales in the drug industry. Although mergers have recently taken place throughout the general chemicals field,20 they have been particularly important in the drug industry. Nearly all of the leading drug firms have a long record of acquisitions, taking almost every conceivable direction-horizontal combinations of competing drug lines, backward vertical expansions into the production of basic chemicals, forward vertical expansions, not only into wholesaling of drug products, but also into the operation of chains of retail drug stores, and now conglomerate expansions into a wide variety of different manufacturing fields. The recent acquisitions of American Home Products Co. are an outstanding case in point." This firm has regularly pointed out to its stockholders that it is following a "continuing policy of expansion and diversification" through purchase and acquisition of other companies. In addition to drugs, which in 1947 constituted only a little more than half of its business, the company's sales include foods (25 percent of its total sales), household products (10 percent), colors and dyes (5 percent), and cosmetics (2 percent)." Its recent acquisitions include, for example, such conglomerate items as Clapp's baby foods, G. Washington coffee, and Kant-Rust waxes and polishes. RUBBER PRODUCTS 22 In terms of production, the rubber products field is the third most highly concentrated of the major manufacturing industries, ranking just behind automobiles and tobacco. The most recent available data indicate that the Big Four clearly dominate the production and sale of tires and tubes-the most important branch of the industry and several of these same corporations are the leaders in the production of rubber boots and shoes. In addition, the Big Four have been the principal producers of synthetic rubber; during the war they operated 89 percent of the total capacity for Buna synthetic rubber, three other companies shared in the remaining 11 percent. Goodyear, Firestone, United States Rubber and Goodrich together have for several years accounted for over 90 percent of the total assets of rubber tire companies. By virtue of long-standing arrangements with the large automobile producers, the Big Four completely dominate the sale of tires and tubes for use as original equipment. It is a well known fact, for example, that Goodyear sells mainly to Chrysler, Firestone is the chief supplier of Ford; and General Motors is United States Rubber's best customer. Significantly, the DuPonts are the principal owners of both General Motors and United States Rubber. Replacement tire sales, while more widely distributed, still are dominated by the Big Four. This high level of concentration has been achieved partly through mergers, with five important acquisitions having taken place since 1935. Goodyear Tire & Rubber acquired Kelly-Springfield Tire Co. in 1935: United States Rubber Co. took over Fisk Rubber Co. in 1931; General Tire & Rubber Co. (fifth largest manufacturer) bought the India Rubber Co. in 1936; Dayton Tire & Rubber Co., a small independent, acquired McClaren Rubber Co. in 1935; and Pharis Tire & Rubber Co. absorbed Carlisle Tire & Rubber Co. in 1944. TOBACCO The tobacco industry has had a long and lurid history of monopoly and concentration. The old American Tobacco trust, a product of the great combination movement of the 1890's, was dissolved in 1911, at which time it controlled 76 percent of the smoking tobacco, 80 percent of the fine-cut tobacco, 85 percent of the plug tobacco, and 96 percent of the snuff. Despite this dissolution proceeding, the constituent parts of the old American Tobacco trust still maintain a substantial degree of control. In the recent de20 Cx. Federal Trade Commission, The Merger Movement, A Summary Report, 1948, p. 34. 21 See chart facing p. 62 of the Commission's recent merger report. The figures also exclude exports, Government sales, and mileage contracts. cision against the American Tobacco companies the court found the big tobacco companies have, for example, continued to conspire "to fix and control prices and other material conditions relating to the purchase of raw material in the form of leaf tobacco for use in the manufacture of cigarettes. *# * * 23 In 1939 the Big Three (American Tobacco, Liggett & Myers Tobacco Co., and R. J. Reynolds Tobacco Co.) produced 68 percent of all domestic cigarettes, 63 percent of all smoking tobacco, and 44 percent of all chewing tobacco. By 1947 the predominance of these companies in cigarette manufacture had risen to a point where they accounted for no less than 82.5 percent of the output. Mr. STEVENSON. Who is the next witness? Mr. BALLINGER. This gentleman, Mr. Chairman, is Mr. Edgar S. Idol, who is representing the trucking and motor carrier industry of the United States and wishes to take exception to some of the statements made by Mr. Wiprud. Will you come forward, sir, and give your full name and representation for the record. STATEMENT OF EDGAR S. IDOL, SPEAKING ON BEHALF OF AMERICAN TRUCKING ASSOCIATIONS Mr. IDOL. My name is Edgar S. Idol. Mr. BALLINGER. I have one proposal to make, Mr. Chairman. I think it would be fair to submit the gentleman's statement to Mr. Wiprud for any further comments he might care to make in connection with it. Mr. STEVENSON. Yes, but we need not take the time of the committee for Mr. Wiprud to come back. Mr. BALLINGER. No. Would that be satisfactory to you, sir? Mr. IDOL. Certainly. I appear before this committee to present the position of American Trucking Associations with respect to the recommendation of Mr. Arne C. Wiprud that the Reed-Bulwinkle Act must be repealed. In his statement before this committee on November 15, Mr. Wiprud said that the transportation problem is essentially a railroad problem. Throughout his presentation, he adhered to that position, in fact he barely mentioned other forms of public transportation. Except for the recommendation that the Reed-Bulwinkle Act be repealed, his conclusions all deal with railroad problems. However, to support the position that the Reed-Bulwinkle Act should be repealed, Mr. Wiprud was compelled to drag into his testimony allegations of collective-rate making by motor carriers and water carriers. To bring ATA into the picture, Mr. Wiprud quoted a 10-year-old statement from a report of the traffic department of AAR. You will note that he made no reference to the current situation with respect to rate competition between motor and rail carriers. The current rail classification differs in many particulars from the motor classification. American Trucking Associations is following the broad general policy of making its motor-carrier classification reflect motor costs so far as it is permitted to do so by the Interstate Commerce Commission. The same pattern is generally being followed in the publication of rates by motor carriers. The adjustment of com 23 U. S. v. American Tobacco Co. (328 U. S. 781, p. 798). |