to the Federal Trade Commission and through the Robinson-Patman amendment to the Clayton Act they finally issued an order restraining the practice, a cease and desist order. However, after they were in court they became suppliers on their good behavior and that stopped the real knock-down and drag-out price war.

In some sections after margins were established, somebody discovered new or better methods to lower the ratios. In other words, we must have a yardstick to discover where the most efficient operation ends and where destruction from competition begins.

The most difficult thing about getting this thing over is that it is so simple that to really get interest in it is a complicated thing. If you want to preserve competition, which is the object of the whole thing, you must prevent its destruction. In order to prevent its destruction, you have to learn where the destruction begins. New methods may be discovered to lower the costs. That is all well and good. That is all in the public interest. All competitors who are on their toes can copy those methods. But who can keep on selling below the cost of somebody being subsidized by a billion dollar corporation? Who of us in the smill business field can do that? They should be restrained from selling below cost unless it can be shown that they have discovered some new method which all live competitors can copy.

I would like to have you people ask a lot of questions on this. I brought this up some time ago with the Department of Justice. For a number of years they were very polite, but I heard now and then that they used to refer to it as "Peck's love." I come from a Republican State and this happened to be passed in a Democratic legislature. It is a most conservative measure. It doesn't hold an umbrella over anybody. It seeks to discover new and efficient methods of cost. It has a lot of competitors who are not efficient who fall by the wayside. We hear about divorcement. I can sympathize with these people who are asking for any divorcement, but a divorcement alone will not attain their objective because in the case of divorcement we will say, take our own business where the retailer, jobber, and everybody else are separated. What is to stop the big fellow from setting up a big retail corporation to stop everybody, until the recalcitrant competitors are wiped out? Nothing at all. I think probably an amendment to the Clayton Act to the effect that some organization, particularly some neutral organization, possibly the Commerce Department, could be petitioned if it is discovered that somebody is ruthlessly selling below cost, could be petitioned to conduct a survey as a yardstick and again notifying them that if anybody wants to sell below that, they must bring it in. In the event of a big fellow going into the retail trade, it has been my experience that it is impossible for a big firm with employees to compete with a little fellow who is running his own business, to compete in the matter of reducing costs and increasing his efficiency.

However, I think I would define cost in this act. If they want to go into the retail business, it is all right, but their basic cost must begin at the same price that they sell the retailers they are going to compete with. For example, the best information that I have-and I got this from stockholders 3 or 4 years ago—is that the lowest margin required for a company to employ persons and management to run a retail station was 780. The highest that I received-and I didn't re

ceive them all-was 1,320. They announced to their stockholders— and I happened to have a few shares-they were going to go into the Iowa marketing plant because their prices were too high; the retailers were fighting at around 22 or 3 cents. The retailer works night and day. He is interested in his business. He gives a real smile to his customers. The man in the big station is on short hours. Certainly in the retail field you cannot manage a station as well as an efficient owner can. It is impossible. There have been a lot of misleading statements about efficiency. Companies get so big that the overhead becomes top-heavy.

I would like to see costs defined. If I represent a big supplying company and I want to go into the retail business, I am really permitted to meet these operators, but I can't sell below them unless I can show that I have discovered some method.

Again I say that their money should be used to discover more efficient methods to be able to lower the prices to the public than to be used for the purpose of destroying our economy.

Mr. BALLINGER. How would you distinguish your plan from the available remedies now existing under the antitrust laws? For instance, you know that the existing antitrust laws prohibit selling below cost for the purpose of eliminating competitors.

Mr. PECK. The only difference I see outside of possibly clarifyingand I know what a tough job that is because there are always those trying to put jokers in it-is to try to discover tools for the most efficient methods. That seems complicated. It was. Anything is complicated to those who don't understand, but as we begin to understand it, it is not complicated at all.

For example: I think I mentioned this before, but I think it is worth while repeating-everybody was on their notice if they wanted to come into a community and get control or monopoly in that community, they could take a cost survey, and that they would be restrained from doing so and there were penalties provided for. That restrained probably many of them from coming in to these various communities, because I notice after the law was enacted, the fatality rate was certainly reduced. However, there was just a small portion of these counties that ever needed a cost survey. Some of them that did, had a remedy. Where they took a cost survey, as I said before, in a few instances they were able to show, some of them, that they had discovered greater efficiency. The prosecutor sets a new minimum and invites somebody to meet that. That is competition at its best. Below that it is destruction of competition.

I have tried to observe this. I have been in the courts in Michigan where thinking-thinking you know is like any other habit. We get habits of thinking. When we came into court, the opposition, mostly oil company lawyers, were there stating that this was a price-fixing law, and this was an ingenious device to hold an umbrella over efficiency, and so on. Before we got through, the judges stated we should have had that from the inception of our Government, that we should have prevented the destruction of competition and we wouldn't have had this problem that we have today.

I don't say that that is the only remedy, but I do say that it works, and it is working and has been working for 10 years and probably, as I have said before, an amendment, the Robinson-Patman amendment

to the Clayton Act, comes closest to this thing than anything else I have heard of, if we just added a cost survey.

Judging from the recent Supreme Court decisions, the question of interstate commerce is involved.

I want to congratulate this committee for the work it has done. Without this law we could not have proved our case about these accounts we long suspected were being subsidized. We were able to smoke them out by this law.

In addition to that, I refer again to the short supply being manipulated to render ineffective all laws. Quite recently, as you know, there was an attempt made to get away from the antitrust laws, under Public Law 391, and write an agreement that where they refused in the beginning to write an equitable distribution at all levels, and your committee has done a lot to bring that forcibly to the Attorney General's attention, and it has been corrected.

Mr. BALLINGER. Thank you, Mr. Peck. If you want further to elaborate your statement and file it with us, I offer you the invitation to do so. I am going to have to cut this a little short because Mr. Patman has to catch a train about an hour and a half from now, and he wants to hear the rest of this and to hear Mr. MacIntyre testify. If you have anything further to say, would you file it with the record, if you want to elaborate your statement.

Mr. PECK. Thank you very much. I didn't know Mr. Patman, but I have spoken to him on the phone a few times.

Mr. PATMAN. Are you representing the United States Wholesale Growers?

Mr. PECK. No, the National Congress of Petroleum Retailers, in the oil business.

Mr. PATMAN. I will read your testimony with interest. I am sorry I wasn't here, Mr. Peck, but I will certainly read it.

Mr. PECK. There is just one thing I want to say in leaving. The Department of Justice seemed to feel this was a sort of price-fixing bill. I have discussed with them this measure quite a while and when I got them to listen I think they finally concluded that we are right at the point to discover where the destruction of competition begins.

Mr. PATMAN. I am very much interested in petroleum because 7 of the 11 counties in my district are petroleum producers and the other 4 are being wildcatted under lease now.

Mr. PECK. I would like to mention this does not bar anybody from going into business at any level. It merely bars them from selling below everybody's cost and put everybody else out of business. At the suggestion of the Justice Department I told them I would mention this and I don't want to forget it. You know, they have this case by the Standard Oil of California, which they feel will be upheld by the Supreme Court, preventing companies from forcing dealers to handle their products exclusively, but there wasn't anything in the decision that would prevent a company from jacking the rent away up in case they took on somebody else's products. It was suggested that something be put in there to that effect, with which I am heartily in accord, but I don't know what to put in or how to do it. Mr. BALLINGER. Thank you very much, Mr. Peck. Mr. STEVENSON. Now, Mr. MacIntyre.

Mr. BALLINGER. Mr. Chairman, Mr. MacIntyre is Chief of the Division of Antimonopoly Trials of the Federal Trade Commission and was associate counsel in the Cement case. He has had long experience in Government with monopoly practices.

Mr. PATMAN. In addition, Mr. Chairman, when Speaker Joe Burns appointed me chairman of a committee to investigate large scale buying and selling in 1935, I thought the best man I could get in the Government department to help me on that was Mr. MacIntyre. He conducted a large part of that investigation, which resulted in the passage of the Robinson-Patman Act on June 19, 1936, following. Mr. MacIntyre has followed it all the way through.

Mr. STEVENSON. You may proceed.

STATEMENT OF EVERETTE MacINTYRE, CHIEF, DIVISION OF ANTIMONOPOLY TRIALS, FEDERAL TRADE COMMISSION, WASHINGTON, D. C.

Mr. MACINTYRE. My name is Everette MacIntyre, Chief of the Division of Antimonopoly Trials of the Federal Trade Commission.

Gentlemen, I suppose that I should say that although I am appearing at the request of the committee and with the permission of the Federal Trade Commission, what I express are not necessarily the views of the Federal Trade Commission, but my own.

I have been with the Federal Trade Commission for 19 years. Throughout that period of time, the principal part of my work has been devoted to investigating and prosecuting monopolistic practices. A major part of that period has been spent on the study and the handling of the basing-point problem, which is given so much concern at the present.

As far back as 1931 I investigated, under a Senate resolution, the Cement industry, and the Federal Trade Commission in response to that Senate resolution made a report on the cement industry particularly with respect to that industry's use of the basing-point system. That report is Senate Document No. 71, Seventy-third Congress, first session, in response to Senate Resolution No. 448 of the Seventy-first Congress. I would like to read into the record with your permission a portion of one of the conclusions and recommendations contained in that report. Quote:

The multiple-basing point pricing system as developed by the cement industry has a tendency to lessen price competition. The system forms the basis for arriving at uniform delivered prices of cement and destroys the value of calling for sealed bids by the Government and other large purchasers. Price competition in the cement industry might be restored in large measure if each manufacturer in submitting bids would quote an f. o. b. mill price based on his own operation and independent of any knowledge or information as to how his competitors probably would arrive at the prices he would submit.

That statement was submitted to Congress in 1933.

Mr. PATMAN. Let me see that, if you don't mind, Mr. MacIntyre. Who made this conclusion?

Mr. MACINTYRE. The Federal Trade Commission, in response to the Senate resolution.

Mr. PATMAN. Did any Senate committee pass on it at all?

Mr. MACINTYRE. Not to my knowledge. There was a report made to the Senate, however, and it was reported upon to the floor. To

my knowledge nothing further was done about it.

Mr. PATMAN. He says here in connection with this report:

Attention is invited to the report on the basing-point formulas and cement prices submitted to Congress by the Federal Trade Commission on March 26, 1932.

Do you have that report with you?

Mr. MACINTYRE. That is an earlier report. I do have a copy of it with me.

Mr. PATMAN. Mr. Chairman, I ask that Mr. MacIntyre go through both reports and pull out such excerpts as are appropriate and helpful in our hearings on the basing points and insert them in connection with his testimony in this.

Mr. MACINTYRE. The earlier report was submitted.

Mr. PATMAN. You understood that, Mr. MacIntyre. Are you willing to do that?

Mr. MACINTYRE. Yes; I am willing to undertake that. The earlier report was submitted during March 1932 to both houses of Congress, and it is entitled "Price Bases Inquiry, the Basing Point Formula and Cement Prices."

Mr. PATMAN. I would like to add to that, Mr. Chairman, the request that Mr. MacIntyre take any other pertinent data that he has in connection with this from these reports or any other reports subsequent before that time and insert them in connection with his testimony.

Mr. STEVENSON. Very well.

Mr. PATMAN. Will you do that, Mr. MacIntyre?

Mr. MACINTYRE. I will endeavor to do that.

I want to say one word about the law as developed with respect to these basing-point systems through the recent court decisions. As Mr. Ballinger has indicated, I did have a little something to do with the handling of those cases. In addition to investigating the cement industry back in the early thirties and reporting thereupon to the Senate, I built for the most part the investigational record upon which the Cement case was undertaken by the Commission, participated in the trial of that as an associate counsel to Mr. Wooden from beginning to the end.

Mr. PATMAN. Tell us here, if you will, Mr. MacIntyre, about the approximate amount the companies charged in violation of that act expended in comparison with what the Federal Government expended.

Mr. MACINTYRE. What we spent in the trial of that case was a rather small amount, running only into a few thousand dollars, certainly under a hundred thousand. We were faced by a battery of attorneys from more than 40 law firms, and it was reported to us through the press that the industry in fighting us in that case spent more than $5,000,000, more than twice the appropriations of the Federal Trade Commission for any 1 year.

Mr. PATMAN. I am told, too, that the record each day would be transcribed immediately and then mimeographed and sent out to a hundred different people in the United States.

Mr. MACINTYRE. More than 100 copies of the testimony taken each day was transmitted to all parts of the country to members of that industry, according to information furnished to us by members of the industry.