Mr. BALFE. I think we have one distributor only, Mr. Buck, and that is of a very recent date, who handles not any of the other three lines. Mr. BUCK. Where is that distributor? Mr. BALFE. In the Chicago market every distributor we have handles Hiram Walker, Calvert, or Seagram. Mr. Buck. The same comparable price bracket? Mr. BALFE. Hiram Walker line is in most cases comparable to our line in the price brackets, yes. Mr. Buck. Would that be generally true, you say? The VICE CHAIRMAN. Do you solemnly swear, in these proceedings, to tell the truth, the whole truth, and nothing but the truth, so help you God? Mr. KELLY. I do. TESTIMONY OF ARCHIBALD KELLY, PRESIDENT, DISTILLERS CO., LTD., OF DELAWARE, NEW YORK CITY Mr. Buck. Mr. Kelly, will you state your name and business connections, please, sir, and address? Mr. KELLY. Archibald Kelly; address, 35 Helena Ave., Larchmont, N. Y.; occupation, president of the Distilleries Co., Ltd., of Delaware, and also correspondent of the D. C. L., Great Britain. The VICE CHAIRMAN. What do you mean by correspondent? Anybody can write. Mr. KELLY. To keep my company in touch with any matters of interest, in the United States, to them. The VICE CHAIRMAN. You write them on any matters that develop in the United States that are of interest to them? Mr. KELLY. In connection with taxes, duties, labeling, regulations; also to advise and recommend in connection with the appointment of distributors. The VICE CHAIRMAN. You have some sort of relationship with that company in connection with selling their liquors in America ? Mr. KELLY. No; not with selling their liquors in America. Mr. KELLY. The duties I have already outlined, plus putting them in touch and advising and recommending regarding the appointment of distributors to sell their liquors in America. The VICE CHAIRMAN. You are in advisory capacity? The VICE CHAIRMAN. Are you on salary with them or do you have an interchange of service ? Mr. KELLY. Salary. Mr. Buck. Mr. Kelly, I believe you have a Distillers Co., Ltd., in the United States as well as in Great Britain. Mr. Kelly. Yes; the Delaware company. Mr. Buck. How long have you been with D. C. L., of Great Britain ? Mr. KELLY. Since 1930 between Canada and the United States. Mr. BUCK. 1930. Mr. KELLY. I might say, in Canada I was with the Distillers Co. of Canada, Ltd., which is the Canadian subsidiary of the D. C. L., and since I came to the States after repeal, then I have been the president of the Delaware Co. of the D. C. L., Great Britain. Mr. BUCK. And as you term it, a corresponding factor, so to speak. OPERATIONS OF D. C. L. AND ITS SUBSIDIARIES IN MARKETING SCOTCH WHISKY The VICE CHAIRMAN. Does the D. C. L. own this Delaware corporation ? Mr. KELLY. D. C. L. owns 250,000 shares out of 850,000 shares of the Delaware corporation, and the balance is owned by the various gin companies which are subsidiaries of the Distillers Co. of Great Britain. The VICE CHAIRMAN. Let's get that clear. This Delaware corporation is owned either by the parent concern or by the subsidiaries of that parent concern mentioned by you. Mr. KELLY. Between the parent concern and the British gin distilleries they own 100 percent of the Delaware Co. The VICE CHAIRMAN. What is the relationship between what you designate as the parent concern and the gin distilleries? Mr. KELLY. By the parent concern I mean the Distillers Co. and their British gin subsidiaries over there. The VICE CHAIRMAN. What is wrong with my question insofar as its comprehensiveness that the parent concern and its subsidiaries own the Delaware corporation, Who else owns it? Anybody else? Mr. KELLY. Nobody. Mr. BUCK. Mr. Kelly, would you state for the committee the brands of Scotch whisky sold in the United States that are owned or controlled by the D. C. L. of Great Britain ? Mr. KELLY. Well, as far as I can remember, there is the Johnnie Walker whiskies, Haig & Haig, Dewar's, White Horse, Black and White, Vat 69, Green Stripe, Sandy MacDonald, Bulloch Lade, Peter Dawson, Watson No. 10, King William, King George. And I think that is about all I can remember just now. There are many of them but I will be able to give you a list of them. Mr. BUCK. If you find what you have stated is not all, will you give me a list? Mr. KELLY. I would be pleased to. Mr. BUCK. Are all of those brands distributed in the United States through sole agency contracts? Mr. KELLY. Through sole distributorship contracts. Mr. BUCK. Yes; I appreciate the distinction between agency and distributors. I notice you carry it in your contract. In other words, your distributors are not allowed to bind the parent company in any way. That is the point, isn't it? Mr. KELLY. None whatever. Mr. BUCK. But they are the only people in the United States who can get this whisky, these particular brands? Mr. KELLY. These particular brands. Each American distributor has a brand. Mr. Buck. No one else can buy from corporations? Mr. BUCK. As I understand it, the D. C. L. allows a certain percent of the total purchases for advertising in the United States, creating consumer demand. Mr. KELLY. No. Mr. KELLY. In the case of what we call the bigger brands they make a lump sum appropriation irrespective of the sales, which the distributor spends to the best of his ability for that brand in the United States. Mr. BUCK. What would you call the higher brands? Mr. KELLY. Dewar's, Haig & Haig, Johnnie Walker, Vat 69, Black & White, and White Horse. Mr. Buck. And who are the agent's sole distributors of those in the United States? Mr. KELLY. Haig & Haig is Somerset Importers, Ltd.; White Horse, Browne Vintners Co., Inc.; Johnnie Walker, Canada Dry Ginger Ale Co.; Vat 69, Park & Tilford; Black & White, Fleischmann Distilling Co.; and Dewar's, the Schenley Import Corporation. The VICE CHAIRMAN. May I ask, are these distributors that you mention selected as a result of your recommendation under your responsibility as correspondent? Mr. KELLY. No; the most of the original arrangements were made in the latter part of 1933, just before repeal, when the directors of the Distillers Co., Ltd., of Great Britain came over here and selected their distributors. The VICE CHAIRMAN. Is there more than one distributor for a given brand in the United States ? Mr. KELLY. No; we have one sole distributor for each brand. The VICE CHAIRMAN. Are the businesses of these distributors owned to any degree by either the parent concern or any subsidiary of the parent concern, referring now to the British organization ? Mr. KELLY. Do I understand you to say, does 1 Mr. Kelly supplied the committee with a list of the principal brands owned or controlled by Distillers Co., Ltd. (Edinburgh), now being imported by American distributors, in a letter dated March 21, 1939. It was marked "Exhibit No. 432” and is included in the appendix on p. 2720. The VICE CHAIRMAN (interposing). I was asking the question whether or not the business of the distributors is owned to any degree either by the chief British concern or any of its subsidiaries. Mr. KELLY. None; no interest whatever. Mr. BUCK. How many sole distributors do you have outside of New York City ? Mr. KELLY. None. Mr. KELLY. Oh, no; there is S. S. Pierce & Co., of Boston, who have the Glengarry Brand, which is a brand that I omitted to mention. Mr. BUCK. That is a secondary brand, is it? The VICE CHAIRMAN. Will you undertake to develop whether or not there is any relationship in ownership, direct or indirect, among these distributors ? Mr. BUCK. I am working on a report to be filed, Mr. Congressman. The VICE CHAIRMAN. Then I withdraw the suggestion. It would be very interesting, I think, to know about it. Mr. Buck. Of course, some of these sole agencies are subsidiaries of our own large domestic distillers. The VICE CHAIRMAN. That has been developed and put in the record ? Mr. BUCK. That is an acknowledged fact. Mr. BUCK (to Mr. KELLY). Now, suppose a sole distributor should permit Haig & Haig to be sold at what the Distillers Co., Ltd., considered to be less than a reasonable price to be charged to the consumer. What would happen to that contract? Mr. KELLY. The Distillers Co. have no control over the price or policy of their American distributors. Mr. BUCK. Yes; they have no control, but what in practice would take place there? If Í should have an exclusive agency for Haig & Haig in the United States, and say it is now selling at $3 a bottle, and I should permit it to be sold at $1.50 a bottle-suppose the price of Haig & Haig dropped to $1.50 a bottle, what would happen to that contract? Mr. KELLY. Nothing. Mr. KELLY. In the 10-year contract many of them have very many years to go, so it is a question of what I might do 10 years from now. 1 In this connection, Mr. Kelly advised the Committee, in a letter dated May 16, 1939, “that in 1936 the British company acquired in the open market approximately 4% of the capital stock of Schenley Distillers Corporation, a subsidiary of which is a distributor of the brands of one of the British companies.” ware. Mr. BUCK. You also have some 1-year contracts? Mr. KELLY. One-year contracts ? Certainly I would recommend the renewal. Mr. Buck. Even though they were selling Haig & Haig at $1 a bottle. Mr. KELLY. Yes; because we have no concern or interest in the resale price in the United States. Mr. Buck. As a matter of fact, you wouldn't know whether, in turn, these brands of whisky are sold under resale price-maintenance contracts in this country? Mr. KELLY. I have no record whatever of any resale prices of any of our brands, either to wholesalers or distributors. Mr. BUCK. You make no effort to have the geographical distribution of these agencies' contracts? That is obvious from your statement before. Mr. KELLY. None whatever. Mr. Buck. What does Distillers Co., Ltd., in the United States manufacture? Mr. KELLY. The various brands of gins that they acquired from the British companies when we formed the Distillers Co. of Dela The brands are the Gordon's, Burnett's, Boord's, Hill's & Underwood's, and some other ones. The VICE CHAIRMAN. Do those goods indicate where they are manufactured ? Mr. KELLY. They are all manufactured in Linden, N. J. Mr. Buck. Our law, Mr. Congressman, requires that that be done. However, most of them are brands that were manufactured in England at one time, I suppose, and established a reputation as English brands and then were brought to this country and manufactured here. Mr. KELLY. Yes. Mr. BUCK. Do you happen to know the capital, the value, the assets of D. C. L.? Mr. KELLY. No. I know it consists of 10,000,000 common shares, Mr. BUCK. Would £20,000,000 be an approximation, do you think? Mr. KELLY. Approximating the market value of their shares at $20, that would be about £40,000,000. Mr. Buck. Mr. Kelly, would you know the specific amounts allowed on certain brands for advertising in a year in the United States? Mr. KELLY. Yes; I know the appropriation amongst the main brands. Mr. BUCK. Take Haig & Haig as an illustration. Would $241,997 be an approximation ? 1 1 In the letter of May 16, 1939, cited in footnote 1 on the preceding page, Mr. Kelly advised that he has “since ascertained that according to the last published balance sheet of The Distillers Company Limited, as at May 15, 1938, the capital was stated as follows: Ordinary Stock £10, 690, 962 6% Cumulative Preferred Stock- 2, 200, 000 12, 890, 962 As at said date the total assets of The Distillers Company Limited were carried at £34,270,966/28/4d." |