EXTENSION OF BITUMINOUS COAL ACT OF 1937 THURSDAY, MARCH 13, 1941 HOUSE OF REPRESENTATIVES, COMMITTEE ON WAYS AND MEANS, Washington, D. C. The Committee met at 10 a. m., Hon. Robert L. Doughton (chairman) presiding. The CHAIRMAN. The committee will please be in order. The first witness this morning is Mr. John Carson, representing the Cooperative League of the United States of America. Mr. Carson, please state your name and address, and the capacity in which you appear. STATEMENT OF JOHN CARSON, REPRESENTING COOPERATIVE LEAGUE OF THE UNITED STATES OF AMERICA, WASHINGTON, D. C. Mr. CARSON. Mr. Chairman and members of the committee: My name is John Carson. I am in charge of the research and information office of the Cooperative League of the United States of America, which has offices at 726 Jackson Place NW. If the committee will permit, I shall read a short statement and then endeavor, to the best of my ability, to answer any questions which are asked. Thereafter, Mr. T. A. Tenhune, who has charge of the buying department of the Central Cooperative Wholesale, of Superior, Wis., will appear; and if the committee will permit, I shall ask permission to present a written statement from Mr. Arthur Smaby, manager of the Midland Cooperative Wholesale, of Minneapolis, Minn.; and W. A. Hackbarth, the buyer of coal for the Ohio Farm Bureau Cooperative Association. The Cooperative League of the United States of America is the educational arm of the consumer cooperative movement. The league is composed of some 20 affiliated regional cooperative organizations, most of which are great wholesale organizations. The league has its main office in Chicago, has an educational office in New York, and has its research and information office here in Washington. Very often, members of Congress desire to know how organizations of this kind, which are appearing before them, are financed and supported. The league is financed by the payment of annual dues of 5 cents a year for each individual member of the various cooperative organizations affiliated with the league. I might say that that budget is very small, at 5 cents a year. 302773-41- -9 125 We are asking that House Joint Resolution 101 be amended so as to remedy a defect in the Bituminous Coal Act, before the act is extended. Our other witnesses will do a far better job than I can do of explaining to you the absolute necessity of amending the Bituminous Coal Act immediately to prevent the confiscation of the wholesale coal business of those organizations; to prevent the confiscation of this property which is very valuable and which is owned by farmers and wage earners. But of equal importance at least, and probably of far greater importance, is our desire to have this act amended so that no precedent, or even a suggestion of a precedent, shall be established by Congress, by which or through which the consumer cooperative movement shall be hampered in its activities, or halted, or destroyed. As you know, the Bituminous Coal Act provides for the establishment of minimum prices at the mines for all kinds and classes of bituminous coal. Incidentally, the act actually provides for the establishing of market prices, rather than mine prices, but that is not an important matter, so far as we are concerned. The act provides for the recognition of service organizations, such as those which distribute coal. Generally speaking, I think it would be helpful to think of the word "distributors," as used in the act, as meaning the wholesalers of coal. The act permits the mine operators or coal producers to pay to the distributors, who are recognized by the Coal Division and granted a license, or in other words, registered, to pay to such distributors a discount, the amount of which the Coal Division has authority to fix. This discount or commission is paid by the coal producers from the minimum prices established. In section 4, part II, paragraph (h) of the act, on page 10 of the printed copies of the act, the word "distributors," is explained. The act declares that they are to be the persons or the organizations which purchase and resell coal in not less than cargo or hailroad carload lots. The Coal Division is given authority to compel such registered distributors to obey the law and the rules and regulations fixed by the Coal Division. The act then lists what are to be "unfair trade practices," and among them are the practices of granting rebates or allowances or discounts to reduce the prices fixed by the Coal Commission. In other words, one of the unfair trade practices prohibited is that of violating the price orders, or attempting to violate the price orders, by using some device of rebates in order to cut some particular price. On page 12 of the act, paragraph 13, or subparagraph 13, the law provides that it shall not be an unfair method of competition for bona fide and legitimate farmer cooperatives to distribute their savings in patronage dividends and that coal producers may pay such organizations a discount, regardless of whether they so distribute their earnings. In other words, that paragraph states that the payment of patronage dividends shall not be construed to be a violation of the price regulations or orders, and the farmer cooperatives shall not be deemed to violate the orders when they pay patronage dividends. As I say, this paragraph states that the payment of patronage dividends shall not be construed to be a violation of the price regu lations or orders when those payments are made by farmer cooperatives, and that the farmer cooperatives shall not be deemed to violate the orders when they pay such patronage dividends. But some of our great cooperative organizations are not farmer cooperatives. Two are represented here, and I may add that the cause they present here is supported by many others of the cooperatives, in fact, by all members of the league. These organizations which will appear here this morning to present their individual cases are distinctly consumer cooperatives. They not only do business with a considerable number of retail cooperatives in cities as well as on farms, but they insist on the right to expand their services to consumers in cities as well as on farms. They have not sought registration as farmer cooperatives. They have sought registration as distributors, but the Coal Division denied their application and ordered a hearing. The hearing has been held. It was held more than 2 months ago and we are still waiting on a decision. But the counsel for the Coal Division in a letter to Midland Cooperative Wholesale set forth his opinion, which was to this general effect: That the cooperatives, other than farm cooperatives, through granting patronage dividends violated paragraphs 11 and 12 of the unfair trade sections of the law, and therefore they could not be granted a license as a distributor. The Coal Division intimated that Midland and Superior-that is, Midland Cooperative Wholesale at Minneapolis, and Central Cooperative Wholesale of Superior, Wis., might be registered as limited farmer cooperatives, or as intervening agencies, but this would impose very definite limitations on the business of these organizations. We contended before the Coal Division that these organizations were distributors and insisted on a broad interpretation of the act because of our conviction that the Congress did not intend to confiscate the business of these companies, and would not want to confiscate it. In other words, we contended that these organizations were distributors in fact and that they were recognized in the trade as distributors, and had been for many years, and we insisted on a broad interpretation of the act because of our conviction that Congress did not intend through this act to have the business of these organizations confiscated. But there we stand, without any decision, but with a desire to know specifically what our rights shall be under this act. These two organizations, as I say, cannot be registered as farmer cooperatives and the Coal Division will not register them as distributors. We want a specific amendment to make certain that if this act is extended the present discrimination against consumer cooperatives shall be destroyed now and for all future time. Then we also ask an amendment to make it definite that the Coal Division shall grant to wholesale cooperatives which perform the functions of a distributor a discount similar to that granted to other distributors. In other words, we ask that the wholesale cooperative organizations be placed on an equal competitive basis with that established for other distributors. We ask that because for many months the Coal Division ruled that the coal operators should pay discounts to certain distributors of certain coals, amounting to 17, 22, and 25 cents a ton. On the same kind of business done by farmer wholesale cooperatives the discount allowed was only 12 cents a ton. Some of our members are farmer cooperatives, registered as such, although they preferred to be registered as distributors. For a long time they suffered under the handicap of competing with other wholesalers when they were paid from 5 cents a ton to 13 cents a ton less for the wholesale handling of coal. We want to eliminate the possibility of any discrimination of that kind in the future. The amendment that we are asking-and I have a copy here that I shall leave with the reporter-is, at the end of the joint resolution, House Joint Resolution 101, add the following (I will indicate where the new language is): SEC. 2. The last paragraph of subsection (i) of part II of section 4 of such Act is amended to read as follows: "It shall not be an unfair method of competition or a violation of the code or any requirement of this Act (1) to sell to or through any bona fide and legitimate farmers' cooperative organization duly organized under the laws of any State, Territory, the District of Columbia, or the United States whether or not such organization grants rebates, discounts, patronage dividends, or other similar benefits to its members;" We set forth in that paragraph the distinction that these cooperatives are not asking any special privilege. They are not asking for discounts to be allowed to them for no services rendered. They are asking for discounts only where they perform the benefits of a distributor and discounts equal only to those given to a distributor. Mr. ROBERTSON. At that point, have you investigated the question of whether or not the amendment that you propose could be added to the joint resolution which merely continues an existing law, or whether a bill would have to be introduced which in addition to providing for the continuance or the reenactment of the act would also carry the change in the act in which you are interested? Mr. CARSON. Mr. Robertson, when I was preparing this amendment, through friends at the Capitol-I have been around here for 25 years through friends on the Hill in the drafting service, I discussed that question with those friends, and they told me that there was no doubt about the feasibility of this. Mr. ROBERTSON. In other words, that you can add to this joint. resolution any germane amendments to the act that it is proposed to continue? Mr. CARSON. Yes: Mr. Roberston. Mr. ROBERTSON. That is perfectly satisfactory to me. I just wanted to know if you had gone into it. Mr. CARSON. I did, thank you. Mr. BOLAND. Is this organization a farmers' cooperative organization? Mr. CARSON. No. These two organizations which are going to appear here this morning, after I have finished, are not farmer cooperative organizations. They are consumer cooperative organizations. Mr. BOLAND. What percentage of their business is coal? Mr. CARSON. I would say it is rather a negligible percentage but if a value were placed on it, comparable with the value placed on a competitive business of a similar nature, the value would be at least Mr. CARSON. That would be the value of the business. Mr. BOLAND. Just the coal business. Mr. CARSON. Yes. These cooperatives do more than $4,000,000 worth of business wholesale a year. They are a tremendous organization. Mr. BOLAND. This is a very small amount of their business, then? Mr. CARSON. Yes. But that part of the business is of distinct value to the coal cooperatives which have built it up, and those coal cooperatives are owned by wage earners and farmers. They have been built through dimes and nickels, sacrifice and labor. Mr. BOLAND. Let me ask you another question. Is there any Federal legislation recognizing them as consumers' cooperatives? Mr. CARSON. Not the word "consumer," no, Mr. Boland. That is what we are insisting on. Mr. BOLAND. There is no Federal legislation recognizing them? Mr. CARSON. None at all. But we are insisting that there must be. Under the N. R. A., the President himself, through Executive order, recognized them. Mr. BOLAND. That is all. Mr. ROBERTSON. Mr. Carson, do you favor an amendment that would permit a consumer cooperative to file a petition for relief from prices that they thought were out of line? Mr. CARSON. I think, Mr. Robertson, under this act-my memory is hazy; I had something to do with the act a few years ago, but I have tried to forget a large part of it-I think under this act, under this amendment as we propose, the consumer cooperatives would have the right to appear in their own behalf. I think under this section of the act the farmer cooperatives have the right to appear in their own behalf. Mr. ROBERTSON. I wish you would refer to it. My recollection is that only a municipality may petition on behalf of consumers, and anybody else, who is a consumer, would have to come through the Consumers' Counsel. Mr. CARSON. I think, Mr. Robertson, section 4-A d of the act- Mr. CARSON. On page 12, under section 4-A, the act says that Whenever the Commission upon investigation instituted upon its own motion or upon petition of any code member, district board, State or political subdivision thereof, or the Consumers' Counsel I was wrong about it, Mr. Robertson. Mr. ROBERTSON. A municipality, in other words, is the only one, being a State subdivision, that may petition on behalf of the consumer. Mr. CARSON. You are right, Mr. Robertson. Mr. ROBERTSON. Now, you have not yet answered my question. Mr. CARSON. I would be very happy to see an amendment permitting farmer cooperatives or consumer cooperatives to petition in their own behalf. Mr. ROBERTSON. That is all. |