going into the channels of the processor, could that then reflect the better price of the producer and lessen the amount that actually had to be picked up by the Department of Agriculture?

Mr. DANIEL. Senator, I think that you are striking at a very strong economic situation there. It has always been of interest to the farmer. The complaint of the farmer, that he gets a small price for his product, but by the time it reaches the consumer there has been a great profit added, and he claims that he comes out at the little end of the horn, as I see it.

Senator THYE. You see your own quotation which I read previously, that National's net sales showed an increase from the year 1950, when it was then $906 million to its present $1,260 million. If that amount of profit, increase, has taken place in about 2 years, if that profit were not as great but had been spread over into-to reflect on the price that the producer received for his product when he produced it-you might have a less percentage of your national production going in under Commodity Credit Corporation's holdings because it would have found a market for reasons that either the price factor would have been more favorable or otherwise at least the Treasury would not have had to put as much money into what they picked up.

That is what my question really was to you: It was whether you had made a study of that, because there is a very, very substantial net profit reflected here in that 2-year period?

Mr. DANIEL. I would like to hand you a copy of the complaints here, Senator, from which I got those figures. I think those complaints are very revealing.

I must say that the cases have not been concluded, but the figures we give are those cited in the Commission's complaints-we don't have the evidence which would back up those figures.

Senator SPARKMAN. Did you want Senator Thye to yield to you at that point?

Senator PROXMIRE. I was going to ask along the same line as Senator Thye.

Senator THYE. I would say that inasmuch as this is a quote from this particular document it might be informative if that portion of the document that you have quoted from be reflected in the record.

Mr. DANIEL. For that reason I brought the complaints from which I had quoted. I am going to ask that they be inserted in the record. Senator THYE. If you are going to request it, then I shall not. Senator SPARKMAN. The complaint, as such portions of it as the witness may desire, will be printed in the record, if you will indicate those work that out with Mr. Jehle.

Senator THYE. I have nothing further, Mr. Chairman.

Senator SPARKMAN. If the whole thing is relevant, it is not very long, put it in.

Mr. PARKMAN.1 Could I interrupt to answer part of the Senator's question as to profits in the dairy industry?

Senator SPARKMAN. Yes, sir.

Mr. Daniel, will you take care of the material to be inserted? Mr. DANIEL. Yes, sir.

1 J. W. Parkman, Jr., president, Dothan Ice Cream Co.

(The material referred to follows:)

EXHIBIT 8

EXCERPTS FROM COMPLAINT OF THE FEDERAL TRADE COMMISSION AGAINST THE NATIONAL DAIRY PRODUCTS CORP. (DOCKET No. 6651)

Paragraph 3: A substantial portion of the growth of National and its subsidiaries has been through mergers and acquisitions. Beginning with 1924, National initiated a policy of expansion by acquiring a large number of concerns engaged in practically all branches of the dairy products industry. By 1950, prior to the time that section 7 of the Clayton Act was amended, National had acquired over 400 concerns engaged in the purchase, manufacture, processing, and distribution of fluid milk, ice cream, cheese, butter, and condensed and evaporated milk. Primarily as a result of said acquisitions, National's net sales increased from $20,180,892 in 1924 to $906,641,022 in 1950. National followed a pattern of acquiring dairy concerns in selected localities, strengthening its position in these localities by additional acquisitions, branching out by acquiring companies in nearby localities, consolidating its local acquisitions into broad regional or district organizatons, bringing into the fold leading companies in the major regions, and, by this steady pattern of encroachment, becoming a nationwide organization with a substantial share of the purchasing, manufacturing, processing and distribution of dairy products.

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Paragraph 5: National's net sales for all products increased from approximately $906 million in 1950 to $1,260 million in 1955, an increase of $354 million, or 39 percent.

National's fluid milk sales increased from approximately $272 million in 1950 to approximately $453 million in 1955, an increase of approximately $181 million, or 66 percent.

National's sales of frozen desserts increased from approximately $135 million in 1950 to approximately $201 million in 1955, an increase of approximately $66 million, or 48 percent.

A substantial portion of the aforesaid increases in sales resulted directly from the acquisitions hereinafter described.

Senator SPARKMAN. Proceed.

Mr. PARKMAN. I have seen a survey recently that we ran of our own in which the profits of the dairy industry compared to any other industry are fairly low, that is, from dairy products alone; that is, net profits for the companies. I know our company is not unusually profitable compared to other industries.

When you mention ice cream cabinets of size, a reasonable size cabinet for the use of dairy products alone, a lot of us think, and there is diversity of opinion there, are essential. Many people cannot buy cabinets until we get our products in the place we would_not. otherwise be able to get in by furnishing them. But when those cabinets become frozen food cases and to sell meat from, or other products, and are given to change business around, then they become a problem to the independent, because you get no profit back on that. Senator THYE. Is it a common practice on the part of all the processors to make cabinets available?

Mr. PARKMAN. For the use of the sale of ice cream products; ves sir.

Senator THYE. It is?

Mr. PARKMAN. Yes, sir, except in some States they have tried to have laws prohibiting it.

As I say, in the ice cream industry alone, I understand, and the independents and big ones alike, there is a difference of opinion about that.

Senator THYE. Do you make available such equipment?

Mr. PARKMAN. Yes, sir.

Senator THYE. Because I notice here that you are president of the Dothan Ice Cream Co.

Mr. PARKMAN. Yes, sir.

Senator THYE. You make a practice of giving out those cabinets? Mr. PARKMAN. Yes, sir.

Senator THYE. Has anybody ever complained that you gave out too fancy a cabinet?

Mr. PARKMAN. I have not been accused of it publicly.

Senator THYE. The oil companies used to give out storage tanks for the convenience of the consumer, or the customers, and the Federal Trade Commission put an end to that because they thought it unfair competition.

Mr. PARKMAN. I will say this, Senator, that in my opinion it is an accepted practice for the ice cream man to furnish the cabinet from which his product is sold. But when you begin to give out cabinets, in addition, to sell frozen food and meat from, or a deep freeze, we will say, then that is getting out of the line of competition.

Senator THYE. What is the difference whether you give out $500 cabinets to dispense from or whether you give out $500 cabinets to dispense cheese and meats and products of that kind?

Mr. PARKMAN. In the first place, we hope to make a profit from the cabinets from which we are selling ice cream. The cabinets I am speaking of are used for items entirely unrelated to the dairy industry or to the people supplying them.

Senator THYE. It is related to the consumer and the products which the consumer is buying; is it not?

I am only thinking that if you were a small processor out here and $500 meant the difference between zero and a profit, and that if you could not afford to give out $500 but another man comes along and said, I will give you a cabinet for you to dispense my ice cream in, and if you wanted to change over to me, it is obvious a thing that the man is going to change over to the other supplier, the moment that he makes that available. Isn't that true?

Mr. PARKMAN. True, sir. One reason, of course, that ice-cream men are notoriously broke is that all of their money is in equipment. Senator THYE. Not my acquaintances. I find that they are able to call me from Florida and some of them have been able to call me from down in Cuba and they were not broke. Yes; they went down there in the pleasant sunshine while the rest of us are rushing around up here in the snow. Let's put it that way.

Mr. PARKMAN. Their money is not fluid. Their resources are not always fluid.

Senator THYE. I know, but what led me to ask the question is the apparent net profit as reflected in the statement given over here on the part of Mr. Daniel and that is a 2-year period of time for which that profit is reflected.

It might be that there has been a great consolidation that has taken place, but I am just saying that I think that it behooves any one of us that have the responsibility of looking into some of these questions to give a very careful study of this, that when you see such a large profit reflected as is shown there, in this statement, and is to be found

23244-58- -5

in the document here, and then when you know that on April 1 the Department of Agriculture intends to cut the supports by another 25 cents a hundredweight in order to be certain that they are not going to encourage more of the products flowing to the Commodity Credit Corporation, it would be far better, in my humble opinion, if there were less profits reflected and a little more price paid to the producers, or lessen the price in order to make it more desirable as a product in the market place for the consumer. That is my interest.

Mr. PARKMAN. I would say, Senator, if I may, one other thing, that in considering this question, we should look into the other products that enter into the profits of some of these large companies, such as glue and many other things that are not related to the dairy industry.

Again I would say in defense of the profits made by the average man in the dairy business, percentagewise it does remain, from what I have seen, very small, sir.

Incidentally, Mr. Chairman, I have here an editorial which is reprinted from the June 1957 American Milk Review entitled "Destructive Competition." I would like to offer that for the record.

Senator SPARKMAN. Without objection, that may appear in the record at this point.

(The editorial referred to is as follows:)

EXHIBIT 9

[Reprinted from the June 1957 American Milk Review]

DESTRUCTIVE COMPETITION

The failure of a fair-trade practices bill in Ohio is a blow to the dairy industry's efforts to extricate itself from the morass of destructive competition in which it is mired. The respect enjoyed by Ohio gives it an influence that extends far beyond, its political boundaries. Other legislatures facing similar decisions will, to a degree, be affected by the debate and action taken at Columbus.

The unfavorable vote was probably the least of the misfortunes that befell the dairy industry. Far more serious in our estimation was the division of the industry that was exhibited. Despite the fact that the bill had the support of the Ohio Dairy Products Association the active opposition of certain powerful segments of the dairy industry contributed to its defeat.

We can view the result only with distaste and foreboding. It tends to give substance to the basic evil in the competitive situation. The evil, expressed in terms of unjustified discounts, free equipment and services, extensive loans, and outright gifts of cash, transform competition from a contest based on quality, service, and efficiency into a contest of financial strength. The victory goes to the biggest bank roll.

Such a condition is bad for the industry and bad for the country. It breeds a cynicism, a corrosion of the moral foundations upon which society rests.

We visited a magnificent plant a few weeks ago. It represented the best in milk processing equipment and design. Here was industrial management at its best. Here were the old virtues of thrift, of sound financial management, of service, of quality plus enlightened labor relations, progressive merchandising, and a high sense of industrial responsibility. By all the standards of the free enterprise philosophy this plant was a model. Yet it was struggling. It was struggling because it did not have a bank roll big enough to meet the deals that some of its competitors were offering. Of what avail are integrity, merit, and quality against a 12 percent discount with a new car thrown in?

This situation is not a mere matter of business relationships. This touches the very heart of the ethical and moral concepts that are the basic framework of civilization. A bribe is a bribe whether it is used to buy a vote or a stop. The demoralizing influene of such practices upon the industry is surpassed by the shameful deterioration of moral standards that they represent.

Senator PROXMIRE. I would like to ask you about a statement you made.

Did you say that National's net profits had increased from $906 million to $1,260,000,000?

Mr. DANIEL. Net sales.

Senator PROXMIRE. You said nothing there about profits?

Mr. DANIELS. Nothing about profits.

Senator PROXMIRE. Nothing in here about profits.

Mr. DANIEL. I was wanting to correct that statement here because the quote is that National's net sales for all products increased from approximately $906 million in 1950 to $1,260 million in 1955. That is over a period of 5 years, instead of 2.

Now, you mentioned the fact that we should look into it, or possibly, I guess, you were alluding to the Congress.

The Federal Trade Commission made a careful study and investigation of those cases, I am sure, and, as a result of the facts they found, they issued these complaints under the antimerger section of the Clayton Act, section 7. They make these allegations here, showing how these corporations have increased in size and with the great rapidity with which they are increasing, expanding. That is an antimerger

case.

Senator PROXMIRE. This increase in sales is largely the result of these mergers?

Mr. DANIEL. That is what I say here later on, that the Commission alleges that those sales, the Commission charges the substantial portion of the increase in the sales, resulting directly from the acquisitions. That is the point of those cases.

Senator PROXMIRE. Thank you.

Senator SPARKMAN. You may proceed with your statement.
Mr. DANIEL. Thank you, sir.

Before Senator Thye came in, I had made some other statements with regard to acquisitions which are earlier in our statement here. Senator THYE. I was in the Chamber during most of your testimony, sir.

I do stand corrected that the reference was only to a 2-year period, when it is actually a 5-year period.

However, the sales, whether it is net or gross, I don't know what you mean by net sales, because you certainly sell or you don't sell.

As to what you refer to as a net sale, is a little difficult for me to understand. It led me to refer to it as a net profit.

Senator PROXMIRE. Could these be sales after discounts, and so forth?

Mr. DANIEL. I haven't talked with the Commission about it. I have only quoted their figures.

Senator THYE. You either sell or you don't sell. That is why that net was so misleading, that it led me into the conclusion that it was net profits.

Mr. DANIEL. I see.

Senator THYE. Or profits rather than sales.

You don't refer to a gross sale or a net sale. You are in the business of selling or you are not selling, one or the other. That's all, sir.

Senator SPARKMAN. Go ahead.