Mr. EPHRAIM. If you reach those figures there might be a saving. I can't tell you offhand just where the point would come in; the point where the savings would be likely to stop, but beyond a certain point-as you say up to a certain point-my savings would be in the manufacturing by having a larger production; beyond that point it might be in the selling.

Mr. HINRICHS. I sympathize with your desire as an individual to have a national market, but as one interested in consumers it isn't necessarily imperative that you as an individual should serve a national market. Have you been able to establish a business which will service a local market? I was going to ask you if you were going out in the near future, but can you establish yourself, have you been able to establish yourself, in that local market so that you are manufacturing and distributing to consumers economically within that limited area?

Mr. EPHRAIM. Well, my business as it is today is not a local business; it is done with individuals in various parts of the country. As a matter of fact, it is essentially a mail-order business; it is not a local business, and it has been severely limited because there has been no way of reaching people. In other words, if I came into the city of Washington I couldn't do a local business without really advertising.

The CHAIRMAN. Any other questions? Thank you very much, Mr. Ephraim.

(The witness, Mr. Ephraim, was excused.)

You have two more witnesses? You will call them tomorrow morning? The committee will stand in recess until 10:30 tomorrow morning and let the Chair express the hope that the members will assemble on time.

(Whereupon at 4: 50 p. m. an adjournment was taken until Friday, May 12, 1939, at 10:30 a. m.)

INVESTIGATION OF CONCENTRATION OF ECONOMIC POWER

FRIDAY, MAY 12, 1939

UNITED STATES SENATE,

TEMPORARY NATIONAL ECONOMIC COMMITTEE,

Washington, D. C.

The committee met, at 10:48 a. m., pursuant to adjournment on Thursday, May 11, 1939, in the Caucus Room, Senate Office Building, Senator Joseph C. O'Mahoney presiding.

Present: Senator O'Mahoney, chairman; Representatives Reece and Williams; Messrs. O'Connell, Lubin, Henderson; and Lowell J. Chawner, Chief of Division of Economic Research, Bureau of Foreign and Domestic Commerce, alternate for Mr. Patterson.

Present also: Messrs. D. E. Montgomery, Consumers' Counsel, Agricultural Adjustment Administration; and Willis J. Ballinger, Federal Trade Commission.

The CHAIRMAN. The committee will please come to order.

A few days ago, during the presentation of the hearings on beryllium by the Department of Justice, when the witness, Dr. F. H. Hirschland, was on the stand, I asked him for some information in respect to the capital structure of certain subsidiary corporations of the Metal & Thermit Corporation, of which he is an officer. That report has now been received and it is here presented for the record. (The report referred to was marked "Exhibit No. 538” and appears in appendix, Hearings, Part V, p. 2298.)

The CHAIRMAN. Will you call your first witness?

Mr. MONTGOMERY. Mr. Walker.

The CHAIRMAN. Do you solemnly swear the testimony you are about to give in these proceedings shall be the truth, the whole truth, and nothing but the truth, so help you God?

Mr. WALKER. I do.

TESTIMONY OF L. R. WALKER, SUPERVISOR OF BUILDING MATERIALS DEPARTMENT, SEARS, ROEBUCK & CO., CHICAGO, ILL.

Mr. MONTGOMERY. Will you give your name, please.

Mr. WALKER. L. R. Walker.

Mr. MONTGOMERY. Address?

Mr. WALKER. Sears, Roebuck & Co., Chicago, Ill.

Mr. MONTGOMERY. What is your position with the company, Mr. Walker.

Mr. WALKER. I am a supervisor.

Mr. MONTGOMERY. Of what division?

Mr. WALKER. Having charge of the building material end of our business.

Mr. MONTGOMERY. Now, Mr. Walker, before you go into your testimony there is a point I want to make. I understand your testimony is going to involve at one point, at least, a criticism of certain kinds of advertising on the part of your competitors that you have encountered. Is that correct?

Mr. WALKER. Yes, sir.

Mr. MONTGOMERY. You are going to offer that testimony?

Mr. WALKER. Yes, sir.

Mr. MONTGOMERY. I want you to state for the record whether or not, when you offer that specific criticism, you are launching an attack on advertising.

Mr. WALKER. I can hardly do that. Advertising has really built our business. We are the largest newspaper advertisers in the country, in addition to spending $8,000,000 a year on catalogs, and we feel advertising has made us.

Mr. MONTGOMERY. And you think it would be a fair statement that I have not brought you here to make an attack upon advertising? Mr. WALKER. I hope not, because I would not make a very good witness.

NEED FOR STANDARD RATINGS IN MARKETING HOUSEHOLD EQUIPMENT

Mr. MONTGOMERY. Now, Mr. Walker, tell us first about the plumbing and heating part of your work. I don't want you to go into a general discussion of the work. I think you can state first of all what the plumbing and heating equipment means in the cost of home building.

Mr. WALKER. In a new home the plumbing and heating part of the home is about 16 percent of the cost of a home. In modernizing it runs from $250 to $1,500 per job, and it is one of the few mechanical parts of a home. It is something that has to perform and function, consequently it is quite necessary that it should have a long life and be functioning right.

Mr. MONTGOMERY. Well now, what has been the development of the art in this plumbing and heating industry over recent years?

Mr. WALKER. Well, since 1927 the industry has been very, very badly depressed. It got down to about 15 percent of normal during the thirties, consequently there has been very little money in the industry to develop improved methods and improved products. But in other industries there has been quite a lot of technological development that could be used in the plumbing industry if manufacturers had the money to spend. A few manufacturers have spent enough money to improve their product but the majority have not because they couldn't afford it.

Mr. MONTGOMERY. Can you give some particular illustration of how improvements have been made in the development of some of this equipment?

Mr. WALKER. Yes. In the case of furnaces, because of the art in the casting and the molding of furnaces the method was quite limited for many years and everybody made the same type of product. Because of the similarity in the product, a measurement of the width of the fire pot of a furnace was used in rating the capacity of the furnace. That went on for many years.

4

Mr. MONTGOMERY. Let me get this clear. You mean then that the width of the firepot became through usage in the trade a sort of standard by which a furnace was rated?

Mr. WALKER. Yes, sir.

Mr. MONTGOMERY. And by which it was sold to consumers?

Mr. WALKER. Yes, sir; and the measurement used was the widest point in the fire pot. Now, because the automobile industry showed so much improvement in casting and molding, it is possible today to make a furnace or a cast-iron product with a much thinner wall, and a much straighter side than in the former days. Formerly it was necessary to have quite a slant on it in order to drag it out of the sand. We call this the drag in molding. When the automobile industry came in they learned how to get straighter sides, how to get thinner walls, and how to do a number of things we never knew before. Consequently today we can make a furnace that has much more capacity with the same size fire pot that we had before. Mr. MONTGOMERY. Under present methods the fire pot may have a larger or smaller capacity but still have the same measure? Mr. WALKER. Yes.

Mr. MONTGOMERY. You can illustrate that?

Mr. WALKER. Yes; the chart.

(The chart referred to was marked "Exhibit No. 539" and appears on p. 3416.)

Mr. WALKER. As an example, if you will visualize this furnace, here, the fire pot

Mr. MONTGOMERY (interposing). Mr. Walker, in talking about the chart, if you will indicate the parts of the chart you are pointing at it will help the final record, because that will be reproduced in the record.

Mr. WALKER. Yes. If you visualize the furnace, this is the fire pot here.

Mr. MONTGOMERY. Where is it on the chart?

Mr. WALKER. Right here; and here is the same thing here.

The CHAIRMAN. The point, Mr. Witness, is that saying "here" or "there" in the record means nothing, so if you will just define the part of the chart to which you are referring, then the reader will know what you are indicating to us by your gestures.

Mr. MONTGOMERY. Each part of your chart has a little label on it, so will you just refer to that?

Mr. WALKER. You mean this? Do I define that by saying it is the fire pot?

Mr. MONTGOMERY. The upper picture, or something like that. Mr. WALKER. In the upper picture here is the fire pot. Now, formerly it was necessary to have a slant similar to this in order to drag out of the sand.

Mr. MONTGOMERY. Similar to the furnace A design.

Mr. WALKER. Yes; shown on the right of the chart. In the last few years we have been able to straighten that out as you see it on the left side of this chart.

Mr. MONTGOMERY. Shown as furnace B.

Mr. WALKER. Shown as furnace B. Now, consequently, the measurement as the consumer knows it today, an 18- or 20- or 22-inch furnace, is a measurement shown from here to here in A. But by