The CHAIRMAN The next witness is Mr. Lewis F. Gordon, Jr., vice president, Grizzard Advertising, Inc., 342 Peachtree Street NW., Atlanta, Ga.

Mr. Davis?

Mr. DAVIS. Mr. Chairman, I thank the committee for scheduling Mr. Gordon at this time because he is one of the outstanding businessmen of Atlanta.

STATEMENT OF LEWIS F. GORDON, JR., VICE PRESIDENT, GRIZZARD ADVERTISING, INC., ATLANTA, GA.

Mr. GORDON. Thank you, Mr. Chairman.

Based on previous testimony, I think I am a little out of context because my statements relate to the matter of third-class bulk rates. I would like to make a couple of observations if I may, before I start this statement.

First of all, I hope you will not be dismayed by what looks like a tremendous Bible in front of you. Most of this is taken up with exhibits, really, for your reference.

The CHAIRMAN. Most of it is copies of letters sent to the chairman of the committee.

Mr. GORDON. Yes, sir.

The second observation I make is this: I noticed, as Will Rogers used to say, in the papers that the Postmaster General held a press conference following an ad which appeared over the signature of the Business Mail Foundation recently. The statement in that press conference to which he gave great emphasis was the apparent dilatory tactics of the opponents of the increase in rate bills who apparently hoped to let time run out.

I would like to assure you, ladies and gentlemen, that I am not here on the basis of a filibuster. I am here to present to you some reasons which I think are cogent, which are unalterably and unequivocally opposed to the increase of postal rates in third-class mail.

The CHAIRMAN. Do you have a position on the increase in first-class mail or second-class mail?

Mr. GORDON. Well, I did not want to take the committee's time to go into that aspect of it, Mr. Murray, but it is my feeling and that of my organization that no bill should be reported out of this committee representing an increase in any class of mail until, as the previous witness indicated, sufficient study be given to the public service aspects of the Post Office Department. I had not intended to touch on any class of mail other than third class.

The CHAIRMAN. Of course, as you know, the Post Office Department runs up a terrific deficit every year. Should that be borne by the general taxpayers or by the users of the mails?

Mr. GORDON. Mr. Chairman, I might answer by saying that the taxpayers bear the cost of operating the White House, the Department of Commerce, the Federal judiciary system, and the FBI.

Mr. REES. You do not compare this with the FBI, do you?

Mr. GORDON. As a public service, yes, sir, Mr. Rees. It is a Government department.

Mr. REES. Third-class mail?

Mr. GORDON. No, sir. Mr. Murray asked the question, should the postal deficit be borne by the users of the mail or the public.

Mr. REES. Part of that deficit is third-class mail.

Mr. GORDON. I might answer you by saying that according to the information that I have seen, the costs of the Post Office Department since 1932 have risen by about 100 percent. The increase borne by third-class users is more than 150 percent in that period.

I would say this is a substantial increase and one which certainly bears a share of the increased cost of the Post Office Department.

Mr. REES. I do not know what the rates are, of course, but I had in mind your statement to the effect that you thought that because it is a so-called Government service for FBI that you ought to have similar service for those who use the mails.

Mr. GORDON. You perhaps misunderstood. I said the taxpayers bore the cost of other governmental services such as the postal service which is a service, I presume, sir, of the Government, the public service aspects of which, as were touched on by the previous witness, we do not feel are being taken into consideration strongly enough in the appropriations bill. We feel this, Mr. Rees: that unlike other Government services a law requires the Post Office Department to account for receipts and expenditures.

Mr. DAVIS. What you are getting at is that public service functions should be paid for by the taxpayers generally whether it is in the FBI or the White House or the Commerce Department or the Post Office Department?

Mr. GORDON. Yes, sir; I do, Mr. Davis.

Mr. REES. I thought since you used the third-class mail for profit and properly so, that you might be willing to pay part of that cost.

Mr. GORDON. Mr. Rees, we feel we are paying part of that cost now. We feel that the 150 percent increase represented in the increase of rates on third-class matter since 1932 is a substantial part of the cost, the increase in postal operations as I say, according to the information I have, having been but 112 percent in that same period.

Mr. LESINSKI. Mr. Chairman.

The CHAIRMAN. Mr. Lesinski.

Mr. LESINSKI. Are you referring to the 40 percent that I mentioned to the previous witness, that that is a public service, the 40 percent on users of second-class mail?

Mr. GORDON. No, sir. I am not willing to put the burden on any class of mail.

I think that the overall service of the postal department, including the registering of immigrants, the selling of duck stamps, the migratory bird census, and things of that nature, which have no relation to the delivery of mail, are part of a public service which ought to be considered.

Mr. LESINSKI. I appreciate that statement, Mr. Gordon, but I had specific reference to the testimony of the previous witness who said that 40 percent of second-class mail was given special rates, special consideration. That is a so-called public service.

Mr. GORDON. Yes, sir.

Mr. LESINSKI. And that those 40 percent are not paying their way at all and the 60 percent are. Therefore, that is a public service such as the things you had mentioned and therefore Congress should

appropriate that amount of money to a class of mail, meaning that, if it is a public service, it should be paid for as such.

Mr. GORDON. Yes, sir. That is true.

Mr. LESINSKI. Thank you very much.

Mr. GORDON. I seem to have gotten a little embroiled here in various classes with which I am not too familiar before I get into my state

ment.

May I proceed, Mr. Chairman.

The CHAIRMAN. Proceed.

Mr. GORDON. Because you have heard considerable testimony from competent witnesses opposed to the increase in the rates on third-class mail recommended in bills now pending before the House of Representatives, I would like to base my testimony instead on both a positive and a negative approach.

On the positive side of the picture, and I have already indicated this, Mr. Chairman, I should like to point out that users of thirdclass mail, effective July 1, 1960, will have absorbed a 150 percent increase in the rates for that particular class of mail which is used as an advertising medium since 1932. The new rate bills now pending would make the percentage increase on bulk third-class mail 200 percent in that same period. This, gentlemen, for a service admittedly designed and always intended as a deferred service. As I am certain all of you are aware, third-class mail was conceived and put into being to provide a sufficient volume of mail to keep postal empoyees profitably occupied during the daily slack periods between the peak loads or first- and fourth-class mails. It has always intended that third-class mail would receive deferred attention, its handling being entirely dependent upon the bulk of first- and fourthclass mail passing daily through any given post office in this Nation. Third-class mail users recognize this deferred handling. In the "Survey of Postal Rates," published in April of this year, the Postmaster General himself said that

The handling of pieces of mail is the principal cost determinant.

The users of third class bulk mail presort by post office and tie bulk mail, deliver it to the post office, obviate the necessity for a postal pickup, delivery, and deposit, relieve postal employees of facing, sorting, cancelling, tying and quite often the sacking of the mail; and require of postal employees no delivery checks nor free forwarding to a current address. I understand that Mr. Summerfield before this committee made some reference to "a slight increase in postal rates on third class mail." I should say, gentlemen, that 150 percent increase, no matter what is affected, is a substantial increase. This also in the face of services performed by mailers themselves which are normally performed by postal employees on other classes of mail. I shall shortly read to you an excerpt from a letter received from a retailer in Atlanta, Ga., who points out that a recent mailing piece which he sent to his customers took more than 10 days to reach the people in a 20-block area around his store. Would you gentlemen consider that this is deferred handling? Would you consider that this is the type of handling of which Mr. Summerfield speaks when he refers to the post office as "a business"? If, indeed, as Mr. Summerfield professes, the post office is a business, can any of you gentlemen conceive of a business which could long continue to operate

by covering inefficient methods with constant increase in prices? Can any of you conceive of a business which would make the same charge for a delivery to Nome, Alaska, as it would to a suburb less than 5 miles from its plant or branch office?

My company has been operating as a direct mail agency for over 40 years. We employ approximately 125 to 150 people, depending upon the load on our plant, many of whom perform almost the identical operations performed by postal employees with reference to the handling of mail. Let me assure any of you who have any doubt on this score that we are unable to cover slowdowns or inefficient handling in our mail department simply by increasing prices to our customers. I have also noted in reading some of the testimony which has been offered to this committee in support of an increase in third class rates a continued reference to the slight increase which can be readily absorbed or passed on. This has generally been followed by some statement to the effect that this slight increase will have hardly any bearing upon the use of third-class mail. I am a little at a loss to understand how such statements can be justified in the face of the impact study on the 1958 Postal Rate Act authorized to be made by the Department of Commerce and which, in fact, was made by that Department. Throughout that report the conclusions reached by the study are in direct opposition to such broad, sweeping, and categorical statements as have been made by protagonists of the increase rate bills. On our own part, in answering this survey we very clearly and unequivocally pointed out the decrease in gross and net profits to our company following the increase in third class postage. I cannot conceive that the facts and conclusions of the report of the Department of Commerce study have been deliberately withheld from the gentlemen of Congress and yet I can account in no other way for the tendencies of witnesses appearing before this committee to fly directly into the face of the facts and make such illogical statements as have been made to you gentlemen with reference to the lack of significant impact on the users of third class bulk mail had by the increase in rates.

To negate just such statements is really my purpose in appearing before you. I have here a notebook containing the original copies of letters addressed to your chairman, Mr. Murray, from some 70 businessmen, the majority of whom, of course, operate in Atlanta although some other cities are involved. I say "of course" because we are concerned primarily with the people who do business in our area.

These letters were written at our instigation, We wrote and asked these firms what effect, if any, further increases in third-class bulk mailing rates would have on their businesses. Copies of these letters are available for each member of this committee. If you look through this material, you will find that these are certainly what the Commerce Department would label small businesses the very category of business which represents the majority of users of third-class bulk mail. I think that it is important, gentlemen, that you observe this point. You see, the minimal effect of an increase of postal rates on General Motors is hardly likely to be of interest to the operator of a retail drugstore or retail furniture store the bulk of whose advertising, because of necessity, is in the mail. I do not make this latter statement categorically, gentlemen. Whether in major cities or in small towns, an advertiser pays print and air media on the basis of circulation or on the basis of numbers of homes estimated to be reached by air media. To a

corner drugstore or to a retail furniture store located in a suburb or in a small community, a major portion of such circulation is wasted since the vast majority of these people either because of income level or because of geographical location can never be his prospects. More and more such businessmen are turning to the use of third-class bulk mail as a solution to this problem.

Without launching into a discourse on economics, I am certain you gentlemen are aware that small businessmen are caught in a squeeze today between rising costs on the one hand and a price ceiling set by competition on the other. The costs of raw material or finished product, if the individual is a retailer, are not controllable by the small businessman. Labor costs, whether set by minimum wage regulations, economic dictates of the area, or unionization, are subject to very little control by the individual businessman. To earn a profit today the one course open to him is the control of his distribution which includes not just delivery but sales and advertising as well. He must, therefore, seek some method of reducing the waste in his advertising-an objective which is the same as that of any professional advertising man. You will see from excerpts from these letters that these small businessmen are quite conscious of this fact; that they are finding it increasingly more difficult to justify the high cost of advertising in the mass media and are, therefore, turning to the more direct method of third class mail.

Mr. Chairman, with your indulgence, much of this is now in print in front of the gentlemen of this committee and I would like to pass that over in the interest of time and go to just two letters that I would like to read you out of this 70.

These I think, represent a true picture of the philosophy of small businessmen.

The CHAIRMAN. Very well.

The letters may be received for the committee file.

Mr. GORDON. One of them is from a retail furniture owner in Algiers, La., with whom we have been doing business for nearly 20 years and the other from a manufacturer of chenille products, in Dalton, Ga.

These are typical of the plight in which all businessmen find themselves with respect to what Mr. Summerfield calls "a slight increase" in postal rates.

MAY 5, 1960.

Hon. Toм MURRAY, Chairman, Post Office and Civil Service Committee, U.S. House of Representatives, Washington, D.C.

MY DEAR MR. MURRAY: I would like to protest the unwarranted and punitive increase being proposed for third-class mail. I operate two retail furniture stores on the outskirts of the city of New Orleans. Because of our location, we serve that portion of New Orleans which is across the Mississippi River and which comprises 10 percent of the population of metropolitan New Orleans. We have found that newspaper advertising produces no results for us, since 90 percent of the circulation is wasted, and consequently, it is necessary for us to use third-class mail with which to advertise to our customers.

Any further increase in third-class rates would make it necessary for us to curtail our third-class mailing, and would result in a decrease in business to us, thus making it necessary for us to lay off several people. We employ 38 people in our business, of which 5 are in our mailing department alone.

While it is true that the large retail operators of furniture stores nationally spend 64 percent of their advertising dollar in newspaper space and only 7 percent of their dollar on direct mail, in the case of smaller dealers (such as myself), operating on the fringe area of large cities and dealers operating in