Now the Pharis plant was in zone C-1 (1924) and the Krug plant in zone B-1 (1927).

Asked why he had established the new C and D areas with their lower prices, Mr. Fry stated that he did so to meet competition and that he found it desirable to have the four price levels (1630). Customers in zone A were reconciled, Mr. Fry said, to the high prices prevailing there (1630).

Speaking for the Ruberoid company, Mr. O'Leary testified that its price list, also effective November 1, once again adopted the changes made by Mr. Fry to meet his competition (2104). În Mr. O'Leary's opinion, it is "necessary to meet Fry whenever he moves-downward particularly," which was the case here (1718).

The Certain-teed company also followed the Fry changes with its price list effective November 1 (1979).

Mr. Pharis went back to the previous schedules to explain the establishment of the new zone C and zone D prices. When the Arkansas independents, such as Elk, were placed in the lower B zone on June 15, 1956, they began selling in Mississippi, Alabama, and Georgia to get the higher A zone prices then prevailing in those States and secured a substantial volume. In Mr. Pharis' opinion zone D prices, the lowest, were then imposed on the Southwest area to restrain these independents. Prices in the Southeast were not lowered to the D level but only to the C level because that was enough to confine the Southwest independents in view of the freight charges. In this connection it should be noted that map III shows that a small area north of Arkansas was also placed in zone C (1554–1555).

E. PERIOD BEGINNING JANUARY 21, 1957 (MAP IV)

In this period the number of area zones was changed from 4 back to 2-zones A and B as shown by map IV (1556). In general, it can be said that the new prices in zone A were about midway between the old A and B prices and that the new zone B prices were about on a level with the old C zone prices.

List prices for 15-pound saturated felt under this revision were as follows:

Discounts were continued at 3 percent for dealers and 8 percent for wholesalers, but Mr. Pharis continued to grant an additional 6 percent to pass on his savings on advertising and salesmen's commissions (2120; 1559).

There was one further change in this revision. Heretofore, the zone assigned to each county determined the price level of all products in the asphalt roofing line. That is to say, if a customer was located in zone A-1, he paid zone A-1 prices for asphalt felt and zone A-1 prices for asphalt shingles. This was now changed by introducing 2 columns in the tables of counties, column 1 showing the zone prices applicable to all asphalt roofing products except asphalt felt, and column 2 specifying the zone prices applicable to asphalt felt only (1937; 1557-1958).

By this device many counties in several States in the Southeast had the higher zone A prices with respect to all asphalt roofing products except asphalt felt, but had the lower zone B prices on asphalt felt. This portion of zone A is indicated on map IV by the diagonal lines. Under this system the Leopard roofing plant of Mr. Pharis in Lauderdale County, Miss., was in zone B-1 with respect to all products, while the Volasco plant of Mr. Krug in Knox County, Tenn., was in zone B-1 with respect to asphalt felt and in zone A-1 with respect to shingles, as shown by the following table:

A reason for this price structure is revealed in the following colloquy:

Senator CARROLL. In your opinion, what is the reason?

Mr. PHARIS. In my opinion, Senator Carroll, it is due to the fact that Knox County, Tenn., is a factory point.

Senator KEFAUVER. That is where the city of Knoxville is.

Mr. PHARIS. The Volasco Co. is located in Knoxville. They manufacture asphalt felt only. That is the reason for zone B-1.

Senator KEFAUVER. So, at this point where they manufacture roll felt only, they lowered the price. But they kept up the price of shingles, which the company did not manufacture.

Mr. PHARIS. Yes, sir.

Mr. DIXON [subcommittee counsel]. For further clarification, Mr. Pharis, at the time Senator Carroll is talking about, with respect to the comparative prices. in Lauderdale County, Miss., you weren't manufacturing shingles at that time, were you?

Mr. PHARIS. No, but Elk Roofing Co. had already broken into Mississippi and were getting a large volume.

Mr. DIXON. You weren't?

Mr. PHARIS. No, we weren't.

Senator KEFAUVER. You mean Elk Roofing Co. had broken into Mississippi and was selling a large volume of shingles?

Mr. PHARIS. Yes, sir. By that date.

Mr. DIXON. All right, now. Let us see if we can determine about the discounts. Mr. PHARIS. Let me butt in just a minute, Mr. Dixon. I was purchasing shingles from Elk Roofing Co. about that time, and I was pulling about 15 loads of shingles a week from Elk, due to the fact that asphalt felt was all we had. So we were really pulling it in and selling it and doing a job on it. So we were made a competitive factory point even on shingles in Mississippi. Senator KEFAUVER. You were buying their shingles and reselling them? Mr. PHARIS. Yes, sir.

Senator KEFAUVER. So you wer really in competition, too.

Mr. PHARIS. Yes, sir. Jackson, Laurel, all around Mississippi.
Mr. DIXON. So you did have shingles for sale?

Mr. PHARIS. Yes, sir; we sure did (1559).

A colloquy with Mr. Fry on the same subject follows:

Mr. DIXON. Now you change to an A and B schedule, with 2 price columns, 1 for felt and 1 for the other products.

Mr. FRY. Yes, sir (1632).

Mr. DIXON. May I also point out to you that the product we have been talking about, 15-pound asphalt saturated felt of 4 squares, in zone A-1 is quoted at $2.39. In zone B-1 the same product is quoted at $2.17.

In Knox County, Tenn., which lies in A zone on map No. 4, all of the products except felt are covered by column 1 and are priced at zone A-1 prices, but felt products only are covered by column 2 and are priced at zone B-1 prices.

Why did you find it necessary to place that section of Tennessee or that general area in the lower price category for felt products only when you did not place in the lower price category your other products, such as shingles?

Mr. FRY. To give recognition to the fact that that was a producing point of felt only. That was to justify the competition that we had to meet or probably we would not have established the schedules.

Mr. DIXON. Whose competition are we talking about? Are we talking about the competition of Volasco?

Mr. FRY. Not particularly, no. Under no circumstances could you say that there was, simply because that was the only plant in the county, that was the only competition that we had.

Mr. DIXON. What other?

Mr. FRY. I think you find that every manufacturer with plants around it, and some that do not have plants around, ship and sell in that market.

Mr. DIXON. Nevertheless, we heard testimony here yesterday that Volasco Co. only manufactured felt products. By comparing these two pricelists with the previous list, which was exhibit 5, we see prices were decreased for felt products in that area but increased for the shingle products which they did not manufacture. Mr. FRY. The indication being that we were taking a crack at Volasco? Mr. DIXON. I don't know whether you were or not.

Mr. FRY. I say the indication by virtue of your question, that is what I would assume you to mean.

Mr. DIXON. I would

Mr. FRY. I say again, no, we don't recognize them as individual competition and never have.

Senator KEFAUVER. There was no other manufacturer with a plant in that area? Mr. FRY. But there are other manufacturers, Senator, that ship into that area that may have lowered the felt price. If we found that to be the case, we would meet that competition whether there was a plant there or not.

Senator KEFAUVER. But other manufacturing plants wouldn't ship some distance and have a lower price in Knoxville than at the place where their plant was located, just to reduce the price in Knoxville, unless they had some motive for doing so?

Mr. FRY. I hardly think that is the case, Senator, because in the competitive market that you find established, I think this illustrates it very clearly, within the period of a year you find that the competitive conditions justify these moves or else I am pretty sure they would not have been made (1633).

The following discussion reveals the circumstances under which the different price levels for different roofing products were established:

Mr. DIXON. Who developed the two-column pricing system?

Mr. O'LEARY. I don't know.

Mr. DIXON. Did you do it?

Mr. O'LEARY. No.

Mr. DIXON. Did Fry do it?

Mr. O'LEARY. I don't know. You will have to ask Mr. Fry.

Mr. DIXON. Mr. Fry, I believe, said that he did it.

Mr. O'LEARY. If he did it, he did it.

Mr. DIXON. And you, again, felt it necessary to follow him along?
Mr. O'LEARY. I sure did (1719).