Dr. STURGES. We couldn't come out, I don't believe, in advertisements, for example, and advocate on Saturday that there ought to be three drinks for the price of one on Monday.

Mr. O'CONNELL. It may be very good business.

Dr. STURGES. It mighť be technically good business for the time being, but I think that my principals' and certainly my own feelings are that that would be quite unfortunate.

Mr. Davis. You want us to understand that the purpose of your principals in undertaking to maintain prices to the consumer of alcoholic liquors is altruistic and from the standpoint of the morals and health of the consumer?

Dr. STURGES. I would like to say this to you, Judge, and it is as direct an answer to your question as I can make, granting the implications of your statement: That I am very confident that the members of the Distilled Spirits Institute are very sensitive to the fact that there is and should be a limitation on consumption of distilled spirits by the consuming public, that the attitude is quite distinct from that of the manufacturer of cornflakes or the producer of milk.

Mr. Davis. Do you know of any members of the industry who have refused to sell at fair prices for that reason?

Dr. STURGES. No, I do not; no.

BOOTLEGGING PROBLEM INVOLVED IN INCREASED TAXATION

Mr. NATHAN. In line with that matter of prices, would you mind telling us very briefly the position you took before the tax committee of New York State?

Dr. STURGES. I took the position before the New York Tax Committee that I felt that if the tax were raised from $1 to $1.50 per gallon, the excise tax, that it would be very unfortunate, that it would be unfortunate in the matter of probably inviting increased distribution of un-tax-paid distilled spirits.

Mr. NATHAN. In other words, you believe that the bootlegging would be increased substantially by higher taxes?

Dr. STURGES. That is my fear; yes. What the precise point is, of course, I do not know and I couldn't state it, but I think the jump from $1 to $1.50 in New York goes over the limit.

Mr. NATHAN. In other words, you believe there is a certain point at which when prices get too high the bootlegging interests come in and too low you may get overconsumption relative to certain moral standards.

Dr. STURGES. I have that feeling; yes, sir.

Mr. O'CONNELL. Doctor, as a representative of the Institute and of the industry, your primary concern in all probability was that to the extent that the amount of illegal liquor consumed would be increased that the amount of liquor sold by the industry would be decreased. Isn't that a fair statement?

Dr. STURGES. I don't think I quite follow you.

Mr. O'CONNELL. I say that in taking the position that you took before the tax committee in New York, your primary concern, as I view it, was that the result of an increase in the duty and as a result

of that an increase in the amount of illegal liquor consumed, the amount of liquor sold by members of the industry would be decreased.

Dr. STURGES. Certainly.

Mr. O'CONNELL. Your primary interest is a business one and not the morals of the situation.

Dr. STURGES. That is true. I would rather have the legalized taxpaying industry have the business than to have what we call the bootlegging, non-tax-paying industry have it.

Mr. O'CONNELL. And to that extent, the Institute is really interested in price, is it not?

Dr. STURGES. You may say that, when you point out the inconsistency of a position with respect to resale price maintenance. I can only say I haven't any final conviction on the use of the Fair Trade Act. It is experimental. I would like to learn more about it.

Mr. O'CONNELL. Generally speaking, would it be fair to say that it is the position of the Institute to oppose attempts on the part of State legislatures or the Federal Government to increase the tax on liquor?

Dr. STURGES. No. I would like to state very definitely what I feel is our position and will continue to be our position; that what is done by the several States and what is their rate of taxation is none of the distillers' business unless it comes to a particular situation which seems to involve some social implications; and the tax case I so conceived, and that I should appear before the committee to present my point of view in behalf of the industry. Mr. O'CONNELL. In New York the tax rate was $1 a gallon. Dr. STURGES. That is true.

Mr. O'CONNELL. And the industry would feel that any attempt on the part of a State legislature, I take it, to increase the tax on liquor above $1 a gallon would by virtue of the social implications be something that the Institute should oppose.

Dr. STURGES. That is correct. I think they have gone practically high enough. We have some suggestion in Wisconsin, I believe, that the tax be raised from $1 to $2. On the other hand, the State of Connecticut proposes to increase its tax from 60 cents, my last information is, to 80. We will not go to Connecticut.

Mr. O'CONNELL. Did the Institute oppose the increase of the Federal tax from $2 to $2.25 ?

Dr. STURGES. I think that they had some difficulties in their points of view as a matter of membership and took no Institute position at that time.

Mr. O'CONNELL. It is pretty difficult to lay down a hard and fast rule for the Institute.

Dr. STURGES. It is.

Mr. O'CONNELL. But it is a matter of the social implications of an increase in the tax rather than the effect upon the sales of the members of the Institute.

Dr. STURGES. It is two ways of saying the same thing. I shall have to have it imputed to me that I am selfishly looking out for my principals. On the other hand, there is the other attitude which if espoused by a professor, for example, would be looked upon as a social job.

Mr. O'CONNELL. But any other component part of the price structure that goes to make up the retail price is subject to the same social implication as the tax.

Dr. STURGES. Well, to impose the increase of a tax from $1 to $1.50 on the present resale price maintenance program in New York is at least a fortiori a case of opposing the tax increase. Maybe there are counteracting and other considerations relating to resale price maintenance which would not be controlling with respect to the question of tax increase-offsetting justifications. Possibly if there were 100

percent law enforcement and the illicit liquor was kept out and that assurance obtained, there would be no occasion to object to the increase in the tax on a social basis. Whether the most effective way of getting more and more revenues is to increase the rate or to decrease the rate, that is another consideration. I relied on expert authority, I thought, the public authorities of the control board who indicate that it is desirable to decrease the rate of tax.

Mr. BUCK. Doctor, I was interested in the statement that you would like to appear to present the views of the industry. Do you mean that your membership of 17 distillers as against 80 who are not members should be taken as representing the industry, or do you mean that you just appear for your principals?

Dr. STURGES. There were many—I will say some—I have forgotten how many—who also requested us to appear in their behalf, distillers and also groups of retailers. It was, in other words, a consensus of trade opinion, as near as I could describe it, that the

proposed tax increase in New York was undesirable.

Mr. BUCK. As I understand it, you oppose tax increase because it would increase bootlegging, yet you don't feel that any activity is required in order to reduce the price of liquor at all.

Dr. STURGES. I have no basis for a judgment.

Mr. Buck. But aren't you dealing with prices, concerned with prices, when you oppose a tax on that principle ?

Dr. STURGES. I grant that is true. There may be inconsistencies 7

in one's behavior, without one being required to justify them at the moment.

SALARIES OF THE DIRECTOR AND PUBLIC RELATIONS COUNSEL

Mr. BUCK. To get back to the question I asked you relative to your public relations man, the committee would like to know, I am told, what you base your objections upon. On what ground do you object to disclosing the information that I have asked for?

Dr. STURGES. You mean the salaries? I have tried to make it as clear as I could, Mr. Buck. I am sure I have.

Mr. Buck. Do you hold this committee hasn't the authority?
Dr. STURGES. Not at all. This is salaries, now, of my staff?
Mr. Buck. That's right.

Dr. STURGES. I have tried to indicate to the committee that I am very happy to have them have it, receive it in confidence. I tried to state why I did not wish to submit it here, and that reason is a matter of personal protection, protection for them, and protection for me in my own office.

Mr. BUCK. Protection from whom?

Dr. STURGES. Salesmen who find out what the salaries are. I may say my salary was once published in a newspaper; it was inaccurate, and why should I be pestered with people; I don't want to buy many things that many people would like to sell. I am perfectly willing that the salaries should be disclosed to you as a committee, and see that you get it, personally—each one of you, or otherwise. If the committee insists that it is important, controlling, I will yield.

Mr. BUCK. I have no interest in it. I just assumed, so long as the committee asked the question of Dr. Doran when he was on the stand, that the committee was interested in that phase of the investigation, and I ventured the question. I personally don't give a rap. Dr. STURGES. I am perfectly willing to tell you. Mr. Buck. What yours is or what his is.

Dr. STURGES. You may have them. I will tell you outside. I am merely trying to keep it out of the public record.

Mr. Buck. The committee was interested and asked Dr. Doran, and I assume they were interested in this question.

You put it on the ground that you don't want to be disturbed by somebody who wants to sell an automobile or something.

Dr. STURGES. Well, it is automobiles, it is dry cleaners, it is books, and it is children's clothes for the summer, and a thousand and one other things.

Mr. BUCK. Well, so far as I am concerned I leave it as it is, in the hands of the committee, and I take it, of course, you will abide by their ruling

Mr. NATHAN. May I ask, your organizer is primarily responsible for the organization of the committee in Connecticut?

Dr. STURGES. Yes. That is; he stayed there until the structure was organized and now he has moved into another State.

Mr. NATHAN. Would you mind admitting for the record the amount of the appropriation to that committee ?

Dr. STURGES. I am very happy to state it. There has been paid $2,200, and the appropriation is $3,500.

Dr. LUBIN. Mr. Sturges, I understood the previous witness to state that the Institute has never taken any activity in the passage of laws relating to fair-trade practices or price fixing. If, as a result of activity on the part of the distiller, it came to your attention that there was a movement on foot whereby the price of liquor was raised, say, 25 cents or 50 cents a quart under the fixed price laws—in other words, the trend was in that direction, which according to the testi

Dr. STURGES (interposing). I am sorry; I lost it.

Dr. LUBIN. I am citing a hypothetical case where you would learn that, because of one reason or another, there was a general tendency in a given State or series of States where fair-trade laws prevail to increase the price of liquor, say, 50 cents a quart. Now, on the basis of the statements you have made, that should lead to an increase in the sale of bootleg liquor. Would you feel it came within the provinces of the Institute or that it would be your duty to undertake to prevail upon the members of the industry which were increasing their prices, to persuade them not to do it?

mony

Dr. STURGES. You have stated a similar social implication. There is no question.

Dr. LUBIN. In that sense the Institute would feel it its duty to see that prices didn't get too high?

Dr. STURGES. Yes. Dr. LUBIN. That assumes, then, that the present price is not too high.

Dr. STURGES. That is a hard question to answer. I don't know how you make the assumption. The price of whisky is not too high for you if you buy it. What little I buy, I buy what I can pay for and I think I buy quality.

Dr. LUBIN. Wouldn't we both do the same if the price were 50 cents higher

Dr. STURGES. No; I wouldn't. My supply, my consumption, would be curtailed.

Dr. LUBIN. There is a further question I would like to ask you. I don't know whether you can answer it, and if you can't, feel perfectly free to say so. "In view of your recent association with the organization it may be you don't know the facts, but I was very much interested in the various figures on expenditures showing a very marked jump in expenditures in the year 1937. Do you know of anything peculiar to that year which resulted in this large increase in certain

types of expenditures? Dr. STURGES. Mr. Lubin, I can't answer that of my own personal knowledge. I don't know.

Acting Chairman WILLIAMS. Now, Doctor, as I understand you, with reference to this question that was asked you concerning the salaries, you don't question the right or the authority of the committee to l'equire you to produce those ?

Dr. STURGES. No; I do not question the power of this committee to subpena them.

Acting Chairman WILLIAMS. It is a question of personal convenience and to avoid some people trying to sell you something?

Dr. STURGES. If those figures were put into the record-

Mr. Buck (interposing). Not to him but to someone else. This salary doesn't relate to the doctor but to an employee of the Institute.

Dr. STURGES. I understood you to ask for mine. Mr. Buck. I didn't ask for yours. Acting Chairman WILLIAMS. Will you ask your question again, Mr. Buck, in order that we may have it in the record?

Mr. Buck. I want to put the matter in this position: I propounded the question in the original instance because a member of the committee itself had asked the question of a previous witness. Picking that up as being a possible matter of interest to the committee, I asked the doctor to give the committee the salary of Mr. Norman Baxter, the public-relations man. Now, personally, I didn't begin the question at all. I have no use for it except that I considered it a matter of interest to this committee, and I was trying to aid the committee. So long as the matter has arisen, I hate to see it go over unanswered. I think it is a good matter. Why make fish of one and fowl of another? We asked Dr. Doran the question. He answered it, and I asked the doctor if he will put in the record