MONOPOLISTIC AND UNFAIR TRADE PRACTICES

MONDAY, OCTOBER 11, 1948

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE No. 2 OF THE SELECT
COMMITTEE ON SMALL BUSINESS,

Houston, Tex.

The subcommittee met in room 717, Federal Building, Houston, Tex., at 10 a. m., Hon. William H. Stevenson presiding.

Present: Represenetatives William H. Stevenson, Wright Patman. Also present: James W. Foristel, executive director.

Mr. STEVENSON. This is a hearing of the Special Committee on Small Business of the United States House of Representatives, a select committee having to do with small business.

Small business, however, gets pretty big, so do not think small business means just a little man on the corner selling shoestrings or newspapers.

The committee holding the hearing here at Houston is the Subcommittee on Monopolistic Practices. The full committee consists of nine Members of the House of Representatives, at the present time five Republicans and four Democrats. In its work the Committee on Small Business is practically nonpartisan. Our good friend, Wright Patman, who is present this morning, will vouch for the fact that you can scarcely tell from the proceedings of our committee that man is either a Democrat or a Republican. We work with one aim in view, and that is the interests of the independent businessmen.

We have been holding hearings at various points throughout the United States, including Butte, Mont.; Salt Lake City, Utah; Casper, Wyo.; Omaha, Nebr.; South Bend, Ind.; Oklahoma City, Okla.; and now, Houston, Tex.

These hearings being held in your city, we are really bringing the House of Representatives to your doorstep. This hearing is typical of hearings held in the Capitol of the United States. Instead of making you come to Washington and putting you to the expense and the inconvenience of making the trip to our Nation's Capitol, we bring the Congress right to your doorstep.

The purpose of the committee is to listen to witnesses in this vicinity, to hear their problems, their suggestions, and their complaints. We will be very glad to welcome anyone who has any problem or any complaint that he thinks is of national scope and for which the committee may be able to recommend some sort of remedy.

With this committee is one of the official reporters of debates of the House of Representatives, Mr. Frank Milberg. He has been with us for some time. He goes along with us and takes the testimony. He is one of the fastest shorthand writers in the United States.

The charming gentleman to my right is James Foristel, not related to the Secretary of Defense; but to this committee he is worth prac tically as much. Mr. Foristel directs the work of the committee, he decides where we shall go, the subjects that are to be discussed, and the bringing of the witnesses to us, and gives them the "green light" on what to say.

Another member of our committee staff is our publicity man sitting over here. He is Mr. Leo Cullinane, a very bright Irishman, and always on the job. Mr. Cullinane is a writer of some note, having contributed articles for the Saturday Evening Post, Collier's, and other national magazines.

The gentleman who is speaking to you happens to be chairman of the Subcommittee on Monopolistic Practices, Bill Stevenson, of La Crosse, Wis., and, by the way, I am a Republican.

We also have with us your own Texas Representative, Wright Patman, a Democrat, sitting at my left, and one of the best friends I have in Congress. From the way Wright and I get along, you would never know that we were on opposite sides of the fence politically, so to speak.

Our sole purpose on this committee is to see that the independent businessman is given a fair break. Wright Patman, one of the leading Representatives from Texas, has been in Congress for some 20 years, always looking out for the little fellow, the fellow that we up in Wisconsin say is the underdog. He is always helping the man who is down and is trying to get up and do a job.

Wright Patman is a friend of all the people.

While I was coming down on the train yesterday, I happened to pick up a copy of Holiday magazine, and I noticed in the present issue a wonderful portrayal of the business life, the social life, and the scenic beauties of the State of Texas; and, to my great delight, I saw a photograph of my good friend Wright Patman there in Holiday magazine. He is given credit for being one of the big boosters of the State of Texas. I have had some of the match boxes that Wright gives out advertising the State of Texas, which was also mentioned in the Holiday article. I have also received one of his books on our Government. He has given these to the people of his district, to the people of the State of Texas and, in fact, all over the United States by the hundreds of thousands.

At this time, it is my pleasure to introduce to you your fellow statesman, Wright Patman.

Mr. PATMAN. I thank you, Mr. Chairman.

Since this is the concluding hearing of a series of hearings conducted by our chairman, Mr. Stevenson, I would like to make a few remarks, if you do not mind, Mr. Chairman, about the work of this committee.

The committee was formed just before Pearl Harbor in 1941: it happened that I had a resolution to create a committee, and Mr. Halleck had one to create a committee. The Democrats being in power, my resolution was adopted. I had the privilege of serving as chairman for a number of years. Mr. Halleck was the minority member on the Republican side. Incidentally, he is now the majority leader of the House of Representatives.

Mr. Halleck and I were together at one time conducting hearings all over the United States, along with Leonard Hall, who was the next

man on the committee and who, incidentally, is chairman of the Republican Congressional Campaign Committee at the present time.

So the members of this committee on the Republican side have certainly done quite well for themselves, and we are proud of them. They have been very helpful to the Democrats when the Democrats were in.

During the last 2 years, the Republicans have been in power; and I have been trying to manifest and demonstrate the same spirit of cooperation.

They, including my friend, Mr. Stevenson here, demonstrated that spirit when we were in the majority, and we are endeavoring to emulate them.

This committee during the war served a very useful purpose. The committee was the author of a number of acts which were finally enacted into law, which were very helpful to small business. I will not attempt to enumerate them, but they were many. The Small Business Committee of the Senate and the Small Business Committee of the House worked together. We did not cover the same subjects over the country at the same places. The object was to give the people in remote sections an opportunity, as Chairman Stevenson said, to really come before the Congress, and present their complaints, or to air their grievances, or to express their opinions about anything they wanted to, with the knowledge that the testimony is taken down, will be transscribed, of course, and given to all the members of the committee first. Next, it will be printed and circulated to all members of the House— 435 members-and the 96 members of the United States Senate. So, really, the testimony that is presented before this committee, of which Mr. Stevenson is chairman, will eventually find its way into the hands of every member of the United States Congress. It does have weight, too, because the Members pay attention to what people say before these committees.

The committee has conducted hearings from Butte, Mont. to Houston, including Casper, Wyo.; Salt Lake City, Kansas City, Omaha, Minneapolis, Madison, South Bend, Detroit, Louisville, Oklahoma City, and today at Houston, the last hearing.

I presume, Mr. Chairman, we will soon meet in Washington for the purpose of getting a report ready for the next session of the Congress? Mr. STEVENSON. That is right.

Mr. PATMAN. The testimony that is presented at the hearing will be helpful to the committee, and to the Members of Congress.

Mr. Chairman, I want to invite your attention to one thing that has been called to my attention down here in Texas that I think is worthy of further investigation. I hear this in sections where oil is produced:

I am convinced that there is something to the rumor; it is more than a rumor, and there must be an unholy alliance between the real large companies—the majors, they call them down here-and the big steel companies in the respect that the small oil producer, who wants to get pipe, for instance, to drill an oil well, cannot get that pipe, but the big company has plenty of pipe. He can go to the big company and he can get this pipe if he is willing to tie his company up for a certain number of years under certain restrictions and limitations as to the delivery of the oil that is produced.

I do not know anything about the fairness or unfairness, if any, of the contracts that are required; but it does occur to me that it is not in the public interest for such vital and scarce material to be channeled through such a limited source of supply.

I really believe there should be some investigation to see if this is a trend toward a monopoly of the most vicious type. I hope that your committee will see fit to give a little consideration to that matter, in the event we have witnesses who are willing to come out in the open and testify under oath, if necessary, that these things are true. They are entitled to consideration, certainly.

That has always been quite a little difference between the big oil companies, the majors, and the little oil companies. Our committee is charged with the duty of protecting small business. That is what we have been doing all the time; and, as the chairman stated, there has been no partisanship in our committee on this subject. You could not tell whether a member was a Democrat or a Republican working on this committee. We have all worked together. Every report we have made has been a unanimous report. Since 1941, every report made by this committee has been a unanimous report. So, we have gotten along splendidly and well.

During the war the smaller oil companies felt they were entitled to an increase in the price of crude. They came to Washington, and our committee gave them a hearing lasting several days. In that hearing it developed that what was of interest to the little man in the way of a higher price for crude was opposed by the major oil companies because they would have had to pay it. I think you will find the same situation existing today. If the little companies need a higher price for crude oil, they will find opposition from the major oil companies, because it is not in the interest of the major oil companies.

Since it is our duty to protect the interests of the small-zusiness man and to prevent the trend toward monopoly, I think that question is certainly worthy of some consideration.

Those are the two questions; the one I mentioned about pipe and the other about resisting an increase which is justifiable and necessary for the small independent producers to exist.

We want to welcome you, Mr. Stevenson, as a Congressman from the great State of Wisconsin, to our great State of Texas, and we hope if you ever decide to change your residence-we are not requesting that you do that you give full and ample consideration to our great State of Texas. We will be very glad to have you in the State of Texas. Mr. STEVENSON. I will be very glad to come down here.

First, I would like to present for the record a telegram that I received sometime ago.

(The telegram referred to follows:)

Hon. WILLIAM H. STEVENSON,

Member of Congress.

PLATTEVILLE, Wis., August 28, 1948.

DEAR SIR: Please register our protest as small business against the autocratic attitude of Republic Steel on its formal notice of closing Cleveland blast furnace on August 31 unless it could dictate its own terms and demanding cancellation of Kaiser-Frazer lease thereof.

Absolutely essential to small business requiring such basic material that lease to Kaiser-Frazer be continued to Kaiser-Frazer and be consummated to protect small dealers solely dependent for livelihood thereon and against the insulting

effrontery of the Republic Steel, in attempting to scrap said lease, using great and unscrupulous political pressure to so do.

BROWNING MOTOR SERVICE.
GUERDON BROWNING.
DAVID O. PARISH.

Mr. STEVENSON. Now, Mr. Foristel, I will turn the meeting over to you for the calling of the witnesses.

You may call your first witness.

STATEMENT OF JOSEPH D. HENDERSON ON BEHALF OF THE AMERICAN ASSOCIATION OF SMALL BUSINESS

Mr. FORISTEL. Please identify yourself for the record.

Mr. HENDERSON. Joseph D. Henderson. I am the national managing director of the American Association of Small Business, Inc., with national headquarters in the city of New Orleans, La., and members throughout the Nation, working in a field of nearly 4,000,000 firms representing over 98 percent of all the business units in the United States, each of which employs or influences on an average of 10 people, totaling a businessman-consumer majority of over 40,000,000.

So you see, Mr. Chairman, small business is not so small, in members, at least.

The invitation to appear at this hearing of the House Small Business Committee is appreciated, and we are glad of the opportunity to furnish you with certain information which we hope will be of assistance to you in your study and investigation of monopolistic practices and other unfair methods of competition.

The American Association of Small Business has always stood in opposition to monopoly. We have testified previously in an effort to bring about enactment of legislation which would plug the loopholes in sections 7 and 11 of the Clayton Act, which was passed in 1914 on the theory that it should be the purpose of the Federal Government to prevent monopolistic mergers by making it illegal in the first instanec.

We presented testimony in favor of enactment of H. R. 515, a bill to amend sections 7 and 11 of the Clayton Act, which was introduced by the Honorable Estes Kefauver, now United States Senator-elect of the State of Tennessee. Incidentally, we predicted that Senator Kefauver would win over the Crump monopoly in Tennessee.

Mr. STEVENSON. I may say that Mr. Kefauver was a member of this committee until a short time ago.

Mr. HENDERSON. I thank you, sir. I was going to say that Mr. Kefauver is also a member of the Select Committee on Small Business. I thank you very much.

The purpose of the Clayton Act was to prevent monopoly rather than merely punish it after it had taken place. The intent of Congress at the time the Clayton Act was passed is definite and indisputaEle. Within a few years after the passage of the Clayton Act, corporations conceived a means of bypassing the plain intent of the act by purchasing the physical assets of their competitors rather than the capital stock. The Federal Trade Commission reports that 2,450 formerly independent manufacturing and mining firms have been swallowed up through merger and acquisition since 1940. Many of