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Competition is keen. Most of corporations are family-owned. Few resort to public financing. No barriers to enter field. Mortality was high in 1930's with about one-third of contracting and one-fifth of jobbing and manufacturing establishments going out of business in course of year.

Recently, mortality has been less than number of new businesses.
Exhibit V shows average life span of suit and coat firms. Similar
table for dress industry in same exhibit.

TNEC concluded: "The industry, in each of its stages, is actively
Danger to industry comes from (1) concentration of textile industry;
(2) concentration among retailers who buy garments. Reads portion
of article in Southern Economic Journal on integrated organizations
in textile industry.

TNEC studies concluded that on over-all basis textile industry was
competitive; same studies revealed concentration in specific products.
There has been greater concentration since then.

Statistics show largest four firms in industry turned out more than
75 percent of the total output of 16 products and between 50 and 75
percent of 34 products.

War gave impetus to concentrate because of OPA regulations; shortages;
taxes. Earnings because of low capitalization subject to high excess-
profits tax; high personal taxes discouraged withdrawing of profits.
Some owners preferred to sell and pay capital gains. Purchasers
could buy at high prices because high capitalization reduced excess-
profits tax.
Some concerns deliberately bought up low profit mills to off-set taxes
incurred for high profits earned in other activities. Exhibit VIII
shows the expansion of the principal textile corporations. Increase
in sales volume may be explained only by consolidations which took
place. Before war, only 9.5 percent of cotton broad goods sold
through outlets owned or operated by the mills. After war, 75
percent of cotton fabrics were sold by integrated organizations.
One of largest integrations is Textron, which controls substantial
percentage of all fabrics used in ladies' underthings, also produces
underwear and blouses on its own account. Burlington Mills for-
merly sold 90 percent of output of converters; now converts 90 per-
cent of goods itself.

Everything Burlington does reminds of what elephant said: “Everyone
for himself" as he danced among the chickens.

He now quotes superlatives in Fortune article regarding Burlington.
One type of pressure applied by textile interests is to force garment
manufacturers to promote textile brands instead of their own.
Some fabric promotions may lead to undue control of the market in
finished garments. Cf. case of Goodall Palm Beach suits-now no
price cutting.

309 This integration in suppliers has led to numerous abuses. Uniformity of prices, tie-in sales, etc. One large producer of wool fabrics refuses to sell his fabrics unless they are made up into garments to sell above a certain price. Exhibit IX demonstrates that textile industry has been able to command prices completely out of line with costs. Profits in 1948 represented 15 cents out of every sales dollar. He doubts that manufacturers in garment industry will combine to meet these combinations of suppliers. There are too many manufacturers. Competition exists in the ladies' garment industry. Mergers in textile industry are baneful to the Nation. As far as resistance to retailers, some arrangements were worked out, but they were challenged by Federal Trade Commission. No decision as yet.


He lists sources of his statistics.

These statistics are accepted by the manufacturers and the industry. True competition is rapidly diminishing among retail distributors, with devastating effect upon manufacturers. "The most important influence on the apparel markets is exercised by department stores, chain stores, and mail-order houses. These aggregations of purchasing power dwarf the manufacturers."

Page 311








Sales volume of Montgomery Ward was $1,211,956,000. Volume of Sears, Roebuck was $2,295,991,000. $500,000,000 of business in women's wear must be done by these two companies-enough to absorb business of several hundreds of garment manufacturers. Department stores have also grown. Cf. J. C. Penney.

Cites statistics of Allied Stores. Combined purchasing power of
various stores operating on a consolidated basis is high. Macy's
dollar volume for 1948 was $315,035,000; Gimbels was $307,289,000;
May's was $407,266,000.

More than one-third of department store's business is in products of
women's wear industry. Mr. Michener asks if breaking up chains
would not raise price to consumer. Teper says mass production
buying tends to lower quality of garments. Better value found
today in independent stores where individual selection of merchan-
dise is made.
Also, costs of distribution in department stores are high; smaller of
retailers operate on a much lower mark-up; their distribution cost is

Would not say bigness per se is bad. There is room for business ex-
pansion. However, when one institution acquires such economic
power that competition is no longer among equals, then it is time for
the Government to step in.

When business group has mass purchasing power and can exact tribute
from other party, its operations are no longer in the public interest.
A & P case showed that they made little profit in retail operations.
Main profits from manufacture of goods sold in their own stores.
They sold same goods to independents at higher price.

We want to permit small-business man to exist. Many similarities
between practices in his field outlined above and practices in other
Garment industry with keen competition being hemmed in by concen-
tration in the textile interests which supply material and concentra-
tion in the retail trade which purchases the garments.
Garments may be sold at same prices in stores controlled by same
interests; not at prices fixed by manufacturers. Doubts if any price
fixing in women's garments extends to retail level. Not prepared to
testify on espionage system of retailers in finding competitors' price
and meeting it.

You will find some loss leaders. Cut-rate stores were found to have
huge mark-ups. May find pricing of trade-marked article on com-
petitive basis. But in case of dresses, stores won't have an identical

In New York market alone, dress industry turns out average of 75,000 different dress designs per year.

So two competing retail outlets might not have identical dresses on their racks. Actually there is a great uniformity of prices among larger stores. There is competition among smaller stores, and the best service to consumer.

Dr. Teper can testify with greater impunity than can the manufacturers.

There used to be strife in the industry between labor and employers
but cooperation now.

He is not out for all he can get out of the industry; otherwise would be
on strike all the time. Money is not only consideration-hours of
work, conditions, sanitary facilities, etc. But union's policy is not
one of getting everything it can without regard for the economics
of the situation. Nor are manufacturers anxious to get every dollar
out of consumer. Otherwise they would consolidate.
Last strike in coat and suit industry was in 1926. Last strike in dress
industry in 1933. Price of clothing in relation to incomes has con-
stantly decreased.

"Ladies' wool suits which in 1914 required an average worker to work
37 hours in order to earn enough to buy it, in 1948 only required.
11.4 hours of work."

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This is the best way to determine relative costs and is not finding of
union study but of a manufacturers, research organization.
Cites statistics showing concentration in specialty shops.
Large-scale establishments also operate jointly for buying purposes.
Largest combination is of 32 department stores which own coopera-
tively the Associated Merchandise Corporation.

Mutual Buying Syndicate buys for 66 department stores. Fernfield
Association buys for 191 apparel stores, etc. Combined purchasing
power of these groups is terrific, especially when compared with the
volume of the individual garment maker.

In retailing it

Estimate that "close to 75 percent of the total volume in women's
wear passes through the hands of buying offices." Group buyers
can issue edicts when to buy and when not to buy.
In industry, such policy would be a restraint of trade.
goes unchallenged.
These buying offices can insist upon special concessions such as dis-
criminatory discounts, special advertising allowances, the right to
return seasonal garments at will. These demands place manufac-
turers in vulnerable position and subject them to a squeeze. Cf.
complaint filed by FTC against Associated Merchandising Corp. and
affiliated stores. This was unopposed and cease-and-desist order

AMC admitted to have induced discriminatory prices by means of
discounts. Obtair ed rebates on purchases.

AMC case is far from unique. However, when manufacturers get
together to protect themselves by certain rules, FTC charges them
with restraint. Legislation should be applied to curtail big business
engaged in monopolistic practices. Never intended to victimize
small-business men who adopt a code for own protection.
Only a healthy industry can provide decent working conditions for
workers. That is why union concerned with ability of industry to
compete. That is why he wants fair play between workers, manu-
facturers, suppliers, and retailers.

If manufacturers testified as he did, might face reprisal from retailers
and textile interests. Mr. Celler cites example of "design copyright
bill" where tried to get cutters and manufacturers to testify and

One remedy is to subpena them. Another is to hold closed hearings so committee could protect witnesses. Mr. Celler says it is a serious problem, hopes that Teper will tell manufacturers the hearings are open for them and committee will help them against reprisals. Charts placed in the record as exhibits to talk.



Today, trying to suggest a method or approach. Later, should like to submit detailed suggestions. CIO believes concentration of outstanding importance. Danger of ever-increasing Government regulation. Failure to control during past few decades seems to point to increasing regulation as only alternative.

Many investigations but no action. TNEC; Economic Concentration and World War II, Senate Committee Print No. 6. Should not in this investigation attempt to retrace TNEC. Can be little question over bulk of data revealed in TNEC reports.

We should reexamine recommendations of TNEC, which have gone unnoticed by the Congress. These proposals can form nucleus for an effective program, especially on price maintenance laws, trade associations, and patents.

Calls attention to Walton Hamilton's TNEC Mongraph No. 16, on ineffective history of Government program. He hopes this committee will give action, not merely investigation.

Previous investigations including TNEC have tended toward an overlegal approach. Tendency to search for collusion. Must give equal emphasis to another line. Many large corporations are in a strong national policy forming position.

Page 329









If corporate leaders should set production level one-third below 1948,
they would determine levels of prices. This is private planning.
Nor would competition plunge in to lower prices and raise production.
This is because of open-price systems, and realization of effect of
price war. Planning done for the Nation by a handful of giant
If their decisions have such vast effect public is entitled to know
criteria used to determine prices and output. What is break-even
point for United States Steel? General Motors testified that 80
percent of capacity was normal plan of operation.

WPB study in 1945 revealed that break-even point for 65 industries
was 52 percent. So long as giant corporations are virtually deter-
mining national economic policy we should at least know the bases
on which they make their decisions.

Committee should extend inquiry of TNEC into relationship of wages and labor costs to prices and profits.

Should also study role of insurance companies and savings institutions which are becoming principal sources of new funds for American industry.

Savings institutions hold one-half total mortgage and long-term corporate debt outstanding. No small group of companies and their boards of directors can be trusted with such vast powers without adequate public regulation.

Red herring of labor monopoly will be dragged into this hearing. Sale or treatment of human labor should not in any way be equated with disposition of commodities. Refer to article by Richard A. Lester, chairman of economics department, Princeton University, in December 1947 Journal of Political Economy.

He reads from this article, that employers have been free to conspire in the labor market. Without unions, there are bound to be monopolistic elements in most labor markets. Economists overlook fact that unions do not sell labor nor are they profit-making institutions. They are as much political as economic.

Mr. Celler notes policy leadership of large concerns and level of operation. An inquiry of that sort would require host of investigators and we are without such funds.

There is pending a joint resolution to investigate insurance companies, too. We may touch peripheries of these subjects but can't get to depths, but there is great reservoir of facts we can draw upon from TNEC.

Witness hopes for study on these great corporations.

He believes that turning spotlight on various practices may have healthy effect. Chairman says this has not worked in the past. Witness says you create a climate. But until we have information, he is not ready to recommend any legislation.

He thinks it would be quite a startling bit of news if it were found that 100 largest manufacturing corporations operated at only 65 to 70 percent of capacity. Can't say if anything effective could be done about it at this time.


He has doctor of philosophy degree from Yale; is assistant professor of economics in Michigan State College. Book will be published in January 1940 on Structure of American Industry. First job is to reexamine economic and political goals. Shall we have a system based on self-restraint of industrial leaders?

Our goal perhaps should be self government as practiced under NRA. Perhaps we believe in socialization. In which case we should encourage concentration. Finally, we might choose as an objective the maintenance of competition. This would require strengthening our antitrust laws and more vigorous enforcement.

Page 336








Assuming competition is goal, we must clarify what kind of competition
we want.
Need not be perfect or pure competition, nor kind de-
pending on instantaneous and automatic adjustments. We can
agree on competitive system preventing a few sellers from dominating
price and output. Want system where technological innovations not
artificially restrained and where economy is dynamic. Also where
cyclical fluctuations are not accentuated by monopoly.
Advantages are social and political as well as economic; power is de-
centralized-broad base for class structure of society; freedom and
opportunity for new ideas, new men, etc. Competitive system
deeply rooted in traditions of America. Generic distrust of size.
quotes Justice Douglas in recent antitrust case. "Size should be
jealously watched."


Industrial power should be decentralized, so that people will not be dependent upon whims of few men. Antitrust laws recognized danger of size by neither condoning good trusts nor condemning bad trusts, but forbidding all trusts.

Yet 50 years after antitrust law passed, we have greatest concentration in our history. In successive industries, a handful of concerns enjoy dominant power-steel, aluminum, autos, oil, motion pictures, cigarettes, chemicals, tin cans-all same story. Economic instructors have hard time finding examples of perfect competition.

No longer such crude combinations as pre-1911 Standard Oil and American Tobacco. Practices may frequently be made to appear as the very essence of spirited competition. Technically we are confronted with oligopoly. Entry of newcomers barred by size of entrenched power. Seller can no longer pursue independent price policy. Price cutting will cause large competitors to follow suit. Result is as if only a single concern dominated field. We get "collusion" not in usual sense but in parallel action.

Has come about partly through mergers, Miller-Tydings Act, and Government inaction or wrong action; explainable, in good part, by the politics behind antitrust prosecutions. Government has also muffed opportunities of stimulating small business.

One example of the latter is the disposition of surplus Government plants in steel industry. WAA held at end of war 29 plants valued at more than $5,000,000 each.


Four of these were integrated steel plants sold to wartime operators— the big steel companies. Especially in far West, disposition of plants allowed major producers to increase control of output in local market. United States Steel increased total capacity in Pacific Coast and Mountain States from 17.3 to 39 percent. Government missed chance of stimulating competition.

The Government took such a loss on the sale ($155,000,000) that could easily have taken an additional loss of $12,000,000 and stimulated greater competition. Many smaller plants could have bought facilities at lower price.

Reconversion Act specifically provided that the Attorney General
could veto any sale made to the highest bidder if in his opinion such
sale would have lessened competition. In this case, Attorney
General did nothing.

There were three or four bids for the Geneva plant; United States
Steel was highest bidder.

WAA couldn't have rejected the United States Steel bid which was
higher, but Attorney General could have.

Second steel plant was sold to Republic Steel.


Mr. Michener tells of aluminum plant which Alcoa wouldn't buy
because condition of sale was that plant keep operating.
Danger in concentration in that of no alternative bidder.
reads from United States v. Columbia Steel where Attorney General
said the sale of Geneva plant did not constitute a violation of trust
laws. Adams says this was a sad mistake.

Significant thing about sale was increase in control over steel capacity
in Mountain States' area.

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