Chairman PLOESER. Will you care to ask any questions?
Mr. COLE. No.

Chairman PLOESER. I would like to ask you, Do you feel that the basing-point system should be renewed or continued, in the steel industry, for example, if there were no shortage of production? I think we all admit that there is an aggravation of the situation due to the fact that there is a shortage.

Mr. REEVES. Yes; the situation is aggravated because of the shortage, but actually the geographical problem enters into the situation. It seems to me that until there can be some major readjustment geographically of the sources of steel and production that continuation of the multiple point basing system will be necessary. I do not think that the end of the shortage of steel will alleviate the situation, created by the interpretation placed by the FTC or the Supreme Court decision in the Cement case.

Chairman PLOESER. Have you come to a conclusion in your own mind that you believe you are ready to advocate the reestablishment of the basing-point system or do you feel that maybe it should be continued until such time as readjustment can take place within a reasonable length of time?

Mr. REEVES. I have only the viewpoint that the present system has been complicated by the decision of the Supreme Court and the FTC interpretations, and until a readjustment can be made the multiple basing point system should be permitted to continue.

Perhaps there is an alternative, Mr. Chairman, perhaps that system can be improved upon, but the improvement is not yet in sight. Chairman PLOESER. Certainly we have confusion at the moment. Mr. REEVES. Unlimited. But that is not a new experience. Chairman PLOESER. Any questions?

Mr. BALLINGER. Would you be willing to explore the possibilities of outlawing the basing-point system or finding a way so that these distressed small fabricators could get some steel? I have had a lot to do with the basing-point system in the TNEC investigation. That was a committee composed of Democrats and Republicans. It was the unanimous opinion of that committee that the basing-point system wherever used, is a simon-pure monopoly, which was one of the few things that it did unanimously agree on.

If that is the case, and that is what the Supreme Court says in its decision, would you be willing to explore the possibilities of trying to prevent monopoly in the selling of steel and to see if something can be worked out so as to prevent the distress which is going on and trying to put the system on a sound economic basis, so far as the production of steel is concerned?

Mr. REEVES. I think that is essential. The thing that has disturbed me and that is disturbing to the steel fabricators and others in this community is the dislocation which has resulted from the sudden abandonment of a system upon which their whole method of business and their patterns of distribution have been based.

I might also point out that this is not only a matter of alleviating the steel shortage in this area, although that is one of the phases of the problem, we have a competitive pricing problem, which occurs from a combination of these two factors that I have mentioned in my prepared statement that prejudices the distribution of products manufactured in this area.

Mr. BALLINGER. I was very much impressed by what you said in reference to the integration that exists. That is a very serious problem. There is also another problem and that is extension or integration that has been growing in the last 20 years by the device, Mr. Chairman, of acquiring plants. These companies have been going out and acquiring still more and more plants.

Mr. REEVES. By purchasing the assets.

Mr. BALLINGER. So as to get around the provisions of the antitrust laws which prohibit that.

Mr. REEVES. Yes.

Mr. BALLINGER. Would you be in favor of strengthening that section of the antitrust laws to prevent those undue absorptions?

Mr. REEVES. Yes; I think I would. Of course, when you come in and ask about a matter of that kind, may I say that you cannot arrive at any hard-and-fast blanket conclusion with regard to that until you have given it pretty careful study. Sometimes a blanket rule does unanticipated damage, but, I think, certainly, consideration should be given to an amendment which would prevent the purchase of assets by merger as well as merger by purchase of stock where the effect would be a substantial lessening or the elimination of competition in industry in the area involved. There are a good many exceptions which undoubtedly should be made to that rule.

Chairman PLOESER. May I say, Mr. Reeves, the time is not very far off when this committee is going to have to work very closely with the great Judiciary Committee of the House of Representatives, because we seem to be inevitably carried toward the fact that there may be necessity for some revision of the laws.

I think that people who are present today, the small-business men who are here, should know that you are, in my opinion, one of the most able members of the great Judiciary Committee.

Mr. REEVES. I thank you.

Chairman PLOESER. I am particularly gratified at your interest in this matter because we are going to need you in a few months on that committee; we are going to need some others who have given some thought and study to these problems to join with us.

It is very gratifying to the members of this committee to see that the members of the Judiciary Committee, and particularly yourself, have gone so deeply into the subject already. For that, we are very grateful.

Mr. REEVES. I thank you very much, Mr. Chairman. Because of the fact that this community, Kansas City, and its vicinity and its trade territory are so typical of small business, I have a great deal more than a casual interest in the work of this committee.

Chairman PLOESER. Personally, I feel you have done a great job of representing this area.

Mr. REEVES. I thank you.

(Witness excused.)

STATEMENT OF STANLEY M. BRASKI

Mr. BALLINGER. Give your full name for the record.
Mr. BRASKI. Stanley M. Braski.

Mr. BALLINGER. What kind of business are you in?
Mr. BRASKI. Wire and iron works.

Mr. BALLINGER. What is the name of the company?

Mr. BRASKI. Braski Bros.

Mr. BALLINGER. You are the president?

Mr. BRASKI. Yes, sir.

Mr. BALLINGER. Do you have a statement you want to make to the committee?

Mr. BRASKI. Yes.

Mr. BALLINGER. You may proceed.

Mr. BRASKI. Well, we have been trying to get steel rods from the Sheffield Steel Corp. for the last 2 years. We intended to make wire, to manufacture wire. They do not give us any satisfaction or any delivery on these rods to make the wire out of.

We went ahead and set up our machine and it has been sitting idle now for the last 2 years. We have contacted them several times. The Sheffield Steel Co. is about 2 miles from our little plant. So in the meantime we have been kind of hanging on a thread there waiting for the rods to come through, but they will not accept an order. In fact, one of the officials dropped into the plant there and tried to discourage us in manufacturing this wire because that is one of the things they do with it. That is the complaint that I have.

They seem to want us to go into the fabrication of some kind and get out of this wire drawing business. The reason we are getting into the wire drawing business is because the two younger brothers have been with the Sheffield Steel Co. for the last 15 years, until we started this plant. They do not know anything but wire drawing. But the Sheffield Steels seems to discourage us, or want to discourage us, in the manufacture of this wire. They will not let us have any rods. Of course, there is a shortage, we understand that, but we do not want a great deal of rods. A carload a week would be just a drop in the bucket, but they will not even talk to us about it.

Mr. BALLINGER. Do they offer you any steel if you manufacture anything else?

Mr. BRASKI. NO. They came down there for the purpose of seeing what we were going to do with these rods. Naturally they saw our machines set up there, they knew we were going to draw wire out of them, so that seemed to be out of the question with them.

Mr. BALLINGER. Were you in this business of making steel wire before the war?

Mr. BRASKI. No; we were not.

Mr. BALLINGER. What was your business, then?

Mr. BRASKI. We were with Sheffeld Steel, drawing wire.

Mr. BALLINGER. You were working for the Sheffield Steel?

Mr. BRASKI. We decided to get out from under the big fellows and get in for ourselves. We have been at it. We have had to go to the fabrication of different iron and steel work of various kinds to keep going. In the meantime we have taken all the money that we had to get this machine set up, but we cannot get anywhere because we cannot get any rods to make wire. We do know how to draw wire. The Sheffield Steel does not seem to think we should draw wire because they said we cannot make any money on it.

Mr. BALLINGER. Are they giving you steel for any other purpose, other form?

or in

any

Mr. BRASKI. No. I got steel through the distributors that came from Sheffield Steel, the distributor buying it from Sheffield, then we get it through the distributors.

Mr. BALLINGER. Did you get some steel rods that way?

Mr. BRASKI. NO. You cannot get steel rods of any kind from them, but they are selling rods to other corporations.

Mr. BALLINGER. Such as who?

Mr. BRASKI. The Union Wire Rope, right near us-3 miles from us. They are sending them carload after carload of rods, but we little fellows cannot get a foot of it. Of course, they claim that the Union Wire Rope Co. has been buying wire for years and years.

Chairman PLOESER. That is probably true. The situation is greatly aggravated by the shortage, of course!

Mr. BRASKI. But, it seems to me

Chairman PLOESER. However, some people take advantage of the shortage.

Mr. BRASKI. We are not asking for a tremendous lot of steel, you understand-just a carload a week. That would be satisfactory until the shortage lets up. But it is out of the question. They come out and tell us we should not draw wire; we should make something else; that we cannot make money by drawing wire, so they say.

Mr. BALLINGER. Do you know how many companies draw wire in the United States? How many of them are engaged in that business? Mr. BRASKI. They are very few. All of the steel corporations do. Mr. BALLINGER. Not many others outside of them?

Mr. BRASKI. There are a few on the coast, individual firms that draw wire.

Mr. FORISTEL. There is a St. Louis company; is there not?

Mr. BRASKI. I do not know about St. Louis. I know there are some in San Francisco, one or two, that buy rods from one of their steel mills. They buy rods there and draw their own wire.

Mr. BALLINGER. All I want now is some rods. How about it? Chairman PLOESER. We have often wished we could draw steel rods out of the air.

Mr. BRASKI. I do not know whether there would be much complaint or not, but it has been hanging in my craw for the last couple of weeks since they came down

Chairman PLOESER. Where is that plant located?

Mr. BRASKI. Lees, Mo., right near the Chevrolet plant.

Mr. FORISTEL. We have established one way to help people like you. That is for you to bid on a military order. The House Small Business Committee, through Congressman Ploeser, offered an amendment to the Draft Act which provided that the President could call on the producers of steel to furnish steel to any person holding such a military contract. If I were you, I would bid on a military contract. It is all competitive. You should write them, stating your plant facilities and capacity and indicating you want to be invited to bid.

Mr. BRASKI. Suppose that one of the bids were accepted?

Mr. FORISTEL. Then you would get steel.

Mr. BRASKI. Yes. Only on a military order?

Mr. FORISTEL. 1,250,000 tons of steel this year will be allocated for military orders.

Mr. BRASKI. Who do I contact on this?

Mr. FORISTEL. You write to our committee in Washington. We will be glad to carry it from there.

Mr. BRASKI. That will be swell. I will do that.

(Witness excused.)

STATEMENT OF EDWARD F. RAGLAND ON BEHALF OF ASSOCIATED TOBACCO MANUFACTURERS

Mr. BALLINGER. Give your full name for the record.

Mr. RAGLAND. Edward F. Ragland.

Mr. BALLINGER. What is your business?

Mr. RAGLAND. I am executive secretary of the Associated Tobacco Manufacturers, a group of smaller manufacturers of cigarettes and other tobacco products located in eight States and constituting substantially all of the independent manufacturing interests in this country.

This opportunity to tell you of our problem is very much appreciated and we are hopeful that you gentlenen will lend your support to the efforts we are making to correct this deplorable situation.

Our presently untenable position is the result of an overwhelming concentration of cigarette volume in the hands of a few companies. Largely because of an unfair tax situation, we are unable to compete with the industry giants. This heavy concentration of business is not new to the tobacco industry, nor to many other American industries for that matter. In 1911, the Supreme Court dissolved the old Tobacco Trust.

Mr. BALLINGER. That was the American Tobacco Co.?

Mr. RAGLAND. The old American Tobacco Co. In the intervening years, however, three of the companies so recreated have managed to recapture better than 85 percent of the domestic cigarette business. This acquisition of the lion's share of cigarette sales has had the inevitable result of killing off the smaller companies so that now there is a real and imminent danger of the total disappearance of competition from the tobacco business, a typical American industry, once the haven for honest and competitive enterprise.

As the cigarette volume became more and more concentrated in the hands of these three companies, so did their power to advertise increase until finally the smaller manufacturers with less capital found themselves unable to merchandise their products in the face of such competition.

In other words, the small cigarette manufacturer no longer could sell his brand at the same price of the big three brands. He didn't have the power to entice the smoking public with high-paid radio stars, back covers of magazines, Nation-wide newspaper copy, and billboards on every highway.

Facing the facts of life, one of the smaller manufacturers in 1931 brought forth a brand of cigarettes which could be sold by retailers at a price of 10 cents a package. Although leaf tobacco had been selling for a very low price, the big manufacturers had raised their prices. Business conditions were pretty bad in those days, too, so the 10-cent cigarette found a ready acceptance. It wasn't long before four or five other smaller manufacturers recognized this opportunity for business and they, too, marketed 10-cent cigarettes.