MONOPOLISTIC AND UNFAIR TRADE PRACTICES

THURSDAY, SEPTEMBER 23, 1948

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE No. 2 OF THE SELECT COMMITTEE ON SMALL BUSINESS, Madison, Wis.

The subcommittee met in the United States Post Office and Courthouse Building, Madison, Wis., at 9 a. m., the Honorable William H. Stevenson presiding.

Present: Representatives William H. Stevenson and Glenn R. Davis.

Also present: James W. Foristel, executive director, and Willis J. Ballinger, economic counsel.

Mr. STEVENSON. Ladies and gentlemen, the subcommittee on monopolistic practices of the Special Committee on Small Business of the House of Representatives will now come to order. We are taking the testimony of any and all witnesses in this area who wish to present their problems and their ideas for the committee.

This committee is conducted in the same way as a committee would be conducted in the city of Washington, except that we bring the committee to your doorstep, so to speak, to save you the trouble and expense of coming to the Nation's Capital. We listen to your story; we take your testimony here the same as it is done in the city of Washington, D. C.

At this particular hearing we will take up the subject of monopolistic practices in various segments of business as will be presented by the several witnesses who reside in the city of Madison, Chicago, and in other cities nearby.

I want to introduce you to the members of the staff who are present this morning.

On my left is James W. Foristel, who is executive director of the Committee on Small Business, a very efficient man, a lawyer by profession. He takes care of all the investigations, including the interviewing of witnesses and the marshalling of the testimony.

To my right this handsome, bright, smiling young gentleman is Leo Cullinane, who is public relations secretary of the committee.

The public relations man is the individual who gives publicity to the committee's activity and the committee's members.

Mr. Cullinane is also a writer of note. He writes articles for our national magazines. You probably have read some of his articles in the Saturday Evening Post, in Colliers, and once in a while in Life.

Our reporter is Mr. F. S. Milberg from the reportorial staff of the House of Representatives in Washington. There are six reporters who take down every word that is said in the House of Representatives.

They take turns of 5 minutes each. The grind is quite terrific at times. When we have several Congressmen trying to get the floor and talking at once, the official reporter stands alongside of the man who is talking. They try to get over to him if he is in any part of the House of Representatives in order to be able to hear his speech. They write standing up, on a little notebook in one hand and a pen in the other. If we have an altercation, they even put down a description of the altercation that takes place.

Mr. Milberg has been with the House of Representatives a good many years and is one of the fastest shorthand reporters in the business. They have to be exceptionally good before they get the opportunity of such a position. They hold the position for life or until they have accumulated enough money to retire.

These reporters are very highly respected by the Members because, you know, the reporters take down everything a Member says, but once in a while he gets excited and says something he should not say and the reporters have that intellectual capacity and judgment to delete such objectionable remarks.

The Member who is speaking to you is Bill Stevenson, of La Cross, Wis. They always want to know what politics he is, so they add after our name in the newspapers a "Rep." or "Dem." after your name. So I will tell you that I am a Republican, and chairman of the Subcommittee on Monopolistic Practices.

We have had hearings throughout the West, at Butte, Mont.; Salt Lake City, Utah; Casper, Wyo.; Kansas City, Mo.; Minneapolis, Minn.; and now Madison, Wis. From here we will go over into Indiana, then to Detroit, South Bend, Ind., and from then on south.

We are going to various cities in which hearings have been requested of the chairman of our committee in order to take the testimony in these particular districts. We are very happy to be here at Madison. I understand we have some very fine witnesses who have very interesting testimony which we will be glad to hear.

All testimony, as I have indicated, is taken down word by word by Mr. Milberg. It will then be transcribed, printed, and made permanent as a record of this committee exactly as is done in every committee hearing in Washington or in connection with the House of Representatives.

I will now turn the further proceedings of the committee over to Mr. Foristel.

STATEMENT OF B. RUARK, GENERAL MANAGER, MOTOR AND EQUIPMENT WHOLESALERS ASSOCIATION

Mr. FORISTEL. Identify yourself for the record.

Mr. RUARK. I am B. W. Ruark, general manager of the Motor and Equipment Wholesalers Association, with headquarters at 309 West Jackson Boulevard, Chicago, Ill.

Mr. FORISTEL. Proceed with your statement.

Mr. RUARK. I have a prepared statement that I will now read. I am B. W. Ruark, general manager of the Motor and Equipment Wholesalers Association, with headquarters at 309 West Jackson Boulevard, Chicago, Ill.

The association consists of approximately 900 independent wholesalers of automotive parts, accessories, supplies, and garage and serv

ice station tools and equipment. In the aggregate its members operate approximately 4,000 automotive wholesale outlets throughout the United States and Canada. The association is therefore representative of independent automotive wholesalers as to standing, number, and extensive geographical coverage. Its members go into the markets, buy merchandise, and resell or attempt to resell it to car dealers, independent garages, service stations, fleet operators, and other types of retail service establishments. They are, therefore, in active competition with major oil and rubber companies, car factories, directselling manufacturers, and others.

I cite these facts to emphasize their close and continuous contacts with a knowledge of competitive conditions in the markets in which they sell or attempt to sell automotive merchandise to the various types of service establishments mentioned-so you will realize the factual nature of the information they have supplied their association on the competitive practices with which they are faced.

At this point I wish to emphasize that I do not appear as a special pleader for the members of this association and other independent wholesalers. The issue of free and open markets in the distribution of automotive merchandise versus the "iron curtain fencing in" of markets by monopoly interests transcends the welfare of any group. It is an issue that directly affects the welfare of all the American people. It is idle to prate of political freedom or any other freedom worthy of the name if economic freedom is blacked out. And that, gentlemen, based on reports made to us is what is taking place in the important sector of our economy represented by automotive distribution as testimony at this and other hearings of your committee will, I believe, show. That is what is occurring in the distribution of automotive goods as the result of restrictive, repressive, dictatorial, and monopolistic controls on part of some car factories and some major oil and rubber companies. The trend is definite, the effects now are only partially felt but those baneful effects are being felt more and more every day as rapacious interests more firmly tighten their controls over other people's businesses. It is imperative that appropriate measures be taken immediately to restore freedom of choice to automotive-service men, to confirm them in their right to buy and sell what, when, and where and to persons who elect to do business with them.

I propose in the testimony I shall give for the record to deal principally with the practices of some or certain major oil or rubber companies through which they attempt to rob and through which they do rob service-station operators of their right to buy certain types of products from sources other than those designated by them. However, I shall make reference to like and other practices of some or certain car manufacturers that have similar results in restricting the right of car dealers to do business with persons of their choice.

Several members have informed me that they and their salesmen will testify at the committee hearings on the practices mentioned. Also that they have secured several service-station operators who will testify. Testimony of the latter is, of course, more conclusive as they have first-hand experiences in specific cases of actual and attempted coercion on the part of oil-company representatives. However, the testimony I shall give and that which wholesalers and their sales

men will give is strongly indicative of the situation that prevails. It will help to show the general pattern of control applied by major oil companies in conjunction with some major rubber companies and otherwise to monopolize the service-station operators' purchases of important specified products.

It is important to point out here that many wholesalers are averse to giving testimony because they fear the reprisal inherent in the domination of the oil companies. In this connection, I quote from a letter from a wholesaler about his being requested to testify in the Government's recent suit against the Standard Oil Co. of California and Standard Stations, Inc.

Recently I was interviewed by a representative of the local office of the FBI, who are conducting an investigation for the Department of Justice on matters of monopoly and subsidy on the part of the Standard Oil Co. of California.

This gentleman was quite thorough and quite persistent in his investigation, and naturally I cooperated with him to the best of my ability. He asked in conclusion, after about 5 hours of cross-examination, whether or not I would be willing to appear in Los Angeles Federal Court on May 6 as a Government witness in this case.

I declined with speed if not pleasure. While I realize the importance of citizens who believe in the free-enterprise system lending their support and full cooperation in matters of this kind, if we are to remain in any way free of such practices and tactics, and to preserve open-trade relationships in this and all other businesses, still I do not desire to put myself on the spot and my company, for I feel keenly my obligation to our organization and I should not care to jeopardize the interest of my organization in any way by calling further down upon us the wrath of such a powerful company as above named.

The fear this wholesaler expresses is typical of that voiced by other wholesalers. Such fear on part of wholesalers is even more pronounced in the effort to get evidence on the coercive and restrictive practices of car factories, whose power of direct reprisal is apparently greater than that even of the oil companies.

In support of this statement, I quote from letter of a wholesaler as follows:

We had the hearing on the House Small Business Committee at

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day. * Nothing came up that would be of interest to automotive wholesalers or to car dealers, independent garages, or kindred lines.

We had nothing tangible here to really stick our necks out on, which is a ticklish thing to do, anyway. Most of the car manufacturers had representatives there merely for the purpose of observing and just in the event that something might come up with which they would have to concern themselves.

Any jobber, therefore, that stuck his neck out by appearing before this com mittee with any sort of grievance would, I am afraid, be immediately jeopardizing the good will of the car manufacturers, and through them the car dealerships. We are still doing too much business with these dealerships to take any such chance. I realize it is the difficulty the committee will always have in getting the facts they want; and, frankly, I don't know how that difficulty can be over

come.

Many service station operators also are afraid to give testimony about the unfair and un-American practices of major oil companies to which they are subjected. They state frankly: "yes, I know I ought to be able to run my business as I see fit and as I know it ought to be run but I can't stick my neck out. I can't run the risk of having my station lease canceled or of having deliveries of gasoline held up.' Service-station operators who have told wholesalers and/or their salesmen that they can't buy this or that product from them because their oil company supplier has forbidden them to do so when asked to testify at the committee hearings have declined to do so for the reason stated and the fact has been reported to the association.

The service-station operator is particularly vulnerable to dictation, coercion, and control on part of his oil company supplier. He operates under a station lease that in view of his relative financial resources as compared with those of the oil company is practically a one-sided lease. It is comparatively easy for an oil company to cancel the lease of an operator and secure another tenant-without any appreciable adverse consequences to the oil company but in most instances cancellation of the station lease results in ruining the business career of the operator who is the victim of the cancellation.

The fear of reprisal that I have mentioned, gentlemen, is a most serious condiion. The power of reprisal on part of major oil companies is so great and so pervasive that it actually bars voluntary testimony of many service-station operators on this subject which so vitally affects their security as independent businessmen. That power is so pervasive and so great as to deny your committee access to a great volume of testimony that it is by every right entitled to as the agency of the Congress.

Reference this fear of reprisal on the part of service-station operators, I cite the following typical statements from letters of members:

Quite a number of service-station operators of the better type have expressed a willingness to testify before this committee in private, but would not testify in an open meeting. I agree with them that they probably would be blacklisted by all oil companies should it be known that they openly and willingly testified against them. As it is still necessary for these service-station operators to remain in business in spite of the unsatisfactory conditions prevailing.

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We have been giving a lot of careful study to your bulletin regarding the House Small Business Committee hearings on oil company distribution practices. We certainly agree that this is indeed important Now it occurs to me that what the committee should really do is to subpena the people that lease these major company stations or operate stations under contract. Then under oath there would be the necessity for them to give evidence as to how much pressure is put on them, forcing purchases through the major companies. I am certain this would produce more and better evidence than the manner in which they are apparently doing * * *. For example, I was talking to one of our customers who operates a major oil company station and he said, upon my asking the question, that he could give plenty of evidence if the proper authorities ask it on the witness stand.

I therefore recommend that if this present series of hearings by your committee as based on voluntary testimony does not, in the opinion of the committee, develop conclusive proof of the illegal controls exercised by major oil companies over service-station operators, that in that event the committee hold additional hearings and use its power of subpena to compel the disclosure of the facts as they do exist, and as they by common knowledge in the trade are known to exist.

The restrictive, repressive, dictatorial, and monopolistic practices of major oil companies as mentioned were in evidence before the last war. They began to develop when the oil companies divested themselves of direct and above-board company operation of stations and adopted the station lease and/or contract method of control under which station operators are allegedly but not actually independent. Whatever the purpose of this change, it has thus far enabled the major oil companies to escape responsibility for payment of millions of dollars of taxes under State chain-store tax laws and Federal unemployment and old-age-pension laws. Also it has enabled them to escape re

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