530. Report of the Bureau of Investigation of the American 532. Bulletin of Consumers Foundation, Inc. No. 1, January 8, 533. Publications of Home-Owned News, issues dated, August, Excerpts from "Tide Magazine" re hidden taxes. News letter from the Institute of Consumer Education, Bulletin of the Institute for Propaganda Analysis, Dec. 1, 535. Pamphlet "Why Pay Taxes in the Dark?" published by 537. Memorandum, proposing a consumer agency in the Federal Government 538. Appears in Hearings, Part V, appendix p. 2298. accepted size designation.. 3415 3416 3418 3419 540. Illustration: 5 section boiler.. 660. Letter, dated May 29, 1939 from D. E. Montgomery, Con- 1. Bills H. R. 4402 and 5530, 76th Cong., 1st sess., fix- 3475 3487 (1) 2. Farmers' Bulletin #1821, U. S. Department of Agri- 21. U. (1) 3. Consumers' Guide, April 25, 1938, Vol. V. No. 2, re (1) 4. Six photographs from Bureau of Agricultural Eco- 5. Excerpt from Consumers' Guide for May 15, 1939, re (1) (1) 1 On file with the committee. INVESTIGATION OF CONCENTRATION OF ECONOMIC POWER WEDNESDAY, MAY 10, 1939 UNITED STATES SENATE, TEMPORARY NATIONAL ECONOMIC COMMITTE,, Washington, D. C. The committee met at 10:38 a. m., pursuant to adjournment on Tuesday, May 9, 1939, in the Caucus Room, Senate Office Building, Senator Joseph C. O'Mahoney presiding. Present: Senators O'Mahoney, chairman, and Borah; Messrs. Henderson, Lubin, O'Connell, and Davis. Present also: Mr. D. É. Montgomery, Consumers' Counsel, Agricultural Adjustment Administration; Milton Katz, Department of Justice; Wilford L. White, Department of Commerce; Willis J. Ballinger and Anderson Tackett, Federal Trade Commission. The CHAIRMAN. The committee will please come to order. The committee has requested Mr. D. E. Montgomery, Consumers' Counsel of the Agricultural Adjustment Administration, to take charge of the presentation this morning of the results of the consumer study which has been under way for some time by this committee. Are you ready to proceed, Mr. Montgomery? Mr. MONTGOMERY. Yes, Mr. Chairman. I would like first, Mr. Chairman, to make an opening statement telling what we are going to do with this testimony, and what we hope to show. STATEMENT BY D. E. MONTGOMERY, CONSUMERS' COUNSEL, AGRICULTURAL ADJUSTMENT ADMINISTRATION, WASHINGTON, D. C. THE CONSUMER MOVEMENT Mr. MONTGOMERY. Mr. Chairman and members of the committee, 1 wish briefly to explain who these witnesses are and why they have asked this opportunity to appear before you. Four of them, Mrs. Belester, Mrs. Roller, Dr. Ayres, and Miss Campbell, are leaders in consumer organization work and are at the same time managers of family households. They will bring you the story, in its different parts, of the chaotic, uninformed, and unenlightened circumstances under which the average consumer must spend money for the service of family and individual needs. Mr. Masters is an officer of one of the major information services which consumers have set up in attempt to solve by their own devices the innumerable and perplexing riddles of the market place. He will further expound the consumer's spending problem, based upon his experience in serving 80,000 consumer families whose subscriptions support the service which he represents. Following the direct consumer testimony you will hear the testimony of two manufacturers, Mr. Ephraim, who is engaged in business on a small scale, and Mr. Walker, who is associated with one of the largest manufacturing and distributing organizations in the world. Their testimony will tend, we anticipate, to confirm what the consumers have told you, approaching the same questions from the manufacturing and selling side of the retail transaction. Mr. Maddux will testify as a professional, paid purchaser of consumer goods, based upon his experience as purchasing agent of Hamilton County, Ohio. A final witness will sum up the significant points in the testimony, particularly those that may relate directly to the further investigations and reports and recommendations of your committee. All of these people come to you as persons qualified to speak for and of that growing development of popular interest which now is generally referred to as the consumer movement. I venture the prediction that this committee will hear the testimony of no witnesses who will discuss matters touching so directly and so intimately the immediate practical problems of all the homes and families of the Nation. Everyone, as is stated so frequently, is a consumer. The consumer is everybody. That is not to say, however, that the consumer interest and the public interest are one and the same. They are not. The consumer's is a special interest, just as the interests of the wage earner, the employer, the professional man, the farmer, the taxpayer are special interests. The consumer's special interest turns upon the spending of his income for goods and services-what he gets for his money, how much money he spends to get it. This together with his occupational, taxpaying, voting, and sundry other interests make up the whole citizen. All of these interests of all citizens make up the public interest. These spokesmen of the consumer movement come before you, therefore, as specialists in the expenditure of family and personal income. The movement for which they speak is nothing more nor less than the growing recognition of this money-spending interest on the part of rapidly increasing numbers of people. It began in 1927 when Stuart Chase and F. J. Schlink published a book called Your Money's Worth which stimulated among many people that curiosity about commodities which is, so to speak, the motive power of the consumer movement. With the increasing severity of the depression this interest spread rapidly and stimulated a great variety of activities, including a marked revival of interest and development of consumers' cooperation, a movement which had survived a long history of success and failure in earlier years. The consumer movement has been sufficiently described and catalodged in print to require no detailed exposition at this point. Most recent of these descriptions is in the April 22 issue of Business Week, a monograph which describes the many angles and major current problems of the movement and states the case fairly from the business point of view, and, with one or two exceptions, from the consumer point of view also. Suffice it to note only that the consumer movement embraces a wide variety of programs, ranging from education on specific commodities and general education on consumer economics through many kinds of organized activity on various economic and legislative fronts, and on to the development of cooperative purchasing of consumer goods on a large and well-organized business scale. No census of the consumer movement has been or could be attempted. It enters into the programs of many of the large organizations of women; it is reflected in the curriculum of hundreds of high schools and many colleges; in one way or another it must have brought millions of people within some phase of its educational or action program. Rough estimates have been made of the number of people who have made some contact with the consumer movement. Such an estimate by the Crowell Publishing Co. last year said that more than 5,000,000 women in various organizations are affected by consumer educational material and are more or less active in efforts to secure legislation favorable to consumers. I am filing with the committee an excerpt from the Journal of Marketing of July 19381 which quotes this estimate and lists some of the organizations which have taken some part in the consumer movement. In addition, I might say, the most recent reports from Government sources indicate that more than 1,375,000 people are members of retail cooperative societies, including both the urban and the farm purchasing groups. Running through all the varied aspects of the consumer movement is the central thread, its unifying principle, so to speak, which is its insistence that consumers be given opportunity to make sensible choices in spending their money for the ordinary purposes of living. This means that consumers want facts-facts about goods, facts about prices, facts about the comparative value and usefulness of commodities offered for sale. "The consumer wants to know." That is the main stem of the consumer movement. It has It has many ramifications. reaching out into numerous special areas where the ultimate consumer comes into contact with the world he lives in. One excursion of this organized curiosity deserves the special attention of this committee. A delegation of consumer leaders representing many thousands of consumers in their membership came to Washington 15 months ago to confer on questions of government and the consumer. A committee of this conference submitted to the President on February 24, 1938, a proposal that just such an inquiry as your committee is now engaged in be undertaken by the Congress." I shall file a copy of the proposal which was submitted to the President on that day. I quote from it only the following [Reading from "Exhibit No. 503"]: * In our concern for production we have allowed it to exploit consumption and, in the process, to cripple its customers for whom, and for whom alone, it confessedly exists. In a democracy no economic system makes sense which is not run so as to maximize consumption, yet our economic system is primarily run to maximize profits and the consumer takes the hindmost. * * * A major need at present is to put current business under the microscope to ask: How does it operate and, operating as it does, how and where does it promote or curtail the welfare of our people who live by it and its products * * *? Self-regulation at a round table must include self-regulation by the whole people through government participation. Government can play an effective role only if its policies are based upon an understanding of what is wrong and what needs to be done. The consumer can play an intelligent role at that table only when he knows the facts and how they affect him, and he is powerless to collect these facts himself. 1 Subsequently entered as "Exhibit No. 504," see appendix, p. 3458. "Subsequently entered as "Exhibit No. 503," see appendix, p. 3457. While the aims of the consumer movement have very direct practical bearing on the every-day problems of the average American family, they bear also in a significant way upon the questions before your committee. Usually the theory and practice of competition in the business world is discussed in terms of the activities of business organizations. For example, are the business units in an industry competing in the sale and purchase of goods, or are they controlling their markets by combination, conspiracy, or otherwise? However, it should not be forgotten that the assumed virtues of competitive enterprise depend for their validity upon the belief that the public at large shall pass final judgment upon the goods and services which such enterprise produces. What I am saying is that in a system of free enterprise the choices which consumers make in the spending of their money provide the ultimate test of competitive virtue and distribute the rewards according to merit. Unless the consuming public is in a position to make this final judgment of approval or disapproval, there can be no assurance that business enterprise is serving the public interest. Insofar as consumers may not be able to know where their own interest lies in the selection of goods and services, they cannot exercise this power to shape the affairs of industry toward maximum satisfaction of their wants. The present strength and vigor of the consumer movement derives obviously from the realization by a great and ever-increasing number of consumers that somehow they do not quite succeed in exercising this final judgment over the products of industry and commerce. They find themselves the subjects of a great mechanism of organized sales effort. They suspect that their wishes are not the sole determining factor of the kind and quality and price of commodities offered for sale. And, most important of all, they know that their choice between one kind of merchandise and another is necessarily determined in large part by prejudice, hunch, and ignorance, because the facts about merchandise upon which they might make an intelligent choice are not disclosed to them in terms that relate specifically to their needs as purchasers and users of commodities. In the testimony which follows we propose to show you by examples in how many ways it is true that consumers cannot spend money intelligently to serve their own interests. We believe that we describe a general condition-confusion and disorganization of the market place at its retail level where commodities pass through the final transaction and into use. We believe that whatever else the committee may recommend to improve the functioning of economic affairs toward abundance, stability, and security, there can be no assurance that the benefits of such improvements will pass to the consumer in tangible and specific additions to the standard of living unless and until the consumer as a buyer of goods is given an active and significant role in the economic system. There can be no free enterprise if the citizen as a consumer is not also free. The consumer cannot be free so long as he must remain in ignorance and confusion on how to spend his money to get what he needs and wants. There is, of course, the alternative that we abandon the system of free enterprise and intentionally adopt a controlled economy, in which case it is likely that consumers will be told, rather than asked, what they shall purchase and use. The rather wide extent to which consumers today are more told than asked what they wish to buy is prob |