Mr. HALE. It is a fixed mark-up here. Mr. HALE. It is smaller. The wholesaler, especially in a food store, will operate on 3 percent, where it will take at least 14 percent for a retail food distributor to operate. Either one of them is way below the cost of his merchandise plus the cost of his operation. The retailer possibly gets a little better break on the 16 percent, but at the same time, he can, if he wishes, sell at least 8 percent below his actual costplus operation. It does bridge the span between loss-leader selling and profitable mark-up. When these laws were put into effect, we had many of the supermarkets and retailers selling 15, 20, 30, or 40 cents below their actual cost. In other words, they bought a can of coffee at 25 cents and sold it at 20 cents. The merchant who attempted to get a seasonable mark-up would sell it at 28 cents. There is an 8-cent spread. Under our 6-percent law, that 25-cent can of coffee cannot be sold at less than 27 cents, or 28 cents; then your customers are not led to believe that you are so far out of line in your prices. It makes it more reasonable for the retailer to compete with the larger operators. Mr. BALLINGER. Would you send the committee a copy of your Unfair Trade Practices Act? Mr. HALE. I have several copies here. Mr. STEVENSON. They may be filed. Now Mr. Dawson, would you like to question Mr. Hale and bring out some facts? Mr. DAWSON. What I have to say is not necessarily directed to Mr. Hale as it is to the operation of the Fair Trade Practice Act. I happen to have an interest in a grocery business here. Mr. Hale was a small grocer before he was appointed to the post that he now occupies. I concur in what he says that this act has operated very successfully, in my opinion, in this State. One of the reasons that it has is the fact that these independent grocers and other small-business people have a man here who has been in business himself and knows something about it. It acts as sort of a clearinghouse. It avoids the necessity of sending out a lot of investigators to be snooping around all the time. There is sort of a cooperative spirit here. It has worked very successfully for this reason. I think he has done a good job up there. Mr. STEVENSON. That is all. (Witness excused.) STATEMENT OF ISADORE R. MORRISON ON BEHALF OF NATIONAL ASSOCIATION OF INDIVIDUAL TIRE DEALERS Mr. BALLINGER. State your name. Mr. MORRISON. My name is I. R. Morrison. I am State director for the National Association of Independent Tire Dealers. Mr. BALLINGER. Are you also in business, Mr. Morrison? Mr. MORRISON. Yes. I am a car and tire dealer. Mr. BALLINGER. What is the name of your business? Mr. BALLINGER. How long have you been in that business? Mr. MORRISON. Under that name since 1939. Mr. HILL. Is that in Salt Lake? Mr. MORRISON. Yes. Mr. HILL. Here in town? Mr. MORRISON. Yes, sir. Mr. BALLINGER. As you know, Mr. Morrison, the committee is making a study and investigation of the monopolistic practices and unfair methods of competition. Do you have any problems in your industry that you could classify as unfair methods of competition or as monopolistic practices? Mr. MORRISON. Yes, sir; we do have. Our complaint primarily is about the practices on the part of the rubber companies. In other words, we feel that we carry an inventory and they pretty much dictate our sales method. Mr. BALLINGER. Could you amplify that and explain that to the committee in detail? Mr. MORRISON. Just to give one phase of the situation, it is the practice of the rubber companies to enter into contracts with large users of rubber on what they term a national-account basis. Mr. HILL. When you are speaking of rubber companies, you are talking about tire companies, too? Mr. MORRISON. Yes, sir. Mr. HILL. In other words, they are the same? Mr. MORRISON. The tire companies I am talking of specifically. Mr. MORRISON. They sell at prices which either equal or are below our cost. We are eliminated entirely from those fields of business. We are called upon to carry an inventory and even service of these accounts on a basis which we in no respect like. Mr. HILL. Have you refused to serve these accounts? Mr. MORRISON. They cannot compel us to do so, but we feel that that should be legitimately a part of our business field. Mr. HILL. Being in the farm-implement business, I can say that farm-implements manufacturing companies always sold directly to the State agricultural college, bypassing us entirely. If any troubles occurred with that implement, we serviced it. You are talking about the same thing I am talking about. I would like to know how to cure that problem, by law, or in any other way. Mr. MORRISON. You are in a position to know whether or not that is possible. Mr. HILL. I do not know. It has been going on for 25 years, to my knowledge. Mr. BALLINGER. You are making a further complaint that big rubber companies sell at prices to the large buyers so you cannot sell to them? Mr. MORRISON. Very often below our cost. Mr. BALLINGER. Below the cost of the tires to you? Mr. MORRISON. Yes. That is one question. Mr. HILL. Are those tires delivered right here in this community by the big company? Mr. MORRISON. Sometimes through a factory branch; sometimes a dealer delivers it. Mr. BALLINGER. You do not have anything to do with the sale of that tire? You do not put your hands on it, it does not come through your warehouse, you do not touch it? Mr. MORRISON. Sometimes yes and sometimes no. Mr. BALLINGER. Both ways? Mr. MORRISON. Yes, sir. Mr. STEVENSON. And you get not profit on such transaction? Mr. MORRISON. There is a practice called a transfer billing whereby a large tire dealer is called upon to deliver a tire to a user. He bills the user, then transfers that billing to a rubber company on possibly 5 to possibly a 72 percent margin of profit. Mr. BALLINGER. Any further practice you want to describe to the committee? Mr. MORRISON. Well, then, we feel also that the selling practices of the rubber companies should be made public. In listening to the testimony of Mr. Lloyd, apparently the grocers know what their manufacturers are doing. We do not. My principal supplier, for example, sells the mail-order houses at a price we have no knowledge of whatever and on a basis of which we have no knowledge, but we know it is far below the price we are called upon to pay and an equivalent product to the best of our knowledge. Mr. HILL. Is that mail-order house located right here? Mr. MORRISON. Yes, sir. Mr. HILL. If they sold to a large company and that tire needed repairing, they would send it over to you to repair it instead of sending it over to the mail-order house? Mr. MORRISON. The mail-order house takes care of its own troubles. Mr. HILL. Does the tire company send any repair work to the mailorder house of the tires that they sell to large companies in this community? Mr. MORRISON. No; they have this kind of a practice in that respect, if I understand your question. The mail-order house, or a so-called mass distributor, has a trouble department of his own. They might employ me to repair that tire, but that would be just a contractual relation between myself and the local company. I believe under their terms of sale-I will try to make myself more clear-they assume that responsibility themselves. Mr. HILL. The mail-order house? Mr. MORRISON. Yes. Mr. BALLINGER. Do you sell to filling stations, Mr. Morrison? Mr. BALLINGER. The committee has heard a lot of testimony that there is some trouble at the filling-station level of distribution. The committee has heard testimony from automobile parts manufacturers that they are finding it difficult to sell to filling stations because the sales policies of such stations are being dictated by the large companies. Do you have any observations to make? Mr. MORRISON. Yes. I should like to do that. To the best of my knowledge, a leased service station which is owned by a company and leased to an operator, that operator is virtually compelled to sell a line of tires dictated by the oil company. Now, if he enters into a contract with the rubber company and buys his tires the same as any other dealer, but it is a pretty well known fact that the oil company takes an override on his business while not entering into the situation. Mr. BALLINGER. He does not have freedom to choose the tire he might want to sell? Mr. MORRISON. Practically that is so, although they will never admit it. Mr. BALLINGER. Do you think that condition is prevalent here in Utah? Mr. MORRISON. Very much so, all over the United States. Mr. BALLINGER. You have encountered it personally yourself? Mr. STEVENS. As a result of that, do they sell their tires cheaper than you can sell yours? Mr. MORRISON. No; it is not that. It is the fact they are compelled to buy as they are told. In other words, if I have a better deal to offer a filling station, he is not permitted to buy my product but he buys the one that is indicated by the oil company. Mr. HILL. Another question. Or course, we are interested in national legislation, not just for the State of Utah. Mr. MORRISON. That is a national situation. Mr. HILL. The question in my mind is, What have you got to recommend? sug That has bothered me personally. I am still in business. We are still running a hardware store. I would like for you to make gestion to this committee how you think a national law can be written that will cover some of these things that we know are apparent to anyone, even to a casual observer. Mr. MORRISON. It would be my opinion any individual who pays rent for his piece of property and is permitted to do business, ought to buy where he pleases. Mr. HILL. He does not pay rent. His rent is usually based on the turn-over of his gasoline, so much a gallon. Mr. MORRISON. Very often he has a fixed rent. Mr. HILL. If you are going to pass national legislation, it has to cover the man who puts nothing in there. He goes in there, they fill up his gas tanks, and he starts operating a business. Now, that is quite a different proposition from your independent business or my independent business. Mr. MORRISON. I think, as a rule, his rent is adequate to cover the investment. Mr. HILL. Provided he sells gasoline. Mr. MORRISON. As a rule they do or quit. Mr. HILL. Some of them quit. Mr. MORRISON. They have to. Mr. HILL. I have reference to national legislation. I wonder how we can get at it. Mr. FORISTEL. May I make a suggestion here? We have had several witnesses at other places who have recommended the extreme possibility that national legislation should be passed which would cause a divorcement between manufacturer and distributor of products; in other words, between the manufacture and distribution of them. Mr. HILL. What do you think of that suggestion? Mr. MORRISON. In the case of an oil company, I think it should be possibly legitimate for it to compel that service-station operator to sell its petroleum products, but not outside products. Why should they make a profit from something in which they do not have an investment or do not engage in selling at all? Mr. HILL. Suppose this suggestion were followed by the Congress and suppose all basic manufacturers could do no more than manufacture their products. Would that not solve all of the problem? Mr. MORRISON. Of course, that would be my solution. Let them make the tires and let us sell them. Mr. HILL. That provides a nitch for everyone in this economy of ours. Mr. MORRISON. Yes; in my opinion. Mr. BALLINGER. Witnesses have also pointed out to us the situation which Mr. Morrison is describing, namely control of the filling stations by the larger oil companies and these independent lessees, which is already adequately covered in existing law. There is a decision in the California district court which has held that these practices violate the antitrust laws. It is a question of enforcement now. But if you conduct any investigation to find out where a filling-station operator is being coerced, it takes a lot of money. It has to be carefully done. Mr. STEVENSON. The Federal Trade Commission has testified before our committee that it has been looking into that situation but that the intricacies of the investigation alone were too much for its present facilities, financially and otherwise. That agency had to give it up. So our committee recommended that more money be appropriated for that purpose and the Eightieth Congress appropriated some $4,000,000 additional. Now we are looking forward to the Federal Trade Commission and the Department of Justice doing something more than thinking about these violations. Mr. MORRISON. Might I make an observation? Mr. STEVENSON. Yes. Mr. MORRISON. The practices are just as prevalent as ever. They do not seem to be intimidated at all. Mr. BALLINGER. In your industry, Mr. Morrison, you have large rubber companies which sell to wholesalers, the wholesalers sell to retailers, and you also have large tire companies which operate retail outlets; is that correct? Mr. MORRISON. That is correct, sir. Mr. BALLINGER. Have you any comments to make on that existing situation as to whether these large tire companies in operating retail outlets compete unfairly with you or other independent tire sellers? Mr. MORRISON. They do so to this extent. They absolutely regulate, and you might say define the retail practices of our business. They are our competitor. If a rubber company has a retail store and it sets up a certain rule of practice, we are necessarily obligated to follow their rule. Mr. BALLINGER. Otherwise they could squeeze you? Mr. MORRISON. Absolutely; they can and do. Mr. BALLINGER. Then is it your conclusion that through these retail outlets they are able to whip you into line? Mr. MORRISON. Definitely so. Mr. BALLINGER. What is your remedy? |