Mr. PATMAN. Certainly. I am strongly in favor of local ownership, as against absentee ownership.

So I think the law should be amended, and I am going to ask this committee to approve a bill that I have introduced; that will prevent these large concerns from getting income-tax deductions upon losses sustained through unfair practices, aimed at destroying the business of their competitors.

Mr. ERNST. That is not good enough, may I suggest?

Mr. PATMAN. Well, how far would you go? I would like to have some suggestions to strengthen it. Now, perhaps I did not use the language that I should use, but the idea is to not permit that to be done, in order to get a tax deduction.

Mr. ERNST. What harm would there be if the chains had to go through a process like the utility companies, of integration; and suppose you adopt the same theory as you do with gas and light and say, "Prove the integration theory." You see? The result is that you would have a break-up, as you had in the utility companies. A chain can be broken up into 10 companies. And, I can tell you, there is no doubt of the fact that no additional real economy exists after a certain number of those stores come together in one chain.

I will tell you what else you get when you allow them to be bigno matter what you do taxwise.

One of the chains is the third largest importer of coffee. Another controls the market at some other point, and they have their outlets. There you have the analogy to the motion-picture case.

The Supreme Court of the United States says, in effect, that the producers shall not own the outlets. These chain people are producers and retail outlets.

The only way that a chain store importing coffee can give the best coffee to the public at the lowest price is not to have outlets that must buy their coffee. That is all.

So, Judge Brandeis turned to this chain man and said, "It is just as if Morris had a thousand clients who had to go back to him for 5 years. Think of the terrible advice they would get."

Why, of course they would. But, in groceries and the like, people have to go back, and if people have to buy movies, have to buy coffee, you do nto have real full free-enterprise operation.

Mr. PATMAN. I think, in view of the expression of the people recently, Congress should be encouraged to try to do something along the lines that you have suggested.

Mr. ERNST. I am not really talking to you, sir; I was hoping the Republicans would electrify the Nation and make this a bipartisan issue.

Mr. PATMAN. Certainly. That is the way it should be, and this committee, practically all the time, has been a nonpartisan committee. We have never filed a report that was not a unanimous report.

Mr. ERNST. May I say another thing? I would say that it is my guess that there are more Republicans in the class of the 500,000 freeenterprise concerns than there are Democrats even. But the trouble is that there have been spokesmen for the 400 giants and none for the 500,000 smaller concerns.

Mr. PATMAN. What would you do about the Lobbying Act? Would you strengthen the Lobbying Act?

Mr. ERNST. I would go no further than disclosure, but more of it. You would need more appropriation to get more disclosure.

Mr. PATMAN. Then in what direction would you go?

Mr. ERNST. I am not competent to say at the moment. I have not examined it recently.

Mr. PATMAN. I thought maybe you would like to make comments about certain people misleading the people on polls, and things like that.

Mr. ERNST. I am not worried too much about the political polls because they have a corrective. The people gave the corrective. I am worried about the Hooper poll, which determines who goes on the air, and there is no way of checking up as to whether Hooper is within 50 percent of what he says.

And I am worried about the polls being used by book people, by radio people, and by movie companies, because there you have no possible corrective, and, more and more, the people who have the control of ideas are hiring the pollsters. The polls, in that sense, are an instrument only for getting at the lowest possible common denominator in our society. Because they only function profitably when they can say to the manufacturer or the book or movie or program producer, "If you will spice this up and put a little more sex on the jacket, and put this on the cover, and cheapen it, you will sell another million." Because they will not stay in business if they come back and say, "If you do this, you will sell less."

So they are the greatest force in America for the reduction of the taste of the people, and the reduction to the lowest common denominator of culture. So I worry about that end of it more than the political end.

Incidentally, I think we ought not to forget that Gallup was more out of the way percentagewise 4 years ago than now. We are not objecting that he is out of the way; we are objecting that he is out of the way on the wrong horse. My point is that we should object to how far he is out of the way.

Mr. PATMAN. Have you heard that he might become editor of the Literary Digest?

Mr. ERNST. I have not, sir.

Mr. RIEHLMAN. Mr. Ballinger, do you have a question?

Mr. BALLINGER. Just one.

Mr. Ernst, do you think insurance companies should compete for business on the basis of price?

Mr. ERNST. Yes; I certainly do. I prepared for Roosevelt when he was Governor, or helped prepare, the banking and insurance legislation.

We had no climate in 1932 and 1933 to get to it. I was an adviser to the insurance department of New York State as to a billion dollars of mortgage companies that had to be reorganized because they were too big.

I should not only suggest that there should be competition, because I believe in competition. I am not like the president of Metropolitan, whose viewpoint is that it depends on whose ox is gored. I really believe in it, and I think it is the only thing that can keep us from statism.

But I would break them down. home building in America today.

You know what has happened to
The New York companies, in the

period of the twenties, when they had so much money coming in that they couldn't invest it, would send a telegram to their representative in Pittsburgh and say, "You have got to get us three or four million dollars of mortgage-loan applications this week," or "You have got to get us two million." And they went all over the country from New York City. There was no "concern" in Pittsburgh, no "concern” in the Quaker sense of the word. Why should Metropolitan be Nationwide? It is not cheaper, because there is no competition on the rates. Mr. BALLINGER. That is the point of my question.

Mr. ERNST. Why not break it up into nine regions, as we do in the case of banking? The policy owners own these companies. They are all mutual. There are no stockholders, in practically all of them. Break them up and have them operate regionally. Then you will have again the impact of local communities going to the regional insurance company and saying, "What about a loan on a factory here?" or "What about a building there?" or "What about a loan to this industrial enterprise?" And you will get some competition on rates if Equitable or Metropolitan, in the ninth circuit, or the third or the fifth, will come out and compete on rates.

Of course, I am for competition.

Mr. BALLINGER. In your opinion, insurance companies at the present time do not compete pricewise?

Mr. ERNST. Of course not. I will tell you: Everybody who insures his home possessions against fire and theft in an American company is a sheer fool if he can get insurance at Lloyd's in England. I have done it for years. I have published the fact for years. Every 3 years I check up on the rate of the insurance on my household furniture. I carry a $10,000 policy, which includes fire, theft, burglary-it even includes jewelry, although our family is not a family of jewelry. I check up every 3 years. It costs me $62 at Lloyd's. It would cost me $180 in America, and I would have to get it in several companies.

The insurance companies in that field have become investment trusts, and are much more interested in their income on their portfolio than in competition on the rates. And Lloyd's is one of the greatest examples of free enterprise in the world, because it isn't even a company. You know the story. A man walks around to these hundred people and says, "Look, will you write an insurance policy of $10.000 on Ernst's home on Eleventh Street?" The fellow says, "I will take $500 of it." Another man says, "I will take $200." Another says, "I will take $100." And from whom is he taking $500? He represents a hundred individuals, and the next fellow represents perhaps a group of 40 individuals; and the next, 30; and there is no big building, and there are no 62 vice presidents.

When you get to a claim adjustment, it is done by the first 3 names on the policy. There you have good free-enterprise and competition. And it is so good and so cheap that there is a law in the State of New York that makes it a crime-not a matter of a tariff, but a crimeto represent Lloyd's insurance. Why? Because the American companies can't stand it, and the Lloyd's people say, "We will come in, and we will pay a tax. We can't comply completely with your procedure as to having deposits, because we are not a company. But we will protect you. We will put up, as we have now, $40,000,000 to protect claimants."

The American companies can't stand up against the competition of free enterprise!

Mr. RIEHLMAN. Are there any other questions?

Thank you, Mr. Ernst, for your very constructive and helpful

statement.

We will adjourn until 2 o'clock.

(Whereupon, at 12:20 p. m., the committee recessed, to reconvene at 2 p. m. this day.)

AFTERNOON SESSION

(Whereupon the hearing was resumed at 2 p. m., pursuant to

recess.)

Mr. STEVENSON. The hearings of the Small Business Committee on monopolistic tendencies will now resume with the witness Mr. Burger. STATEMENT OF GEORGE J. BURGER, NATIONAL FEDERATION OF SMALL BUSINESS, INC., WASHINGTON, D. C.

Mr. BALLINGER. You have a statement, Mr. Burger?
Mr. BURGER. I have, Mr. Ballinger.

Mr. BALLINGER. May Mr. Burger present his statement?
Mr. STEVENSON. Yes.

Mr. BURGER. My name is George J. Burger. I am a member of the board of directors of the National Federation of Small Business, Inc., head office, San Mateo, Calif., a national organization, which has the largest individual membership of any business organization in the Nation. I am also in charge of the Washington office of the National Federation of Small Business, Inc., located in the Bond Building, Washington, D. C.

I am glad to have the privilege to appear before the committee and express our views on the monopoly situation as we find them due to the reports, either from our Nation-wide membership or through the contacts our sales force has in their daily visits with small business institutions throughout the Nation.

The monopoly situation facing small business is no new problem insofar as the federation is concerned, and it will be found from the record that the federation has been in the forefront of all small business organizations of this Nation in making it its principal and main objective to bring relief to the people we represent-small business. It is our opinion that, if monopoly is not destroyed, it will eventually destroy our Nation and build for complete regimentation by the Government of all businesses throughout the Nation.

We took this position after directives from our members, and due to the startling testimony given by the then Assistant Attorney General, the Honorable Wendell Berge, before the Senate Civil Service Committee in February 1947, where he stated in substance that for 35 years the administrations had been merely giving lip service to the enforcement of antitrust laws, and it is our opinion that many big businesses and monopolies were aware of this situation and shaped their policies accordingly.

In his testimony he brings out the fact that of the 175 lawyers in the Department there were 25 or 30 "career men," as he termed them, who have been with the Department for 10 years or more. In view

of this, it is nothing short of miraculous that the Antitrust Division of the Department of Justice was able, up to the present time, to do the job that it has done. Apparently the same condition must apply to the Federal Trade Commission in enforcing the laws entrusted to the Commission.

We refer to the Federation's testimony before the Joint Committee on Economic Report July 14, 1947, where we specifically asked that committee to make a definite recommendation for vigorous enforcement of the antitrust laws, and further urged that committee to recommend a special appropriation for both agencies so that the laws could be enforced. It was our thought that through such a recommendation being put into effect, it would bring about a reduction in prices, speed production, and more important insofar as we are concerned, protect the people whom we represent-independent business of this Nation. The Small Business Committees of the Congress have been in operation since the fall of 1940. The reports of these committees and their recommendations are of a startling nature, and to the credit of these committees, no one from the monopoly side of our economic picture has seen fit to challenge the reports and findings of the committees. We say without fear of contradiction that if these Small Business Committees of the Congress had not been in operation these past 8 years, it would be a safe conclusion that most small business of this Nation would have been reduced to a minimum; and further, monopolies would have been increased to a greater extent than now prevailing. In other words, the actions of these committees have been a deterrent not only to increased monopolies, but a spark to the antitrust agencies of the Government to go out and do an effective job.

It is our hope and trust and recommendation that the new Congress will have the wisdom and foresight to reconstitute these committees, both in the Senate and in the House, because without the functioning of these committees the future of small business will be in a precarious condition.

Mr. BALLINGER. Do you recommend they be made standing committees?

Mr. BURGER. Exactly. I was glad to note that the last witness this morning, Mr. Morris Ernst, made a similar recommendation that these committees be continued.

I have just completed visits in Los Angeles, San Francisco, Portland, Great Falls, Denver, St. Louis, and Cincinnati. During these visits I not only was privileged to confer with the field officers of the Federation, but also the executive officer, and I was also privileged to visit with many groups of small-business men in the respective cities. In certain cities I was interviewed by the press; and to the credit of the press, they gave considerable publicity in their respective papers to these conferences. We in the Federation were encouraged to see this publicity, and we asked a representative of a leading paper, "How come?" and he remarked that members of the working press now believe that small-business problems are news for the American public to get. In other cities I was invited on two occasions to speak over the air. One was a panel discussion on the problems of small business and the position of the Federation on many of these problems, and particularly the monopoly that exists in the business structure which even reaches to the labor field. In both queries and in the an