the twenty-first amendment up to that time, and what whisky had been manufactured then was new green whisky?

Mr. BUCK. Judge, I don't know whether the fact that it was green whisky retarded consumption or not. I wouldn't know.

The CHAIRMAN. Well, when we bear in mind the fact that Congressman Reece has testified this afternoon that Tennessee only recently repealed the State prohibition law, I think we will see the explanation for the low consumption in 1934. [Laughter.]

Mr. Buck. I think that is about right. Representative REECE. Has it been advanced at any time as a possible explanation for the decrease in consumption since repeal that the effects are less than they might have been during prohibition?

Mr. Buck. My experience is that the population generally doesn't learn much from experience.

Senator, the price of whisky might have some point there. I don't know. It is there, I mean the figures are there. Of course, the price of whisky now is much higher than it was before prohibition, and the price of all whiskies I think is higher. Too, you know we have had a depression, someone told me, and a lot of people maybe can't buy whisky.

Representative WILLIAMS. Would the consumption of illicit whisky have anything to do with it?

Mr. Buck. That is a question I can't answer. I would say that how much illicit whisky, that is, non-tax-paid whisky, is consumed is more or less a matter of personal opinion. Those are statistics of which I don't know the accuracy. It is about as indefinite as my old friend Judge Perkins once said, as indefinite as a school of mullet in the middle of the Atlantic Ocean. You can't tell. I don't think anyone can tell definitely what amount of un-tax-paid whisky is consumed. There are, however, some very respectable figures on the subject. We have some collection of those figures and would be glad to submit them if they are of interest.

Representative WILLIAMS. Would it be fair to assume that there is considerably more since prohibition repeal than there was before we had prohibition ?

Mr. Buck. That I wouldn't be able to answer. I am sorry, but I just wouldn't have anything that would be dependable on that.

I might say that the reports of the Treasury Department proper show the destruction of considerable production by the Alcohol Tax Unit in this respect. That is, they have destroyed a tremendous number of illicit distilleries through the operation of the Alcohol Tax Bureau. That number I am not exactly sure of.

I have here now a more definite statement on that which shows according to this report that there were approximately 16,000 stills16,142—destroyed by or captured by the Alcohol Tax Unit for the year 1937. That, of course, may account for a considerable amount of un-tax-paid whisky.

Bootleg whisky: That is a confusion of terms to me, because it may mean whisky that is tax paid; I mean there is such a thing as bootleg tax-paid whisky—that is, whisky that is bootlegged, for instance, in Tennessee before legalization. It may be tax-paid whisky.

s The CHAIRMAN. Perhaps we had better stop talking about Tennessee. [Laughter.]

Representative REECE. However, we were not entirely dependent on outside sources. [Laughter.]

Mr. Buck. I am glad to see that someone recognizes home industry. Now, this chart may be of interest to the committee.

LIQUOR PRODUCTION EXCEEDING CONSUMPTION

Mr. Buck. This exhibit, as you will see, purports to show the number of distilleries engaged in the business for the years indicated together with the annual capacity of those production units, and also proposes to show the annual production. This chart is based on fiscal years, whereas the previous charts, Senator, were based on calendar years. I couldn't account for the discrepancies involved here.

(The exhibit referred to was marked "Exhibit No. 398" and is included in the appendix on p. 2677.)

In 1933 it shows 7 distilleries in operation; in 1934 it shows 44; in 1935, 79; in 1936, 112; in 1937, 126, and in 1938, 108. You will notice considerable dropping off there in the number of distilleries from 1937 to 1938.

The CHAIRMAN. Now this chart taken in connection with your previous charts upon production and warehouse stocks indicates rather clearly that the capacity to produce has been steadily increasing.

Mr. BUCK. That is right.

The CHAIRMAN. While the production increased for a time and is now being cut down.

Mr. BUCK. That is right.

The CHAIRMAN. So that here again you appear to have presented a condition which exists in so many industries of a larger production of the commodity than is actually consumed.

Mr. BUCK. That is right.

The CHAIRMAN. So that the question of maintaining the price arises in this industry just as it arises in the farm industry, for example, with respect to wheat.

Mr. BUCK. I think the general rule would apply on that point.

Mr. Davis. Mr. Chairman, of course you have in this industry the importance of aging whisky. I think there is a general effort to get enough whisky in stock that they can sell whisky 4 years old or more, on the whole. Whisky is one of the few things that improves with age. In the case of farm products generally, and manufactured articles, the reverse is true, but a surplus in the whisky business is not such a liability as it is with regard to many other products.

The CHAIRMAN. Well, Judge, the committee is very glad of course to hear from another Tennessee expert.

Representative REECE. Referring again to the chart that you had on display a few moments ago—it is not necessary to exhibit it"againthe chart showed some 460,000,000 gallons in bonded warehouses.1 Mr. BUCKS. Stocks on hand; yes. Representative REECE. Is all of that whisky 4 years old ?

Mr. Buck. Oh no, no. I have a further chart on that that shows what proportion is 4 years old.

In "Exhibit No. 398" the principal value perhaps to the committee, as Senator O'Mahoney said, is that it shows the tremendous production possibility of the industry as it now stands. It seems as though everyone tried to produce as much whisky the first 2 or 3 or 4 years as they could. It was sort of a race to get surplus stock to age,

the idea being that the whisky could age, and in doing that they have established in the industry an annual capacity of 434,986,000 gallons, whereas the necessity, according to consumer demands, would be approximately 70,000,000 gallons.

Mr. Katz. Mr. Buck, is a license from the Alcohol Administration necessary before a distillery may be built?

Mr. BUCK. That's right; before it may be operated.

Mr. Katz. Well, in passing upon an application for a license, do the statutory standards require the administration to take account of the relationship between capacity and current demand?

Mr. BUCK. No.
Mr. Katz. What sort of standards are laid down in the statute ?

Mr. BUCK. The standards are more or less those, you might say, that pertain to social questions, that is whether or not the man has been previously convicted of crime and whether his trade connections are such as that he will likely comply with the law in the manufacture of whisky, and things of that sort. The Alcohol Administration has no authority in the issuance of permits to restrict or to allocate production. It may be that in the early days—I am not quite clear under the codes that were set up under the N. R. A. whether that condition prevailed or not, I am inclined to believe it may have prevailed at that time.

You will observe, also, from this chart the fact that whereas we have now 108 distilleries with a production capacity of 434,000,000odd gallons, in 1914 we had 352 distilleries with a production we don't know. We don't know what the potential possibilities of the distilleries were before prohibition, but we know that they did produce 88,000,000 gallons annually.

Representative WILLIAMS. Has the Administration the right under the law to revoke one of these permits?

Mr. BUCK. Yes, sir.
Representative WILLIAMS. Has that been done?
Mr. Buck. Oh, yes; in a number of cases.

Representative WILLIAMS. Does that account for the reduction of the number there in 1938?

Mr. Buck. No; not in this chart. The Administration has revoked numbers of permits, some for nonuse. The statute provides that if a permit isn't exercised for a period of 2 years it may be revoked and then it may be revoked in addition after violating the other provisions of the statute relating to labor or trade practices under the statute. It wouldn't show here because this chart is based upon distilleries in operation, annual capacity and production. I don't think it would show up there, and I am sure that doesn't account for it, because enough distilleries of any consequence have not been put out of business to make any appreciable dent in that situation.

As I say, it might be significant to notice that in 1914 we had 352 distilleries in operation, according to our information, whereas in 1938 we have 108 distilleries. We have less than one-third the number of distilleries now that we had in the old days.

Mr. BALLINGER. Mr. Buck, were any distilleries bought up by the large companies and closed down?

Mr. BUCK. During what period ?
Mr. BALLINGFR. This period where it drops from 126 to 108.

Mr. BUCK. Well, I would say to no appreciable extent. Certain stocks of whisky have been bought by the large concerns, but the distilleries haven't changed hands to any appreciable extent. They may switch them around from one subsidiary corporation to another, but very few change in management. That is my information on the subject.

Still, I say we have apparently one-third of the distilleries, less than a third as many distilleries now as we had in 1914.

Mr. Davis. Mr. Buck, in giving the number of distilleries operated, you have it in 1938 as 108. Do you mean by that there are that many companies operating distilleries or that many physical distilleries in operation?

Mr. Buck. I mean by that that those are physical distilleries.

Mr. Davis. Have you any figures or information as to how many of those distilleries are owned, two or more, by an individual company?

Mr. BUCK. Yes, Judge; I think we have that on the next chart.

Again, you can see that for 1914 we were producing in excess of 88,000,000 gallons of whisky a year, whereas in 1936 I think we produced 245,470,000. That comparison may be of some interest as we go along with this matter.

Representative WILLIAMs. But it appears that the still per unit produces about seven times as much as the old one. Is that right?

Mr. Buck. I think that is about right; yes, sir. I account for that in my own way by the fact that the whisky industry now is in the hands of large companies and great progress has been made in distilling apparatus, as always follows the integration of commercial needs, and the large companies have developed, or other people developed for them, new distilling apparatuses that are much largermass production, you might say, as compared with single production before.

Mr. Davis. In connection with this question of acquirement, you may be intending to go into it later, and if you are I don't want to interject the question at this time; but I should like to inquire whether you contemplate making any explanation of the buying up by the major companies of old whisky brands which during the past have contained more or less reputation and goodwill.

Mr. BUCK. Judge Davis, that is a question that I couldn't ascertain from statistics or history-I could from history, I know the change of hands, of course, of old brands in the industry; but I think it is one of the points that ought to be discussed when we bring the witnesses on for examination. I think that would be the appropriate and best place to develop that point.

Representative REECE. May 1 ask a question, if you please? Do you intend to make a study, or have you made a study, to find out the reason for the falling-off of the number of distilleries since 1937, with a view of ascertaining to what extent they may have been bought up by other larger distilleries and sold by the purchaser?

Mr. BUCK. I am afraid that we haven't the answer to that, Congressman.

Representative REECE. That may be developed later.
Mr. Buck. It may be developed by witnesses in the hearing.

Mr. Davis. In that connection I wish to call attention to the fact as shown by the figures on the chart, that while the number of distilleries operated in 1937 dropped from 126 to 108 in 1938, yet the annual capacity only dropped from 435,814,000 gallons to 434,986,000, or a relatively small reduction in capacity, not at all comparable to the reduction in numerical distilleries operated.

Mr. Buck. That, Judge, would indicate to me that the distilleries' capacity has remained approximately the same, and I might also say that this chart relates to distilleries in operation. It doesn't necessarily mean that the distillery has been destroyed or even changed hands. It may mean that, as the figures indicated on the previous chart, they have been closed for the purposes of preventing a larger accumulation of stocks. They may have been closed and remained in status quo. The CHAIRMAN. You may proceed.

Mr. BUCK. Just for the sake of comparative figures, we undertake to show, in an approximate way, the relation of four of the largest units in the industry to the whole structure, and the chart we introduce now is of interest because it does compare in an approximate way, as I have said, the four-company position as against the entire industry in repect to distilleries operated and whisky produced.

(The chart referred to was marked "Exhibit No. 399" and is included in the appendix on p. 2678.)

The CHAIRMAN. You are now referring to the chart showing the amount of whisky produced by the four major companies as compared with the entire industry?

Mr. Buck. Yes, sir; the entire industry, you see—this is on the calendar year for 1938—had 97 distilleries in operation. Four companies operated 20 of those 97 distilleries. That figure may not appear so important until you consider the production. The entire industry for 1938, for instance, produced 94,990,000 gallons. The 4 companies produced 60,400,000 gallons of that total. That gives you an idea of how large in production capacity the 20 held by the 4 companies may be as contrasted against 77 for the entire industry. Twenty held by the four large companies produced approximately two-thirds of the total for the year 1938, and, of course, for the year 1936 the percentage is much higher. It is 111 as against 245.

Mr. BALLINGER. That is all whisky, isn't it, Mr. Buck?
Mr. Buck. Everything I am showing you is whisky.

Mr. BALLINGER. "There is a higher concentration in the 4-year-old whisky?

Mr. BUCK. That is to be brought out in its regular order as we progress.

The third break-down on this chart shows the entire industry as an average per distillery. The entire average for the entire industry, per distillery, is 979,000 gallons production. The four companies