STATEMENT OF H. J. KUHN

Mr. FORISTEL. State your name.
Mr. KUHN. H. J. Kuhn.

Mr. FORISTEL. Proceed, please.

Mr. KUHN. About 40 years ago the only paint factory in the State, practically, I started, and I called on most of these oil companies, sulfur mines, and industries and helped them with all of their paint problems.

Then as soon as we get them to a standardized position where we might sell them, these reciprocal arrangements or reciprocal actions begin to show up.

I have gone to New York to sulfur companies with photographic examples of tests that have been run right down in that territory and showed them materials that were twice as good as they were using. The man says, "I am aware of that, but I cannot buy your material if it was 50 cents a gallon."

He said, "We do not even have the privilege of saying when we paint our property. The material people insist on our painting and at regular intervals."

We have a building within a stone's throw of our factory, and they cannot buy a dollar's worth of stuff from us. There are some of the employees that insist on our goods for their own homes. That is all we can sell.

I started with the Boykin brothers in Boykin Machine Tool in Beaumont. I started those colors for all the concerns, and I find myself through there; thrown out. I am not complaining. We are doing a marvelous business, we have a nice business, but what provokes me are these subsidiary or associated activities in the oil industry where they do not engage in the paint-manufacturing business, and attempt to sell goods on their merits, or to go into the open market and compete on a competitive basis.

They go in there with high-handed methods to make their people do things, and they make them do it. That is all there is to it.

I have gone in many times and started something and when I got back to get a repeat order, they said, "I am sorry, so and so saw it, and they tell me you cannot buy anything more from him."

It is not a question of "won't you buy?" They tell him what he can do. Some of these fellows who have not enough sales initiative and enough go will submit to that.

Of course, we are running into the same situation they were talking about this morning, as far as supplies are concerned. I went in to Sinclair's office in New York to try to sell them some material. They said "What did you buy from us last year?"

I said, "I do not know."

"How much did you sell us?"

"I do not know. I do not run the statistical department. I am a salesman. I come up here to try to sell you something."

So he reaches into his drawer and said, "You bought so much stuff from us last year. We bought so much from you."

I said, "We would have bought a lot more material if you would give us an extra fine price, but you are making us pay an Oklahoma price."

There used to be an $8 switching charge. There used to be this and that, and we cannot buy naphtha on that basis. We had to buy it as at the maximum zone price, and such things as that. Naturally, we have to go out as they go out, for competitive reasons, and buy from the small refineries delivered in tank wagons from the small refineries. Maybe we have been helpful in trying to put in this business.

The Texas Co. for years have thrown reciprocity in my face, yet they make a product that we use 50 carloads of a year. They will not give us a gallon of that out of Port Arthur.

Mr. FORISTEL. Will you join with Mr. Dragert in making a complaint?

Mr. KUHN. To make it perfectly clear, I am not disgruntled. I wanted to see what this all amounted to, but in the interest of fair play, as an example of the viewpoint of these people, they want to use money for brains; they do not want to sell anything.

We were selling Humble prior to their paint-manufacturing development. We were selling them $100,000 worth of stuff a year. I called up their general sales manager, and I said, "We would like to show our appreciation," to me, reciprocity, for a man ought to be glad to do business with people that do business with him.

I said, "We would like to give you some business." I said, "We have very little outside of our solvents, which you do not make through moter fuels."

I said, "We have an arrangement close to our plant with one filling station that services the whole company group, employees and all." I says, "If you will get them to put in one of your pumps, I will see to it that your products do go through that pump."

He says, "I will tell you what you do; you go over there and make that man put in a pump." That is their idea of selling-make somebody do something. They do not have gumption enough to do it any other way.

I had the filling-station man put in one of his pumps. They did not have the gumption to do it.

Those are the things I objected to; the dictatorial attitude of the big fellows is all the same. The railroads are the same way. I walked into a railroad agency and had the same experience.

Here are two blue cards from Montgomery Ward telling us, “We cannot give you anything." They are in the paint business, too. That is all I have to say.

I will be very glad to write a letter.

Mr. PATMAN. That is very interesting testimony. It is an evil we have to cope with.

Mr. KUHN. I think it is an evil. I have no argument with big industry, I have no argument with any man, but I think the oil industry has enough advantage in the processing of hundreds of raw materials and all of the things that they enjoy without having to chisel on a few other things.

If they want to go into the soap business, that is all right if they go in on a competitive basis, not on a pressure basis.

I will be glad to get some other paint manufacturers to write some letters if you want them.

Mr. FORISTEL. Yes; do that.

(Witness excused.)

STATEMENT OF C. G. STUBBS ON BEHALF OF THE TEXAS RETAIL GROCERS' ASSOCIATION

Mr. FORISTEL. Identify yourself for the record, please.

Mr. STUBBS. My name is C. G. Stubbs. I am vice president of the Texas Retail Grocers' Association and chairman of à committee appointed by this association to present to this body some specific facts which we thought would be helpful in helping us protect our business. First, I would like to say that, due to the illness of Miss Johnson, she will not be able to be with us. There are myself, two other members, and we would like to have them heard; and also we have some documents we would like to file with the committee.

Mr. STEVENSON. That is fine.

Mr. STUBBS. First, I would like to call your attention to what we think are two very significant points to our business. No. 1 is-we think it ranks No. 1 in importance to the welfare of the people of the country because of the fact that it is food.

No. 2 is that we think that it is probably operating on the smallest margin of profit of any business that has anything like the amount of money involved in it that the grocery business does have.

A national survey has disclosed the following facts pertaining to the operating costs, and the margin of profits, in the average wellmanaged and operated independent retail grocery store: (1) The overall gross margin of profit is 18 percent; (2) the average over-all operating cost is 16 percent. The total net profit is 2 percent.

From the public records published in a national trade journal, the Safeway corporation had a net profit of 1.28 percent in trade in 1946, while in 1947, according to this same trade publication, their net profit dropped to 0.78 percent.

The fact that the well-managed grocery store's profits are so small makes it evident that all barriers that have to do with gross profits necessarily must be removed, or the small-business man in the food business will automatically be put out of business. These reasons prompted the Texas Retail Grocers Association to appoint a committee for the purpose of submitting to this honorable board the following statements, which they think are harmful to small business.

I personally would like to call your attention to three specific points: (1) Effective legislation should be passed to abolish or regulate the passing of coupons good for merchandise to the consuming public. (2) A more strict enforcement of antitrust legislation.

(3) Effective legislation whereby sponsors of radio programs could not give away valuable prizes to attract listeners.

Witness has observed that, in the giving out of coupons by manufacturers, they are invariably passed among neighborhoods with greater purchasing power and in vicinities where chain stores are predominant. To illustrate:

The witness operated a small grocery business and has observed that large portions of chain-store advertisements are taken up in inviting the public to bring the coupons to their stores. Further observing, we find in many instances that few, if any, coupons have been passed in the neighborhoods outside of chain-store territory. That is doubly confusing to the consumer and unfair to small business in that the chain stores are in a position to buy large advertisement space, whereas the small merchant cannot so do, and this leaves an

impression in the consumers' minds that the coupons can be redeemed at the chain store only.

In other words, in their page advertisements they invariably insert in their ads, "Bring your coupons for soap," or whatever it is, "to our store."

In many instances the retailer is paid for the coupons at the arbitrary chain-store price, instead of the shelf price of each individual store. This is a hardship on the operator for the reason that his expenses of doing business are sometimes of a percentage greater than that of the chain store. We have had occasions in the city of Dallas where, upon the opening of a large chain store, the town was flooded with coupons that were redeemable only at the opening of the chain store. This is unfair to small business.

(2) A more strict enforcement of antitrust legislation: Large firms are ordinarily more guilty of violation of the antitrust laws than smaller firms for many reasons. The large firms can, by violating the antitrust laws, practically control both output and distribution, and the small firm has no resources save through enforcement of antitrust laws.

From comments appearing in newspapers, it appears that many manufacturers, and especially small ones, have been greatly hampered by reason of the fact they have been unable to secure steel. Combinations of big steel industries could absolutely strangle the small-business man who is engaged in manufacturing articles in which steel is used.

The many vices of combinations guilty of antitrust violations are so numerous and apparent that it is needless for further discussion.

By a strict enforcement of antitrust laws, the small manufacturer and retail merchant would be benefited greatly. How this can affect the corner grocery store was shown by the Government investigation of some of the big food outlets which practically strangled the markets in many places. Therefore, this witness urges that a strict enforcement of antitrust legislation would be highly beneficial to small business.

From comments of polls taken to determine the number of listeners to radio programs, we find that the most popular programs are those which give away the greatest amount of prizes. Often these prizes are huge sums of money.

This is, in effect, a mere method of buying listeners and which, in the opinion of the witness, is unfair and constitutes more or less of encouragement to gamble or lotteries. A small business or factory buying time upon the air has no chance of competition with big business in giving away tremendous prizes or huge sums of money, since the expense would be prohibitive.

Naturally, the listeners should be entitled to tune in on the most interesting program; however, such interest should not be stimulated by gambling or lotteries and disguised as gifts. It is unfair and unjust to small business for such programs to be allowed to continue.

Therefore, effective legislation or adequate controls enforced by the Federal Communications Commission would do much to aid small business.

I would like to now call on the other members of the party at this time, and also to give you a transcript of the testimony of Miss Jerry Johnson, who also presents some of the materials I have here.

830194950

Mr. FORISTEL. You may hand that in for the record. She is your local secretary, the Houston (Tex.) secretary?

Mr. STUBBS. She is the State secretary.

STATEMENT OF MISS JERRY JOHNSON ON BEHALF OF TEXAS RETAIL GROCERS' ASSOCIATION

Miss JOHNSON. My name is Jerry Johnson. I am secretary-manager of the Texas Retail Grocers' Association, and it will be my privilege to present to you the members of our committee, who will discuss various problems of the independent retail grocers in our State.

First, I would like to introduce Mr. C. G. Stubbs, first vice president of the Texas Retail Grocers' Association, and owner of Stubbs Stores, Dallas.

And now may I present Mr. William H. Levy, Houston grocer, former director of our State association, and immediate past president of the Houston Retail Grocers Association.

Another well-known Houston grocer is our third witness; Mr. Joe R. Lewis, who has served as an officer and director of both State and local associations.

And now, if I may have a few more minutes of your time, I would like to briefly summarize the practices that we feel are harmful to our retail grocers. To substantiate the statement by Mr. Stubbs on coupons, may I read a letter received in September, which is typical of the complaints that are made to our office from time to time? Mr. Connorty's letter.)

The testimony of Mr. Levy can easily be verified for the firms mentioned as having the various quantity discounts, issue printed lists to their salesmen showing these differentials, and there is no secret about it. It is a case of too few who can qualify for these discounts.

The same is true of the testimony of Mr. Lewis. The various manufacturers named by him have their fixed prices for wholesalers, as well as their suggested resale prices, in printed form, and again it is a case of too few who can qualify.

I also wish to call your attention to the evidence I hold in my hand that the chains and large operators are guilty of advertising special low prices on certain items of merchandise and are conveniently out of the item so advertised.

I hope you will admit the following letter from Mr. Hal E. Dean, a retail grocer of El Paso, Tex., and a State director of our association. Mr. Dean's letter clearly shows the practice still exists of advertising one price and charging out the merchandise at the regular shelf price. I also have a sales slip from a large independent chain operator in Texas, the H. E. B. Food Store. The attached ad shows one price advertised while reguar price was charged.

I also have here evidence that the Safeway Stores manipulate prices even in the same trade area, and on their own controlled brand, namely, Edwards coffee. San Angelo and Ballinger are only 36 miles apart. Yet, the price was 47 cents per pound in San Angelo and 51 cents in Ballinger, on the same date. A difference of 4 cents per pound on coffee is quite large.

I have a number of newspaper ads, all on the same date, which shows beyond any reasonable doubt that this chain varies its prices for the same size and the same brand of merchandise in different parts