average per distillery is 3,020,000 as against 979,000 for the entire industry average per distillery. That gives you an idea of the difference in size and capacity of the distilleries held by the large companies as against the general average size and capacity of the distilleries in the trade.

That is about all, I think.

Mr. O'CONNELL. When you speak of the 4 companies and the 25 distilleries owned by the 4 companies, does that figure include, or .is it intended to include, all companies affiliated with or controlled by the large companies?

Mr. Buck. My information is that that number, 20 units, includes all subsidiaries held by the main 4 big corporations. That is the position. Most of the subsidiaries, I might say, are wholly owned.

Mr. BALLINGER. What are the names of the four large companies ?

Mr. Buck. They appear on the chart: Schenley Distillers Corporation; National Distillers Products Corporation; Joseph E. Seagram & Sons, Inc.; and Hiram Walker & Sons, Inc.

My investigation is to the effect that they constitute the four largest in the industry when taken together with their subsidiaries.

PRODUCTION BY FOUR LARGEST UNITS COMPARED WITH TOTAL PRODUCTION

Mr. BUCK. The next chart shows the total production of whisky in the United States for the years 1933 to 1938 inclusive, and the percent

of total production by four corporations for each year except 1933. I have taken that off.

Mr. FERGUSON. These are the same four companies ?

Mr. BUCK. The same companies. The four largest units, as I say, in my opinion, in the industry for 1934, produced 60 percent of all the whisky. In 1935 they produced 46 percent, although they apparently produced more whisky than they did in 1934, but less in proportion to the total.

In 1936 the four companies produced 45 percent and still produced more whisky than they did in 1935. Now that was the peak year, as we saw by the total production charts heretofore submitted.

(The chart was marked “Exhibit No. 400” and is included in the appendix on p. 2679.)

Mr. BUCK. Something happened in the industry. What it was, it may have been good sense—I don't know. But anyway it appeared to be the purpose of the industry beginning with 1936 to retard production over their previous years and the total production dropped from 245,000,000 to 155,000,000, and the four companies produced 47 percent of that total.

In 1938 the total production experienced a more radical decline from 1936. It dropped from 245 high in 1936 to 94 low in 1938. In that year, however, the 4 companies produced 64 percent of all

, the whisky.

Mr. BALLINGER. Mr. Buck, between 1937 and 1938 did the large companies purchase many competitors?

Mr. BUCK. 1936 and 1938 ?
Mr. BALLINGER. 1937 and 1938.

Mr. BUCK. As I have said before, I don't know offhand about the purchase of competitiors.

Mr. BALLINGER. Or acquire control by merger, combination, or anything else?

Mr. Buck. That is a matter I think we will have to develop with the witnesses as we go along in the hearing.

As I said before about the other charts, it may have been a laying by of production capacity, instead of an acquisition.

Mr. FURGÐSON. Mr. Buck, when you speak of production you mean the new whisky that is produced by the distillery, without reference to the 4-year?

Mr. BUCK. Yes; that is per year production. It is all each year's new whisky.

Dr. LUBIN. Mr. Buck, I am very much interested in your exhibit 3A, which apparently shows the greatest decline in production occurred in the distilleries that were owned by the so-called smaller companies; in other words, the relative drop in the black section of your bars is much smaller than the drop of the cross-hatched section. I noticed in your chart 5A, which you showed a few minutes ago, that the same was true in regard to the number of distilleries in operation, that whereas the 4 companies had 18 distilleries in 1936 and 20 in 1937 and 20 in 1938, your smaller companies declined in number from 129 in 1937 to 97 in 1938. Does that mean, then, that the actual cutting down in production took place for the most part in those distilleries

Mr. BUCK (interposing). In the smaller distilleries.
Dr. LUBIN. That were independent of these four companies.

Mr. BUCK. That would be the conclusion that I would draw from those figures, Dr. Lubin.

The CHAIRMAN. You may proceed.

AMOUNT OF WHISKY HELD IN BONDED WAREHOUSES BY FOUR LARGE

COMPANIES IN COMPARISON WITH WHOLE INDUSTRY'S STOCKS

Mr. BUCK. The chart entitled "Stocks of Whisky in Bonded Warehouses Held by Four Companies Compared to Total Stocks” which I promised I wouldn't mention but can't help but mention, shows the amount of stocks of whisky in bonded warehouses held by the four large units in the industry from 1933 to 1938, inclusive, as compared with the total of all whisky stocks in bonded warehouses.

(The chart referred to was marked “Exhibit No. 401” and is included in the appendix on p. 2680.)

Mr. BUCK. The percentage, of course, runs from high in 1933. As I said before, we had only 1 month of operation for that year—a high of 71 percent of total over-all control by 4 companies in stocks. In 1934 there was 60-percent control; in 1935, 55 percent; in 1936, 48 percent; in 1937, 52 percent; and in 1938, 54 percent. So you see, notwithstanding thé sloughing off in over-all production as shown by the previous charts, the four companies have developed continuously in their percentage control of the whole stock. In 1936 the production was the high year, and in 1937 the production was way down, yet the percentage increased in the hands of all 4 in the whole of the stocks. The same thing is true in 1938. While production had radically de

clined in 1938—the over-all production in the industry had radically
declined in 1938—still the percentage of the 4 companies in the total
whiskies on hand had increased.

Mr. TUPPER. Mr. Buck, I assume that these stocks may be acquired
by purchase from other manufacturers ?
Mr. Buck. Stocks of whisky?
Mr. TUPPER. Yes.

Mr. BUCK. There is no doubt but what they may be acquired by purchase as well as manufacture, and oftentimes are acquired, of course, by purchase. I might say there, in further explaining the mechanics of the industry, that there is a class of business in the industry known as rectifiers, as distinguished from distillers. This deals with distillers. A rectifier is a man who buys whisky, as a rule; sometimes he produces his own. But as a general rule I think they purchase whisky in the market and blend it or mix it and put it out in that way. So your question as to whether or not stocks may be acquired by purchase as well as production is, of course, correct.

The CHAIRMAN. The percentage of stocks owned by the 4 large companies does not appear to vary greatly after 1934, does it? It is 55 percent for 1935, 48 percent for 1936, 52 percent for 1937, and 54 percent for 1938.

Mr. Buck. That is in the percentage, Senator, of stocks on hand; but my point is there that 1937 and 1938 were declining years in production, yet it had no effect at all on their percentage in the whole stocks. In fact, their percentage in the whole stocks developed, notwithstanding the radical decline in the production of those years.

The CHAIRMAN. Well, if the large companies were reducing their production, it might also be presumed that they were reducing their withdrawals from the warehouses.

Mr. BUCK. That isn't the fact.
The CHAIRMAN. It is not?

Mr. Buck. No; they were increasing their withdrawals. The business of the large companies was increasing each year tremendously.

Mr. O'CONNELL. May I ask a question, Mr. Chairman, on the percentages that are shown of stocks held in bonded warehouses by the four companies? Is that necessarily accurate as to the percentage of whiskys owned by the four companies, or is it taken from records that indicate the persons to whom warehouse-receipts stocks have been given?

Mr. Buck. It is my opinion that the large companies perhaps don't acquire very many gallons of whisky by the purchase of warehouse receipts. That trade is usually indulged in, as I say, by the rectifiers. Of course, there are instances where the large companies may buy warehouse receipts, but that is a negligible factor.

Mr. O'CONNELL. I didn't intend to indicate I thought they did, but are the percentages taken from warehouse-receipts ownership?

Mr. BUCK. No.
Mr. O'CONNELL. I mean how did you arrive at the percentages?

Mr. Buck. They are based on production; the company reports on what they sold.

Mr. BALLINGER. What is your explanation of how they increase their control over the reserve supply, the four companies ?

Mr. Buck. What is my explanation?

Mr. BALLINGER. Yes.

Mr. Buck. One explanation is that they have, of course, tremendous producing facilities. That is one explanation. The other is that apparently they did not quit producing when the general run of distilleries began to quit producing in 1936, or to restrict their production.

The CHAIRMAN. It is true, is it not, that "Exhibit No. 400” shows that in 1938 the four companies produced 64 percent of the total production for that year? Mr. Buck. That is right.

The CHAIRMAN. And that probably would be one important explanation of the situation?

Mr. Buck. Yes. At this point it might be of interest to the committee to discuss the importance of age in whisky, as Judge Davis has already indicated; and I won't attempt to match my knowledge of quality of whisky with Judge Davis, of course, because I come from Maryland.

The CHAIRMAN. We are not going to test the qualifications of the committee members at this time.

Mr. Davis. We have no material with which to make any tests, unfortunately.

Mr. Buck. It is generally believed, however, and it is understood that proper aging is a necessary factor in the production of a palatable whisky. To this point the Congress in 1897 enacted the Bottled in Bond Act, which lays down the qualifications and the methods of producing and aging bottled-in-bond whisky. Bottled-in-bond whisky since that time, in my opinion, has generally been understood by the consumer to be the standard American whisky. Whether this consumer assumption is correct or incorrect, we will not discuss here. Suffice to say that 4-year-old whisky is looked upon generally as being a matured whisky, and might therefore be used as a standard in our consideration of the subject of whisky so far as quality is concerned.

I should like to introduce the chart entitled “Total Stocks of Whisky 4 Years Old and Over Remaining in Bonded Warehouses as Compared with Such Stocks Held by Four Companies."

(The chart was marked “Exhibit No. 402,” and is included in the appendix on p. 2681.)

Mr. Buck. Considering the importance of 4-year-old whisky in the industry

The CHAIRMAN (interposing). You have identified this chart?

TOTAL STOCKS OF 4-YEAR-OLD-AND-OVER WHISKIES HELD BY ENTIRE

INDUSTRY AS COMPARED WITH HOLDINGS OF FOUR MAJOR COMPANIES

Mr. BUCK. Yes, Senator. This chart shows the total stocks of whisky 4 years old and over remaining in bonded warehouses as compared with such stocks held by four companies. This shows the holdings of the four largest units in relation to the total of 4-yearold-and-over whiskies.

Mr. FERGUSON. Mr. Buck, these are the same companies ?

Mr. BUCK. The same four companies are used throughout the entire study. For the first 3 years the chart indicates the percentages held by two companies only, that is Schenley Distilling Corporation and National Distillers Products Corporation. Those two companies according to my information in 1934 held 72 percent of all four-yearold-and-over whisky. In 1935 the two companies held 79 percent of all 4-year-old-and-over whiskies. In 1936 they held 78 percent of all 4-year-old-and-over whiskies. Now, in 1937, we include the four companies, that is, Schenley, National, Seagram, and Hiram Walker. In that year the four companies' percent of control is 91. In 1938, when the stocks had greatly increased, the four-company control over 4-year-old whiskies is still 78 percent of the total.

This point, I might say, is to me very important and very significant because it is my opinion again, and I don't vouch for its value, that 4-year-old bottled-in-bond whisky makes the top level of prices in the industry.

Mr. FERGUSON. May I ask, Mr. Buck-I am not sure whether you have stated for the record or not—but these charts and your testimony constantly refer to 4-year-old whiskies-

Mr. BUCK (interposing). Four years old and over.

Mr. FERGUSON. Is that because whisky that is under 4 years old cannot be legally sold?

Mr. Buck. Oh, no. Mr. FERGUSON. What is it? Mr. BUCK. In this country, as distinguished from Great Britain, whisky may be sold at any age. The only difference is in the standard of the whisky. For instance, no whisky can be sold as straight whisky in this country unless it is, I think, at least 2 years

old now. All straight whisky must be 2 years old, but whisky might be any age and it may be a composition of whisky and neutral spirits, and water, and so forth. It doesn't all have to be straight distilled whisky.

Senator King. The licensed vendor must indicate, must he not, the character of what he is selling?

Mr. Buck. The regulations under the Federal Alcohol Administration Act require the whisky is to be labeled according to its standdard fixed by that Administration; therefore, in order to label any whisky “straight whisky," "straight rye," or "straight bourbon,” it must be, for instance, 2 years old and have complied with other requisites of the standard.

Senator KING. You haven't answered the question. Has your organization made such investigation so that you are able to state whether there is any considerable quantity of whisky or spirits sold by bootleggers or by those who have private stills; or have the stills and the bootleggers been pretty well eliminated ?

Mr. Buck. Senator King, just before you came in we were on that point.

Senator KING. That is all right. I will read the record.
Mr. BUCK. I am perfectly willing to go over it.
Senator KING. I had another committee and couldn't be here.

Mr. BUCK. The statistics available to me as to the gallon basisI don't know whether they are dependable—the report of the Alcohol Tax Unit shows that approximately something over 14,000 distilleries were destroyed last year, 16,000 distilleries were destroyed last year. How much of that is sold, no one knows, Senator, and I don't know any way to find out.