I recognize that in the various outlying communities that there is not too great a degree of competition, direct or otherwise, amongst retail establishments.

Post exchanges and naval stores may be essential, but do you not think that there has been too great a growth? Do you not think that there has been too much merchandise bought by and sold by those naval stores and those post exchanges?

Secretary MATTHEWS. Mr. Celler, that is something that I could not express an opinion on because I have absolutely no knowledge of what has been bought or to what extent these post exchanges operate in the Military Establishment.

The CHAIRMAN. Would it be your opinion that if these exchanges could be diminished in number, that would help private enterprise? Secretary MATTHEWS. I do not know as to what extent. It would, possibly, benefit the local dealer in the community. The CHAIRMAN. That is what I mean.

Secretary MATTHEWS. Of course, the manufacturer is engaged in private enterprise, too, but he is not affected, because as far as he is concerned, it does not make any difference who the retail dealer is. I know this as a civilian, Mr. Chairman, from my observation of the Military Establishment, that very frequently the private business interests take advantage of any opportunity that they have to exploit the members of the armed forces.

I think there is an obligation to protect them in that respect, and I would not hesitate, if it were necessary, to protect the members of the armed forces from such exploitation, to encourage or develop post exchanges.

The CHAIRMAN. We all agree with that, of course.

Secretary MATTHEWS. Of course, that is a thing that can be subject to abuse, too.

The CHAIRMAN. It takes careful supervision.

For example, I read this morning a copy of a statement made by one of our colleagues with reference to complaints offered by retail liquor dealers of the District of Columbia, who complained that the right to sell liquor in officers' clubs in and around the District of Columbia was being abused, and that nonmilitary individuals were able, through officers, to buy their liquor at much reduced prices at these officers' clubs.

If that is the case, and the citizens are able to purchase liquor and wines at the officers' clubs, it certainly would bear looking into.

Secretary MATTHEWS. Mr. Chairman, of course if that condition exists it is reprehensible, and ought not to be permitted, and it is being looked into at the present time.

The CHAIRMAN. You have been made aware of that?

Secretary MATTHEWS. Yes; that is being investigated. I have not been investigating it but the

The CHAIRMAN. But the Department has

Secretary MATTHEWS. But the Military Establishment has been, and is looking into it now.

Mr. KEATING. Are Reserve officers able to buy liquor in post

exchanges?

Mr. MICHENER. The gentleman is a Reserve officer. [Laughter.] Secretary MATTHEWS. Are you asking for any special reason? [Laughter.]

Mr. KEATING. Just a general matter of information.

Secretary MATTHEWS. I do not know. I do not know what the regulations are about buying liquor.

Mr. MICHENER. Does the same rule apply to liquor as does to gasoline?

Secretary MATTHEWS. You mean the sale of it or the handling of it? Mr. MICHENER. Any PX or any ship stores?

Secretary MATTHEWS. I do not know.

Mr. MICHENER. If I might want to buy gasoline, my friend might want to buy liquor

Secretary MATTHEWS. I would think that the same rule ought to apply to whatever the commodity would be that would be sold at these establishments, in the military set-up.

Mr. MICHENER. Well, the real distinction between the purchase of gasoline and the purchase of liquor is that the fellow who purchased the liquor for a friend could purchase a quart and carry it away, and the fellow who purchased the gasoline has to drive his own car up there and get his gasoline at the PX.

The CHAIRMAN. There is even a greater inducement because some taxes on spirits are waived when it is sold to officers at officers' clubs. Secretary MATTHEWS. I did not know that.

Mr. MICHENER. Well, that ought to be remedied, ought it not? That is true.

Now, liquor is not a necessity, although some people might think it is, but if there is a waiver of taxes on liquor sold by the Government to the employees of the Government, that condition should be remedied, should it not, Mr. Secretary?

Secretary MATTHEWS. Well, my associates here tell me that there is no waiver of the tax in officers' clubs for the sale of liquor.

Mr. MICHENER. That is one less question we have to wrestle with. Mr. BRYSON. Mr. Chairman, I would like to make this observation: Outside of the District of Columbia complaints are filed by the several States and municipalities where there are military establishments that officers are permitted-I am not charging that they sell liquor there but officers are permitted to have access to liquor in the officers' clubs on the military bases. Of course, where the officers get their liquor at officers' clubs they do not have to pay the State tax, which is oftentimes higher than the Federal tax. But the enlisted men must go off the reservation to get their liquor. Of course, the liquor they get is subject both to Federal and State taxes.

Secretary MATTHEWS. Of course, if that is the case it is discrimination which ought not to be permitted.

Mr. DENTON. Is there not a statute which prevents the sale of liquor on an Army post?

The CHAIRMAN. Not in officers' clubs.

Mr. DENTON. Was there not a Fort Sill case right on that?
Mr. BRYSON. It is done whether or not there is a statute.

The CHAIRMAN. If there are no other questions, we are very grateful to vou, Mr. Secretary, and your aides, for your remarks this morning. We do indeed hope that that policy which we thoroughly endorse will be carried out by the Department. It will be most helpful in the work that we are trying to do here.

Secretary MATTHEWS. If I can succeed at all, that will be one of the things I will try to do.

The CHAIRMAN. Splendid. Thank you very much.
Secretary MATTHEWS. Thank you very much.

The CHAIRMAN. This meeting will be adjourned now and we will hear Secretary of Agriculture Brannan on Monday morning at 10 o'clock.

(Whereupon, at 11 a. m., the special committee adjourned, to reconvene at 10 a. m., Monday, July 18, 1949.)

(The following matter was submitted for the record:)

Hon. EMANUEL CELLER,

NAVY DEPARTMENT, Washington, August 29, 1949.

Chairman, Committee on the Judiciary, House of Representatives, DEAR MR. CHAIRMAN: During my testimony on July 15, 1949, in connection with the hearings on monopoly power which your committee is conducting, a number of questions were asked, concerning which I requested an opportunity to have appropriate studies made in order to furnish the information to your committee.

The first question was: "What is the geographic dispersion of contracts let by the Military Establishment?" Inclosures 1, 2, and 3 indicate the figures for Air Force, Navy, and Army for various representative periods. Although the periods covered are not identical, I think the figures will indicate the general pattern for your committee.

The next question asked was: "What percentage of business is being done by competitive bidding at the present time?" Our statistical studies for the first half of fiscal year 1949 for the three Departments indicated that, in numbers of transactions, the contracts which were advertised amount to 9 percent and those negotiated, 91 percent. In money value, the amount obligated under advertised contracts was 28 percent of dollar volume and that expended through negotiation was 72 percent. I would like to indicate the Navy figures under this topic and point out certain facts in the light of which these figures should be evaluated. During fiscal 1949, Navy contracts were let by advertising in 11 percent of the transactions, or 36 percent of the total number of dollars. Negotiated contracts were 89 percent of the number of transactions, or 64 percent of the dollar volume. In connection with the negotiated contracts, it should be noted that the percentages of transactions negotiated reflect a large number of purchases under the provisions of section 2 (c) (3) of the Armed Services Procurement Act, which permits purchases in a manner common among businessmen where the total amount is $1,000 or less. A portion of the transactions is reflected from reports from the shore establishment, and this portion comprises 96.6 percent of the number of transactions, or 5.9 percent of the dollar volume of the contracts negotiated. Numerous minor transactions within the fleet and by the smaller shore installations are not reflected; however, it is apparent that the volume of transactions reflects a substantial number of purchases of $1,000 or less.

The question was asked as to whether or not 80 percent of the business by dollar volume was placed with firms larger than those which would meet the definition of small business. Our statistical studies tend to confirm this statement. It should be noted, however, that these statistics reflect only prime contract business. The volume money-wise during the war was very high, and 20 percent would represent a substantial amount of business. It should be further borne in mind that finished items which the armed services were procuring frequently were of a type produced only by relatively large businesses. A good example of this fact would be aircraft procurement, since there are no aircraft manufacturers which would meet the definition of small business. The same would be true of other items of military significance produced in volume during the war.

The question was raised during the hearings as to whether or not post exchanges and ships service stores compete with private industry. This was the subject of recent inquiry by the Philbin subcommittee of the House Armed Services Committee. The result of the inquiry was the adoption of a joint regulation by all the services. The results of the investigation are stated in the remarks of Congressman Philbin, commencing on page 11084 of the Congressional Record for Friday, August 4, 1949. The agreement between the committee and the representatives of the armed services is summed up on page 11086 in the

following changes: Imposition of the Federal retailer's tax, revision of the authorized list of merchandise, and the abolishment of special order privileges.

Information was further requested with reference to the number of persons engaged in work at navy yards which might be considered of a manufacturing nature, which in turn might be in competition with private manufacturing concerns. I would like to emphasize that the primary purpose of navy yards is to build and repair ships, and manufacturing activities are not significant. Our figures indicate that during fiscal year 1949 only 1,200 productive workers, with the possible addition of 1,200 supporting overhead workers, were engaged in manufacturing work. This would be approximately 22 or 3 percent of the total shipyard employment. The policy of the Navy Department with reference to the manufacture of items of standard stock is that such items shall be manufac tured only for one of the following reasons:

(a) To develop, maintain, and improve quality;

(b) To obtain material which cannot be obtained at advantage commercially due to its special nature or small quantities required; or

(c) To retain special skills in working force.

The further question was asked concerning the use of the provisions of the Armed Services Procurement Act permitting reports to the Attorney General on evidence of antitrust or monopolistic activities. I am advised that although there has been some use of the provisions relating to negotiation after competitive bid prices were determined to be unreasonable, thus far no use has been made of the provision in a situation in which it was considered that the prices were not independently arrived at.

I am returning herewith a corrected copy of the transcript of the testimony. If I can be of further service to the committee, I will be pleased to have you call upon me.

Sincerely yours,

FRANCIS P. MATTHEWS.

STUDY OF MONOPOLY POWER

MONDAY, JULY 18, 1949

HOUSE OF REPRESENTATIVES,

SPECIAL SUBCOMMITTEE ON THE STUDY OF
MONOPOLY POWER OF THE COMMITTEE ON THE JUDICIARY,

Washington, D. C. The special committee met, pursuant to adjournment, at 10 a. m., in room 346, Old House Office Building, Honorable Emanuel Celler (chairman) presiding.

Present: Representatives Celler (chairman), Bryson, Denton, Wilson, Michener, and Keating.

The CHAIRMAN. The meeting will come to order.

Our first witness this morning is the distinguished Secretary of Agriculture, Mr. Charles F. Brannan.

We are very happy to hear from you, Mr. Brannan.

STATEMENT OF HON. CHARLES F. BRANNAN, SECRETARY OF AGRICULTURE; ACCOMPANIED BY S. R. NEWELL, DEPUTY ASSISTANT ADMINISTRATOR FOR MARKETING, PRODUCTION, AND MARKETING ADMINISTRATION, DEPARTMENT OF AGRICULTURE

Secretary BRANNAN. Thank you, Mr. Chairman. I have a statement which I think should take about 15 to 20 minutes, about 20 minutes. Would you care to proceed in that fashion?

The CHAIRMAN. Anyway you wish.

Secretary BRANNAN. Mr. Chairman, monopoly is one aspect of the concentration of economic power.

At what point the concentration is considered to be monopoly is always a controversial issue and must be determined by law. The problem that concerns us, as a Nation, is not so much whether a particular concentration of power meets a technical definition of monopoly but rather it is whether that concentration is harmful to a group or to the whole people.

I am very glad that the Congress has seen fit to undertake a broad study. I think we should constantly survey the entire economy in this way so as to see where the economic powers lie, how they are used, whether they stifle competition, whether they prevent the expansion of the economy by holding down production or by holding up prices, and whether the remedial laws are adequate.

The farmer has long been pitted against economic giants and has had to fight constantly for his freedom. It is a never-ending struggle. It is still true to a considerable degree that the farmer has to accept what is offered when he sells his products and that he has to pay what is asked when he buys.