Page 305 306 307 308 STATEMENT OF LAZARE TEPER, OF ILGW-Continued 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. TNEC concluded: "The industry, in each of its stages, is actively TNEC studies concluded that on over-all basis textile industry was Statistics show largest four firms in industry turned out more than War gave impetus to concentrate because of OPA regulations; shortages; Everything Burlington does reminds of what elephant said: “Everyone He now quotes superlatives in Fortune article regarding Burlington. 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. 310 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 311 312 313 314 315 316 317 STATEMENT Of Lazare TEPER, OF ILGW-Continued 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 More than one-third of department store's business is in products of Would not say bigness per se is bad. There is room for business ex- When business group has mass purchasing power and can exact tribute We want to permit small-business man to exist. Many similarities You will find some loss leaders. Cut-rate stores were found to have 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 He is not out for all he can get out of the industry; otherwise would be "Ladies' wool suits which in 1914 required an average worker to work Page 317 318 319 320 321 327 328 329 STATEMENT Of Lazare TEPER, OF ILGW-Continued This is the best way to determine relative costs and is not finding of Mutual Buying Syndicate buys for 66 department stores. Fernfield In retailing it Estimate that "close to 75 percent of the total volume in women's AMC admitted to have induced discriminatory prices by means of AMC case is far from unique. However, when manufacturers get If manufacturers testified as he did, might face reprisal from retailers 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. HEARINGS, MONDAY, JULY 25, 1949 STATEMENT OF EVERETT M. KASSALOW, CIO 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 329 330 331 332 333 334 335 336 STATEMENT OF EVERETT M. KASSALOW, CIO-Continued If corporate leaders should set production level one-third below 1948, WPB study in 1945 revealed that break-even point for 65 industries 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. STATEMENT OF WALTER ADAMS, PROFESSOR 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 336 337 1338 339 340 341 342 STATEMENT OF WALTER ADAMS, PROFESSOR-Continued Assuming competition is goal, we must clarify what kind of competition He 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 There were three or four bids for the Geneva plant; United States WAA couldn't have rejected the United States Steel bid which was Second steel plant was sold to Republic Steel. Chairman Mr. Michener tells of aluminum plant which Alcoa wouldn't buy Significant thing about sale was increase in control over steel capacity |