Mr. BALLINGER. The smaller companies do? Mr. GOLDER. Yes. Mr. BALLINGER. Such as? Mr. GOLDER. Republic, Columbia Mr. BALLINGER. Is that not block booking? Mr. GOLDER. Yes; block booking. Mr. BALLINGER. When they sell to you a year in advance? Mr. BALLINGER. The larger ones sell you four pictures at a time? Mr. BALLINGER. You cannot buy one picture? Mr. GOLDER. You can, but they give you an argument. Mr. BALLINGER. You have to take the other four with it? Mr. GOLDER. They will let you eliminate one out of a block, or perhaps two, but I have found it troublesome to try to eliminate more than two pictures out of a block. Mr. BALLINGER. No further questions. Mr. PATMAN. We thank you very kindly. We will keep these documents for the record, and if Mr. Ballinger wants to put some of it in the record he may do so. STATEMENT OF JOHN J. JEWELL ON BEHALF OF THE MONTANA AUTOMOBILE DEALERS ASSOCIATION Mr. BALLINGER. State your name. Mr. JEWELL. John J. Jewell. Mr. BALLINGER. Your business. Mr. JEWELL. Secretary-treasurer of the Montana Automobile Dealers Association. I act as counsel with the association with an agreement I am not to handle contested litigation. Mr. BALLINGER. Do you have a statement you wish to make? Mr. BALLINGER. Go ahead. Mr. JEWELL. Mr. Chairman, I want to thank you, first, for the final legislation that you gave us in the old Murray-Patman Act in 1942. Mr. PATMAN. Mr. Murray and I worked very hard on that. We are proud of it. Mr. JEWELL. It was a wonderful assistance to the dealers. Mr. PATMAN. We are entitled to the credit only insofar as we were chairmen of the committees involved. The bill was sponsored by the two respective committees of the House and Senate. Mr. JEWELL. It resulted in the saving of many dealers in the State of Montana. In making this statement I would like to tell the committee how I operate as the head of this association. Once every year I meet every automobile dealer in his place of business throughout the State. Mr. PATMAN. How many do you have? Mr. JEWELL. Three hundred and fifty members in the association; 575 in the State, including exclusive truck dealers like International, Reo, FWD, and so forth. These statements are given to me by dealers knowing that they are privileged, I being an attorney for them and acting in that capacity. I can say freely I have been relieved from the restriction of a privileged communication in two cases, one in Bozeman and one here in Butte. I find as I travel over the State that undue pressure-it is not only undue pressure, it is coercion-is exercised upon the dealers by what I call boy scouts, the company representatives. They come into a place of business and if they just get out of bed on the wrong side that morning, they say, "dirtiest place I ever saw." That is the beginning. From then on they go through the service department; they go through the parts department, they go through the lubrication department, they go through the financial statements which they have no necessity for going through because they are sent to the factory once every 30 days. If they are not received at the factory in a certain time, the factory immediately threatens to reduce the allotment of cars to that particular agent or dealer. They come in and they sell advertising. In fact, on my last trip into northwestern Montana I met one dealer and asked him what that was. He said, "That is $150 worth of advertising." He sells on an average of about six cars a year and probably three or four trucks. I said, "What are you going to do with it"? "Well," he says, "When the factory representative comes through and sees it and knows I got it and I paid for it, I will throw it back there. It is of no value to me at all." You heard the testimony this morning concerning pipes and the distribution of pipes. That is no news to you people. In documents 468, filed with you in the Seventy-sixth Congress, all of those things were mentioned. The thing that we are facing today, probably that is more serious than any other matter, is the compelling of dealers under the threat of losing their franchise to build a new building. In fact, we have a case right in this city, a case in which I have been released. I refer to the Parker Morelli Co., who have handled the Packard cars for years. The boy scouts came in here and said, "You must build a certain kind of building." Mr. Parker made the statement that the building they recommended will cost more than is necessary and it will create an overhead that we cannot retire by the sale of Packard cars. The boy scout says, "That is your problem and we do not give a damn about that." That is one of them. I will tell you of another one at Bozeman. Knapp has represented the DeSoto for 17 years. He built a building that cost $45,000 with the knowledge, approval and acquiescence of the boy scout. Because of the fact they wanted to give that dealership to someone else, they came in and asked him to extend that building for 50 feet, which would cost between $35,000 and $45,000. His franchise has been canceled out because he refuses to put that much more into his overhead. This is the story that comes to me from every dealer almost throughout the State. A few weeks ago a rumor was spread in this country that Buick was going to change their method of doing business. There is not one single Buick dealer in Montana who knows whether he is going to be a Buick dealer on the first day of November, after the franchises have been issued for new dealers. Mr. BALLINGER. How long are these franchises for? 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 buy. 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 83019-497 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 shou'd 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.) |