(navigation image)
Home American Libraries | Canadian Libraries | Universal Library | Community Texts | Project Gutenberg | Children's Library | Biodiversity Heritage Library | Additional Collections
Search: Advanced Search
Anonymous User (login or join us)
Upload
See other formats

Full text of "Investigation of concentration of economic power. Hearings before the Temporary National Economic Committee, Congress of the United States, Seventy-fifth Congress, third Session [-Seventy-sixth Congress, third Session] pursuant to Public Resolution no. 113 (Seventy-fifth Congress) authorizing and directing a select committee to make a full and complete study and investigation with respect to the concentration of economic power in, and financial control over, production of goods and services .."

^S2:^53335S5552 



Northeastern University 





School of Law 
Library 



vWWW VV%>N^vV^?W9V 




INVESTIGATION OF CONCENTRATION 
OF ECONOMIC POWER 



HEARINGS 

BEFORE THE 

TEMPOEARY NATIONAL ECONOMIC COMMITTEE 
CONGRESS OF THE UNITED STATES 

SEVENTY-SIXTH CONGRESS 

FIRST SESSION 
PURSUANT TO 

Public Resolution No. 113 

(Seventy-fifth Congress) 

AUTHORIZING AND DIRECTING A SELECT COMMITTEE TO 
MAKE A FULL AND COMPLETE STUDY AND INVESTIGA- 
TION WITH RESPECT TO THE CONCENTRATION OF 
ECONOMIC POWER IN, AND FINANCIAL CONTROL 
OVER, PRODUCTION AND DISTRIBUTION 
OF GOODS AND SERVICES 



PART 8 
PROBLEMS OF THE CONSUMER 



MAY 10, 11, AND 12, 1939 



Printed for the use of the Temporary National Economic Committee 




UNITED STATES 

GOVERNMENT PRINTING OFFICE 

WASHINGTON : 1939 



TEMPORARY NATIONAL ECONOMIC COMMITTEE 

(Created pursuant to Public Res. 113, 75th Cong.) • 

JOSEPH C. O'MAHONEY, Senator from Wyoming, Chairman 

HATTON W. SUMNERS, Representative from Texas, Vice Chairman 

WILLIAM E. BORAH, Senator from Idaho 

WILLIAM H..KING, Senator from Utah 

B. CARROLL REECE, Representative from Tennessee 

CLYDE WILLIAMS, Representative from Missouri 

THURMAN W.- ARNOLD, Assistant Attorney General 

•WENDELL BERQE, Special Assistant to the Attorney General 

Representing the Department of Justice 

WILLIAM O. DOCGLAS, Chairman 

•JEROME N. FRANK, Commissioner 

Representing the Securities and Exchange Commission 

GARLAND S. FERGUSON, Commissioner 

•EWIN L. DAVIS, Commissioner 

Representing the Federal Trade Commission 

ISADOR LUBIN, Commissioner of Labor Statistics 

•A. FORD HINRICHS, Chief Economist, Bureau of Labor Statistics 

Representing the Department oi Labor 

JOSEPH J. O'CONNELL, Jr., Special Assistant to the General Counsel 

•CHRISTIAN JOY PEOPLES, Director of Procurement 

Representing the Department of the Treasury 

RICHARD C. PATTERSON, Jr., Assistant Secretary 

Representing the Department of Commerce 

LEON HENDERSON, Executive Secretary 

•Alternates. 

II 



CONTENTS 



Testimony of: Page 

Ayres, Dr. Ruth, Economist, New York City 3345-3375 

Belester, Mrs. Alice, Chairman, United Conference Against the High 

Cost of Living, Chicago, Illinois 32S7-3308 

Campbell, Miss Persia, Executive Secretary, Consumers' National Fed- 
eration, New York City 3376-339C 

Ephraim, Jerome W., Jerome W. Ephraim, Inc., New York City 339G-3412 

Maddux, Milton R.. Purchasing Agent, Hamilton County, Ohio— 3440 -3452 
Martino, Robert, Chief of Consumer Contacts and Labeling, National 

Bureau of Standards, Washington, D. C 3432-3440 

Masters, Dexter, Director of Publications, Consumers Union of U. S., 

Inc., New York City 3329-3342 

Mumma, George E., Manager, Heating Department, Sears, Roebuck & 

Co., Chicago, Illinois 3425,3430 

Roller, Mrs. Paul S., Chairman, Consumers' Section of College Park 
American Association of University Women and Consumers' Section 
of Prince Georges County General Federation of Women's Clubs, 

Berwyn, Maryland 3309-3328 

Walker, L. R., Supervisor, Building Materials Department, Sears, Roe- 
buck & Co., Chicago, Illinois 3413-3425, 3426-3432 

Statement of — 

Montgomery, D. E., Consumers' Counsel, Agricultural Adjustment 

Administration, Washington, D. C 3283-3287, 3452-345G 

The consumer movement . 3283 

Typical American consumer 3287 

Inadequate consumer information 3290 

United Conference Against the High Cost of Living 3303 

Mislabeling of consumer goods 3310 

Brands not a standard for quality 3312 

Need for standard sizes 3325 

Price not a guide to quality 3330 

Confusion of brands, sizes and prices 3346 

Consumer credit , 3355 

Price fixing 3366 

Consumer services and organizations 3376 

Commodity rating services provided by commercial agencies 3378 

Consumer "Educational" material supplied to schools by commercial 

agencies . 3381 

Consumer organizations sponsored by commercial agencies 3384 

Problem of marketing new consumer products : ^ /3396 

Need for standard ratings in marketing household equipment 3414 

Functions and activities of National Bureau of Standards 3433 

Use of standards in purchases of consumer goods by public agencies 3440 

Schedule and summary of exhibits .-- v 

Wednesday, May 10, 1939 3283 

Thursday, May 11, 1939 3345 

Friday, May 12, 1939 3413 

Appendix ^ 3457 

Supplemental data 3475 

Index _, I 

III 



SCHEDULE OF EXHIBITS 



Number and summary of exliibits 



Intro- 


Ap- 


duced 


pears 


at 


on 


page 


page 



503. Proposal to investigate and analyze current practices which 

lead to underconsumption, inadequate returns to farm 
and factory worker, and business bankruptcy 

504. Total number of women and organized groups interested in 

and affected by consumer movement 

505. Illustration : Dress advertisement 

506. Illustration : Shirt sale advertisement 

507. Illustration : Vacuum cleaner advertisement 

508. Illustration : Inlaid linoleum advertisement 

509. Illustration : Coffee advertisement 

510. Illustration : Electric refrigerator advertisement ■^. 

511. Chart: Variations in quality of canned fruits apd vegetables 

sold under the same brand in three cities 

512. Chart: Same as Exhibit 511 with brands weighted by number 

of cans sampled 

513. Chart: Variations in construction and weights of 2 brands of 

cotton turkish towels 

514. Chart: Variations in weight, breaking strength. and heat 

transmission of three brands of blankets 

515. Chart: Variations in sizes and retail prices of a selected list 

of cosmetics in Maine 

516. Appears in Hearings, Part VI, appendix, p. 2745. 

617. Chart: Tomato juice, sizes and prices in one Washington 
store 

518. Chart: Dried vegetables, variation in labeled weights of 

comparative packages 

519. Chart: Carrying charges as percentages of unpaid balances 

in 106 installment transactions in which quoted interest 
rates were 6 percent ( Massachusetts) 

520. Chart: Computed rates of interest on 106 installment 

transactions in which quoted interest rates were 6 percent 
( Massachusetts) 

521. Chart: Carrying charges as percentages of unpaid balances 

in 31 installment transactions in which quoted interest 
rates were 10 percent (Massachusetts) 

522. Chart: Computed rates of interest on 31 installment trans- 

actions in which quoted interest rates were 10 percent 
(Massachusetts) 

523. Chart: Carrying charges as percentages of unpaid balances 

in 40 installment transactions in which quoted interest 
rates were 5 percent (Massachusetts) 

524. Chart: Computed rates of interest on 40 installment trans- 

actions in which quoted interest rates were 5 percent 
(Massachusetts) 

525. Quotations from Trade Press on Resale Price Maintenance — 

526. Letter, received January 10, 1939 from Vick Chemical 

Company, signed by L. Richardson, to a school teacher, 
describing the Vick Cold Control Plan 

527. Bulletin, Home Makers Educational Service Vol. 24 No. 5, 

January 1939. Suggestions for studying the common 
cold, including the Vick Cold Control Plan 

528. Report of Women's National Institute to the Educators of 

American Youth on the problem of a common cold 

529. Same as Exhibit 528, Difference in wording of statement on 

proprietary product ; 

1 On file with the committee. 



3287 

3287 
3291 
3295 
3295 

3299 I 

3300 ! 

3301 ! 
I 

3315 

3316 
3320 
3323 
3333 

3347 
3349 

3355 

3356 

3356 

3357 

3360 



3360 
33G7 



3382 

3383 
3383 
3383 



3457 

3458 
3292 
3296 
3297 
.•{290 
3301) 
3302 

3315 

3317 

3321 

3324 

3334 

3348 
3350 

3355 

3357 

3358 

3359 

3361 



3362 
3460 



3382 



(') 

0) 

0) 



VI 



SCHEDULE OF EXHIBITS 



Number aod summary of exhibits 



530. 



531. 



533. 



534. 



535. 
536. 
537. 



540 
639 



660. 



Report of the Bureau of Investigation of the American 
Medical Associatioix re scientific sponsorship of Vick 
products 

Program and report on public relations for the Institute of 
Distribution 

532. Bulletin of Consumers Foundation, Inc. No. 1, January 8, 
1938, re grant to Pollack Foundation from Institute of 
Distribution for purpose of determining proper consumer 
organization needed 

Publications of Home-Owned News, issues dated, August, 
September, December and October 1937, re financing by 
chain stores of Foundation For Consumer Education 

Letters and leaflet of National Consumers Tax Com- 
mission Inc. re contributions to and purpose of. 

Photostat of front page of Farmer-Labor Press of Dec. 8, 
1938 re hidden taxes. 

Excerpts from "Tide Magazine" re hidden taxes. 

News letter from the Institute of Consumer Education, 
dated April 1939, re hidden taxes. 

Bulletin of the Institute for Propaganda Analysis, Dec. 1, 
1938 re Atlantic & Pacific Tea Co. campaign against 
anti-chain store legislation 

Pamphlet "Why Pay Taxes in the Dark?" published by 
National Consumers Tax Commission Inc. re hidden taxes . 

Statement issued by Tax Policy League of New York, "Tax 
Nonsense" Sept. 1936, re hidden taxes 

Memorandum, proposing a consumer agency in the Federal 
Government 

538. Appears in Hearings, Part V, appendix p. 2298. 

539. Illustration: Warm air gravity furnace output against 
accepted size designation ^ 

Illustration : 5 section boiler 

Let. "»-, dated May 25, 1939, from Lyman J. Briggs, Director, 
N^ ?nal Bureau of Standards, to Senator Joseph C. 
O'Mahoney, Chairman, Temporary National Economic 
Committee, re statement of functions and activities of the 
National Bureau of Standards. Entered in the record 
May 26, 1939 

Letter, dated May 29, 1939 from D. E. Montgomery, Con- 
sumers' Counsel of the Agricultural Adjustment Admin- 
istration, to Senator Joseph C. O'Mahoney, Chairman, 
Temporary National Economic Committee, re Standard 
Container Acts of 1916 and 1928 and the Standard Barrel 
Act. Entered in the record June 7, 1939 , 

Included are the following exhibits: 

1. Bills H. R. 4402 and 5530, 76th Cong., 1st sess.', fix- 
ing standard types of containers for fruits and 
vegetables 

2. Farmers' Bulletin #1821, U. S. Department of Agri- 
culture, April 1939, dealing with containers for 
fruits and vegetables 

3. Consumers' Guide, April 25, 1938, Vol. V. No. 2, re 
container sizes 

4. Six photographs from Bureau of Agricultural Eco- 
nomics of sizes and types of small fruit and vege- 
table baskets, in use before passage of Standard 
Container Act in 1916 

5. Excerpt from Consumers' Guide for May 15, 1939, re 
standardizing containers - 



Intro- 
duced 

at 
page 



3384 
3385 

3387 
3388 



Ap- 
pears 



(0 
3468 



0) 



3393 


(') 


3393 


(0 


3394 


(') 


3395 


347? 


3415 
3418 


3416 
3419 



3475 



3487 

(0 

(') 
(') 

(0 



' On file with the committee. 



INVESTIGATION OF CONCENTEATION OF ECONOMIC POWER 



WEDNESDAY, MAY 10, 1939 \ 

United States Senate, 
Temporary National Economic Commute,, 

Washington^ D. C. 

The committee met at 10:38 a. m., pursuant to adjournment on 
Tuesday, May 9, 1939, in the Caucus Room, Senate Office Building, 
Senator Joseph C. O'Mahoney presiding. 

Present : Senators O'Mahonej^, chairaian, and Borah ; Messrs. Hen- 
derson, Lubin, O'Conneil, and Davis. 

Present also: Mr, D. E. Montgomery, Consumers' Counsel, Agri- 
cultural Adjustment Administration; Milton Katz, Department of 
Justice; Wilford L. White, Department of Commerce; Willis J. 
Ballinger and Anderson Tackett, Federal Trade Commission. 

The Chairman. The committee will please come to order. 

The committee has requested Mr. D. E. Montgomery, Consumers' 
Counsel of the Agricultural Adjustment Administration, to take 
charge of the presentation this morning of the results of the con- 
sumer study which has been under way for some time by this com- 
mittee. Are you ready to proceed, Mr. Montgomery ? 

Mr. Montgomery. Yes, Mr. Chairman. I would like first, Mr. 
Chairman, to make an opening statement telling what we are going 
to do with this testimony, and what we hope to show. 

STATEMENT BY D. E. MONTGOMERY, CONSUMERS' COUNSEL, 
AGRICULTURAL ADJUSTMENT ADMINISTRATION, WASHINGTON, 
D. C. 

the consumer movement 

Mr. Montgomery. Mr. Chairman and members of the committee, I 
wish briefly to explain who these witnesses are and why they have 
asked this opportunity to appear before you. Four of them, Mrs. 
Belester, Mrs. Roller, Dr. Ayres, and Miss Campbell, are leaders in 
consumer organization work and are at the same time managers of 
family households. They will bring you the story, in its different 
parts, of the chaotic, uninformed, and unenlightened circumstances 
under which the average consumer must spend money for the service 
of family and individual needs. Mr. Masters is an officer of one of 
the major information services which consumers have set up in at- 
tempt to solve by their own devices the innumerable and perplexing 
riddles of the market place. He will further expound the consum- 
er's spending problem, based upon his experience in serving 80,000 
consumer families whose subscriptions support the service which he 

represents. 

3283 



3284 CONCENTRATION OF ECONOMIC POWER 

Following the direct consumer testimony you will hear the testi- 
mony of two manufacturers, Mr. Ephraim, who is engaged in business 
on a small scale, and Mr. Walker, who is associated wdth one of the 
largest manufacturing and distributing organizations in the world. 
Their testimony will tend, we anticipate, to confirm what the con- 
,sumers have told you, approaching the same questions from the manu- 
facturing and selling side of the retail transaction. 

Mr. Maddux will testify as a professional, paid purchaser of con- 
sumer goods, based upon his experience as purchasing agent of Hamil- 
ton County, Ohio. A final witness will sum up the significant points 
in the testimony, particularly those that may relate directly to the 
further investigations and reports and recommendations of your 
committee. 

All of these people come to you as persons qualified to speak for 
and of that growing development of popular interest which now is 
generally referred to as the consumer movement. I venture the pre- 
diction that this committee will hear the testimony of no witnesses 
who will discuss matters touching so directly and so intimately the 
immediate practical problems of all the homes and families of the 
Nation. 

Everyone, as is stated so frequently, is a consumer. The con- 
sumer is everybody. That is not to say, however, that the consumer 
interest and the public interest are one and the same. They are not. 
The consumer's is a special interest, just as the interests of the wage 
earner, the employer, the professional man, the farmer, the taxpayer 
are special interests. The consumer's special interest turns upon the 
spending of his income for goods and services — what he gets for his 
money, how much money he spends to get it. This together with his 
occupational, taxpaying, voting, and sundry other interests make up 
the whole citizen. All of these interests of all citizens make up the 
public interest. 

These spokesmen of the consumer movement come before you, there- 
fore, as specialists in the expenditure of family and personal income. 
The movement for which they speak is nothing more nor less than the 
growing recognition of this money-spending interest on the part of 
rapidly increasing numbers of people. It began in 1927 when Stuart 
Chase and F. J. Schlink published a book called Your Money's Worth 
which stimulated among many people that curiosity about commodi- 
ties which is, so to speak, the motive power of the consumer move- 
ment. With the increasing severity of the depression this interest 
spread rapidly and stimulated a great variety of activities, including 
a marked revival of interest and development of consumers' coopera- 
tion, a movement which had survived a long history of success and 
failure in earlier years. 

The consumer movement has been sufficiently described and cata- 
lodged in print to require no detailed exposition at this point. Most 
recent of these descriptions is in the April 22 issue of Business Week, 
a monograph which describes the many angles and major current 
problems of the movement and states the case fairly from the business 
point of view, and, with one or two exceptions, from the consumer 
point of view also. Suffice it to note only that the consumer move- 
ment embraces a wide variety of programs, ranging from education on 
specific commodities and general education on consumer economics 
through many kinds of organized activity on various economic and 



CONCENTRATION OF ECONOMIC POWER 3285 

legislative fronts, and on to the development of cooperative pur- 
chasing of consumer goods on a large and well-organized bubiness 
scale. No census of the consumer movement has been or could be 
attempted. It enters into the programs of many of the large organi- 
zations of women ; it is reflected in the curriculum of hundreds of 
high schools and many colleges ; in one way or another it must have 
brought millions of people within some phase of its educational or 
iiction program. 

Rough estimates have been made of the number of people who have 
made some contact with the consumer movement. Such an estimate 
by the Crowell Publishing Co. last year said that more than 5,000,000 
women in various organizations are affected by consumer educational 
material and are more or less active in efforts to secure legislation 
favorable to consumers. I am filing with the committee an excerpt 
from the Journal of Marketing of July 1938 ^ which quotes this esti- 
mate and lists some of the organizations Avhich have taken some part 
in the consumer movement. In addition, I might say, the most 
recent reports from Government sources indicate that more than 
1,375,000 people are members of retail cooperative societies, including 
both the urban and the farm purchasing groups. 

Running through all the varied aspects of the consumer movement 
is the central thread, its unifying principle, so to speak, which is its 
insistence that consumers be given opportunity to make sensible 
choices in spending their money for the ordinary purposes of living. 
This means that consumers want facts — facts about goods, facts about 
prices, facts about the comparative value and usefulness of commodi- 
ties offered for sale. "The consumer wants to know." That is the 
main stem of the consumer movement. It has many ramifications 
reaching out into numerous special areas where the ultimate consumer 
comes into contact with the world he lives in. 

One excursion of this organized curiosity deserves the special atten- 
tion of this committee. A delegation of consumer leaders representing 
many thousands of consumers in their membership came to Washing- 
ton 15 months ago to confer on questions of government and the 
consumer. A committee of this conference submitted to the Presi- 
dent on February 24, 1938, a proposal that just such an inquiry as 
your committee is now engaged in be undertaken by the Congress.'' 
I shall file a copy of the proposal which was submitted to the Presi- 
dent on that day. I quote from it only the following [Reading from 
"Exhibit No. 503"] : 

In our concern for production we have allowed it to exploit consumption and, 
in the process, to cripple its customers for whom, and for whom alone, it con- 
fessedly exists. * * * 'In a democracy no economic system makes sense 
which is not run so as to maximize consumption, yet our economic system is 
primarily run to maximize profits and the consumer takes the hindmost. * • * 
A major need at present is to put current business under the microscope to ask : 
How does it operate and, operating as it does, how and where does it promote 
or curtail the welfare of our people who live by it and its products * * *? 
Self-regulation at a round table must include self -regulation by the whole people 
through government participation. Government can play an effective role only 
if its policies are based upon an understanding of what is wrong and what needs 
to be done. The consumer can play an intelligent role at that table only when 
he knows the facts and how they affect him, and he is powerless to collect these 
facts himself. 



^ Subsequently entered as "Exhibit No. 504," see appendix, p. 3458. 
' Subsequently entered as "Exhibit No. 503," see appendix, p. 3457. 



3286 CONCENTRATION OF ECONOMIC POWER 

While the aims of the consumer movement have very direct prac- 
tical bearing on the every-day problems of the average American 
family, they bear also in a significant way upon the questions before 
your committee. Usually the theory and practice of competition in 
the business world is discussed in terms of the activities of business 
organizations. For example, are the business units in an industry 
competing in the sale and purchase of goods, or are they controlling 
their markets by combination, conspiracy, or otherwise? However, 
it should not be forgotten that the assumed virtues of competitive 
enterprise depend for their validity upon the belief that the public 
at large shall pass final judgnient upon the goods and services which 
such enterprise produces. What I am saying is that in a system of 
free enterprise the choices which consumers make in the spending of 
their money provide the ultimate test of competitive virtue and dis- 
tribute the rewards according to merit. Unless the consuming public 
is in a position to make this final judgment of approval or dis- 
approval, there can be no assurance that business enterprise is serv- 
ing the public interest. Insofar as consumers may not be able to 
know where their own interest lies in the selection of goods and 
services, they cannot exercise this power to shape the affairs of 
industry toward maximum satisfaction of their wants. 

The present strength and vigor of the consumer movement derives 
obviously from the realization by a great and ever-increasing number 
of consumers that somehow they do not quite succeed in exercising 
this final judgment over the products of industry and commerce. 
They find themselves the subjects of a great mechanism of organized 
sales effort. They suspect that their wishes are not the sole deter- 
mining factor of the Kind and quality and price of commodities 
offered for sale. And, most important of all, they know that their 
choice between one kind of merchandise and another is necessarily 
determined in large part by prejudice, hunch, and ignorance, because 
the facts about merchandise upon which they might make an intelli- 
gent choice are not disclosed to them in terms that relate specifically 
to their needs as purchasers and users of commodities. 

In the testimony which follows we propose to show you by ex- 
amples in how many ways it is true that consumers cannot spend 
money intelligently to serve their own interests. We believe that we 
describe a general condition — confusion and disorganization of the 
market place at its retail level where commodities pass through the 
final transaction and into use. We believe that whatever else the 
committee may recommend to improve the functioning of economic 
affairs toward abundance, stability, and security, there can be no 
assurance that the benefits of such improvements will pass to the 
consumer in tangible and specific additions to the standard of living 
unless and until the consumer as a buyer of goods is given an active 
and significant role in the economic system. There can be no free 
enterprise if the citizen as a consumer is not also free. The con- 
sumer cannot be free so long as he must remain in ignorance and 
confusion on how to spend his money to get what he needs and wants. 

There is, of course, the alternative that we abandon the system of 
free enterprise and intentionally adopt a controlled economy, in which 
case it is likely that consumers will be told, rather than asked, what 
they shall purchase and use. The rather wide extent to which con- 
sumers today are more told than asked what they wish to buy is prob- 



CONCENTRATION OF ECONOMIC POWER 3287 

ably a significant measure of the distance we have already come 
from a competitive to a dominated and controlled economy. It is 
suggested that the committee's further inquiries might well give 
attention to the methods employed by various industries to dictate 
consumer selection and to narrow and restrict the consumer's oppor- 
tunity to select the kind of merchandise or the kind of merchandising 
service which best meets his particular needs. The freezing of indus- 
trial and commercial initiative, which is characteristic of the drift 
toward concentration, is nowhere more dramatically revealed than in 
the treatment accorded by an industry to its ultimate consumers. 

The testimony which follows contains no word on the consumer 
cooperative movement. Doubtless this is a major subject which your 
committee will want to consider in its investigations. It is too large a 
subject and touches in too many ways upon the protection and ad- 
vancement of the consumer interest, to receive adequate attention in 
these brief hearings. I am sure the cooperative movement stands 
ready to tell this committee what it hopes to do and what it is already 
doing to put back into the hands of consumers a really effective 
force for the determination of their own economic welfare. 

One word more : In the testimony which these consumer representa- 
tives are to present to you such references as are made to particular 
brands or particular manufacturers are incidental and by way of 
illustration only. In many parts of the testimony it was feasible to 
eliminate the identifying names. These witnesses are concerned not 
with malefactors but with a condition. Their complaint runs not so 
much against specific frauds and abuses as against a general and con- 
tinual neglect of the consumers' need for reliable and informative 
facts about the goods and services for which they spend their money. 

Mr. Chairman, I will identify these exhibits to which I referred 
in my statements. 

The Chairman. They may be received. 

Mr. Montgomery. The first is a statement filed here by the dele- 
gation of consumers on February 24, 1938. 

(The statement referred to was marked "Exhibit No. 503" and is 
included in the appendix on p. 3457.) 

Mr. Montgomery. The second is a quotation from pages 4 and 5 of 
the July 1938 issue of the Journal of Marketing, referring to the 
Crowell estimates on the size of the consumer movement. 

(The quotations referred to were marked "Exhibit No. 504" and 
are included in the appendix on p. 3458.) 

The Chairman. Do you solemnly swear the testimony you are 
about to give in this proceeding shall be the truth, the whole truth, 
and nothing but the truth, so help you God ? 

Mrs. Belester. I do. 

TESTIMONY OF MRS. ALICE BELESTER, CHICAGO, ILL., CHAIRMAN, 
UNITED CONFERENCE AGAINST THE HIGH COST OF LIVING 

TYPICAL" AMERICAN CONSUMER 

Mr. Montgomery. Will you please tell your name? 
Mrs. Bejlester. My name is Mrs. Alice Belester. 
Mr. Montgomery. "Where do you live, Mrs. Belester? 
Mrs. Belester. 2853 Neva Avenue, Chicago, 111. 



3288 CONCENTRATION OF ECONOMIC POWER 

Mr. Montgomery. What is your family, Mrs. Belester? 

Mrs. Belf.ster: My family consists of my husband and myself. 

Mr. Montgomery. In what trade is your husband? 

Mrs. Belest-er. My husband is a carpenter by trade, but he has two 
other occupations he is very skilliul at. He is an upholsterer and he 
is a cabinetmaker. 

Mr. Montgomery. Mrs. Belester, this consumer question starts back 
with how much money the individual family has to spend and how 
they spend it, so I think these hearings ought to start off, if you can 
help u^s, by telling us about your own personal budgetary situation. 
Have you "made a family budget ? 

Mrs. Belester. Yes; I keep a fairly accurate budget of my income 
and my expenses. 

Mr. Montgomery. Will you tell the committee for the year 1938 
what your total income was? 

Mrs. Belester. Our total income was $1,140. 

Mr. Montgomery. What were your total expenditures during the 
year? 

Mrs. Belester. Our expenditures were $1,642. 

Mr. INIontgomery. Your expenditures were 'larger than your in- 
come. You had a deficit, then, for the J^ear, of how much? 

Mrs. Belester. $502. 

Mr. Montgomery. How did you meet that? 

Mrs. Belester. We had to borro^v $510. 

Mr. Montgomery. What was the total amount of your debts at 
the end of the year? 

Mrs. Belester. $4,473. 

Mr. Montgomery. Will you tell us what items that was made 
up of? 

Mrs. Belester. Then we liad a loan of $510, taxes were $96, special 
assessments $52, our doctor bill $45, and the -loan on the mortgage is 
still $3,770. That makes the balance of $4,473 at the end of the year's 
debts, 

jNIr. Montgomery. Those are all sums you still owed at the end 
of 1938? 

Mrs. Belester. Yes, sir. 

Mr. MoNTGOiSiERY. You said your total income for the year was 
$1,140. Do you liappen to know what the Government reported on 
family incomes for the year 1935-36? Have you seen any of those 
reports ? 

Mrs. Belester. Yes; in the Consumers' Guide of last September it 
stated that half of tlie middle families' income was $22 per week. 

Mr. INIontgomery. Wliat do you mean by that $22 a week? 

Mrs. BELES'raR. That means $22 a week; that was the lowest middle 
family. That aniounted to $1,160 per year. The other half were 
living below that. 

Mr. Montgomery. Half the families were living below $22 a week 
and half above, and that is $1,160 a year? 

Mrs. Belester. That is very jimch like my own income, which was 
just a few dollars less. 

Mr. Montgomery. In other words, your situation is about typical, 
was right in the middle, and half of the families had incomes lower 
than your own ? 



CONCENTRATION OF ECONOMIC POWER 3289 

Mrs. Belester. Very similar. I am one of the typical American 
families. 
' Mr. Montgomery. What were your husband's earnings in 1938? 

Mrs. Belester. $600 that year. His work was very slack. His sal- 
ary was made the first part of the year. He was occupied at carpenter- 
ing at $1 per hour. He was formerly a union man. Unable to pay his 
dues in the union, he had to give that up, but this year he is rejoining 
again. He also made money outside, on his other occupations as an 
upholsterer and a cabinetmaker. 

Mr. Montgomery. So he made $1 an hour when he worked but he 
had very slack work ? 

Mrs. Belester. Yes ; the work was very slack. 

Mr. Montgomery. You told us your total income was $1,140. How 
was the other $o40 earned ? 

Mrs. Belester. I rented rooms in my home. That is where the $540 
came from. 

Mr. Montgomery. Is your home large enough to rent several rooms? 

Mrs. Belester. Well, the home was built by my husband and myself, 
and I am very happy that we built this home, because it now houses us, 
although we are very inconvenienced. We live in the basement, our 
living quarters are down in the basement,. whereas we sleep in the attic. 
I feel very grateful that we were able to do this, although it does 
inconvenience us. 

Mr. Montgomery. The house you built, then, is providing a large 
share of your total income? 

Mrs. Belester. Yes ; it provides a large share of our income. 

Mr. Montgomery. I want you to tell us some of the facts about your 
expenditures. You said the total for the year was $1,642. What was 
the largest single class of expenditure included in that total? 

Mrs. Belester. The largest was $872.50. That was to meet the 
mortgage jDayments, the taxes, repairs, and remodeling on our home. 

Mr. Montgomery. In other words, money spent on keeping your 
■ home was the largest single thing, and it amounted to $872.50. 

Mrs. Belester. That was the largest item. 

Mr. Montgomery. How^ much did you spend for food during the 
year ? 

Mrs. Belester. We spent $220 for food, and I realize that with the 
sales tax taken off, which amounted to about $10, it would leave it 
about $210. I have a small garden which realizes me about $20. I 
can some of my own fruit and vegetables, and that tides us over for 
the winter. 

Mr. INIoNTGOMERY. What do you figure your total expenditure for 
food, including what you produced yourself? 

Mrs. Belester. Deducting sales tax, which was $10, it would be 
$230 for my husband and mj'self. 

Mr. Montgomery. How much does that mean you can spend for food 
per person per week ? 

Mrs. Belester. I budget very closely ; figuring out the amounts I 
spent throughout the year it amounts to $2.31. Of course, that varies 
some weeks. 

Mr. Montgomery. $2.31 for each of you? 

Mrs. Bet,ester. For each. 



3290 CONCENTRATION OF ECONOMIC POWER 

Mr. Montgomery. With only that much to buy your food for the 
week, you have to be pretty careful in making your selections of 
food, don't you ? 

Mrs. Belester. Yes, Mr. Montgomery; I do. I have to be very 
careful. I have always been a very careful shopper, and especially 
this last year or so I have had to be very, very careful. When I go 
shopping it seems so confusing, especially when I am going out for 
the bare necessities of life. When I go to the grocery store I look on 
the shelves and I figure on purchasing canned goods, and there are 
so many brands it is hard to choose. I have difficulty in finding just 
what brand will suit my purpose. But I have found one store where 
they have a brand that is sold by grades, and I buy that purposely 
because I find it suits my needs. 

Then, also, I find that when we buy meat, which is in very small 
quantities, I discovered that in our neighborhood one store carries 
Government-graded meats, and that I found very satisfactory, be- 
cause I can buy the quality that I want, and this is an exception be- 
cause the stores in our city of Chicago, very few of them, carry the 
Government-graded meats. 

Mr. Montgomery. Now about your food purchases in general. Do 
you have difficulty getting enough information about them to know 
whether you are getting your money's worth or not when you make 
a selection? 

Mrs. Belester. Yes ; I do. I have to make the choices myself. It 
seems I do not get any information from the sales clerks when I do 
ask them. They just use their own judgment, there being so many 
brands on the market. 

Mr. Montgomery. About these other purchases, how much did you 
spend for clothing during the year ? 

Mrs. Belester. I spent $38.40 for clothing last year. 

Mr. Montgomery. Does that include any dresses for yourself? 

Mrs. Belester. I purchased a suit. I was greatly in need of a suit; 
I went to one of the stores which I knew was reliable. There was 
a suit there that was $25, marked down to $10, which I purchased. 
It was the first purchase I had made for myself on a large item since 
1936. Then I bought myself a pair of canvas shoes. The last pair 
of shoes I bought was in 1935. I replenish. my shoe supply by $1 
or $1.50 pairs of shoes every summer. 

Then I bought work shirts for my husband, and overalls, socks, a 
polo shirt, and a hat. That is where the $38.40 was spent. 

inadequate consumer information 

]\Ir. Montgomery. Now let's take the situation if you are going 
to buy a dress. Where do you look for help to tell you what this 
dress is that you are going to buy? 

Mrs. Belester. Well, usually I look up the ads in the papers to see 
if I can possibly get a bargain. 

Mr. Montgomery. You brought an ad with you about some dresses. 
Will you show those to the committee? 

Mrs. Belester. I did. For instance, here we have a dress at $2, 
and this ad gives no description whatsoever of the quality or the 
goods that it is made of. All it states is, "You, in crisp, dainty, 
young shepherd checks, $2." 



CONCENTRATION OF ECONOMIC POWER 3291 

If I were ^oing to the store to buy this dress, that wouldn't give 
me sufficient information, I went to this store to see if I could buy 
a dress one time, at this very store this ad came from, and found that 
I wasn't satisfied. What I am looking for is information regarding 
the grading of the goods and the quality, how much wearing I can 
obtam from a dress, since my budget is so low. 

Mr. Montgomery. Will you get any information on the label on 
the dress, telling you these things? 

Mrs. Belester. There is no information on the dress tliat will de- 
scribe the thing I am looking for, such as information as to the wear- 
ing quality or the material it is made from, 

Mr. Montgomery. Do you get information from the sales girl on 
those points? 

Mrs. Belester. Well, the girl tries very hard to give me the infor- 
mation and oftentimes I do go by her judgment, because she has had 
experience in selling; but she can't give me the correct information 
that I am looking for. 

Mr. Montgomery. Let's take some of these other purchases. How 
much do you spend for coal during the year ? 

Mrs. Belester. We spent *^113.20 for coal. 

The Chairman. When you examine a garment such as that which 
is advertised here, isn't it possible for you to determine whether it 
is of the quality that you think you desire? 

Mrs. Belester. Yes ; to the best of my ability I can. 

The Chairman. Well, haven't you all the ability that is necessary 
to obtain that information? 

Mrs. Belester. Not enough, because some of the dresses have, say, 
rayon in them, and it is v^ry hard to distinguish that, and they have 
to be laundered a little differently from a cotton dress. 

The Chairman. So that you have to have specific information from 
some authoritative source before you can satisfy your own mind as 
to the quality of the goods that you see before you and that you feel ? 

Mrs. Belester. Yes, sir. There should be a standardized label for 
commodities of this kind, in fact, for all commodities, so that a house- 
wife can choose and get her money's worth. 

Mr. Montgomery. May we introduce into the record the adver- 
tisement Mrs. Belester referred to? 

The Chairman. It may be received. 

(The advertisement referred to was marked "Exhibit No. 505" and 
appears on p. 3292.) 

Dr. LuBiN. May I ask Mrs. Belester some questions ? 

Is there any way of your knowing whether that dress is silk or 
rayon? Would you know, yourself, by looking at it? 

Mrs. Belester. I couldn't distinguish silk from rayon, if there 
isn't a tag attached to the dress. It is impossible to. This particu- 
lar dress that I am shoeing doesn't state whether it is cotton or 
rayon. It doesn't give any description whatsoever excepting the 
style. 

Dr. LuBiN. If you looked at the dress, would you know whether it 
were silk or rayon? 

Mrs. Belester. There is so much rayon that we have on the mar- 
ket today that looks similar to silk — ^how are you going to distinguish 
that? 



3292 CONCENTRATION OF ECONOMIC POWER 

The Chairman. Wouldn't the price distinguish it? You wouldn' 
expect- to get silk for raj^on prices, would you ? 

Mrs. Belester. Well, that is very hard to judge, too. Some of the 
stores can sell a rayon dress for a silk dress. 

The Chairman. The advertisement you presented liere was for a 
$2 garment. 

Mrs. Belester. Yes. 

Exhibit No. 505 




Special Purchaiet 



SPORTS 
DRESSES 

Made to Sell tor 
$S.9S and $7.95 



3.99 



The newMt in prints , . . nrip«i . . . 
doti . . . brought to you in this ex- 
ccptional collection. Clever styling 
. . . variety of unusual necklines . . . 
interetting details. Many samples in- 
cluded. Not all sizes, in all styles. 
Sizes 12 to 20. 

Third Floor— Tftree Stores 




'22.95 



The successful cornerstone of your toivn 
and countr^ivardrobe . . . our thorough' 
bred chssU stud dress. W\lh freedom- 
assured fullness, and clean-clipped lines. 
Navy, light blue, sherbet green, primrose, 
white. Rayon crepe. Siies 12 to 42. 



Sfarti Shop, Fmrlh Fhtr—Hals, Fifth Fleer. 




Dress of liny shepherd cheeW 
with its spanlcing whit* shark* 
skin over self double collar. 
Wide lealhereHe belt flatten 
the figure . . . buttons dow« 
the front from nedillne to bot. 
torn of skirt. With a pert 
kerchief that adds to Its smart* 
nest. White checks on navy 
or black grounds. 

MBZZANIHE FLOOR 




The Chairman. You wouldn't be under any misapprehension when 
you saw that garment, whether it was silk or rayon, would you i 

Mrs. Belester. No; but I would like to mention an instance of a 
dress that was advertised that looked similar to a dress that was sell- 
ing for $4. It didn't tell the description of the goods; it was very 



CONCENTKATIOxN OF ECONOMIC POWER 3293 

similar to the one I am showiii^^ you now. This person went to tho 
store and discovered the dress was a cotton (h-ess, where hers was a 
rayon dress a very good-looking dress, the same style. Slie went 
down there in order to see wlietlier she was really getting gy'M>d, in 
l)lain words, on $3, and she was going to go back to tlie stV.e and 
tell them, but she found that the advertised dress was a cotton dress, 
where hers was rayon and cotton, a mixture. 

So you see you can't very Avell judge by advertisements. 

Dr. LuBiN. Mrs. Belester, in your experience as a shopper do you 
find that the sales girl has the information that you would like to 
liave in most instances? 

Mrs. Belksti<:r. No; I clon't think she has, yet many times I have 
bouglit because of her decision and the information she has given me. 
1 dop't believe she has. In fact, many times I have found it Avasn't 
what the sales clerk told me it was. 

Dr. LuBiN. She wouldn't know whether it was new wool in a 
thess, or reworked, or virgin wool, or what? 

Mrs. Belester. 1 don't see how she could, luiless there was a tag 
describing the dress. 

Mr. Henderson. Some years ago I know the Better Business Bu- 
reaus throughout the country had a great deal of difficulty with the 
advertising of dresses as silk that were actually rayon. Do' you know 
whether they are still having that same difficulty? Do you still find 
rayon dresses advertised as silk? 

Mrs. Belester. Not being in the marlset for dresses of late, I 
haven't watched them very carefully, but I have been told through 
some of the women that I am connected with that they have pur- 
chased rayon dresses for silk dresses. 

Mr, Montgomery. Let's go down through some of these other ex- 
penditures in your budget. How much did you spend for coal during 
the year ? 

Mrs. Belester. $113.20. 

Mr. Montgomery. How about all the utilities — gas, electricity, 
water, and so forth? 

Mrs. Belester. $121.75. 

Mr. Montgomery. What was the cost for medical care during the 
year ? 

Mrs. Belester. The total cost was $107.10, and that was an es- 
sential. My husband took very ill last year and he had to go to the 
hospital. I had to borrow money in order to get my husband out 
of the hospital. That is an essential bill that must be paid when 
leaving the hospital. My doctor only received $15. I still owe the 
doctor $45. 

Mr. Montgomery. How much did you spend during the year for 
automobiles and transportation? 

Mrs. Belester. For transportation I spent $18, and on the auto- 
mobile we spent $73. That seemed to be a very large amount, but 
my husband — it is necessary that he has his car. He takes his tools 
alon^ with him and his ladders, and oftentimes he has to bring 
furniture home to do some extra w^ork when he possibly can find it. 
It really is necessary for us to have a car; although it is a 1927 
model Buick, it gets around. 

The Ch.4irman. I think the Buick people would want to delete 
the word "although." 

124491— 39— pt 8 2 



3294 CONCENTRATION OF ECONOMIC POWER 

Mr. Montgomery. Do you know what you, spent for life insurance 
during the year ? 

Mrs. Belester. $22.32. 

Mr. Montgomery. When you add up all these things we h^ve 
mentioned so far, expenditures on the home, food, clothing, fuel, 
utilities, medical care, auto and transportation and life insurance, 
how much was the remaining expenditure that you had in your total 
budget ? 

Mrs. Belester. I had $55.73 left. 

Mr. Montgomery. Which included a variety of miscellaneous 
things, I suppose? 

Mrs. Belester. Yes; some necessities and some incidentals of dif- 
ferent amounts. 

Mr. Montgomery. Wliat are some of the items included in there? 

Mrs. Belester. I had to buy some linens which were greatly needed 
in the home. 

Mr. Montgomery. How much did you spend for that ? 

Mrs. Belester. I spent $9.83. 

Mr. Montgomery. Tell us some of those items you bought under 
that expenditure. 

Mrs. Belester. I needed dish towels ; I bought some curtain goods, 
and I bought some sheets that I badly needed. 

I was mending my old sheets and I turned them into pillowcases, the 
best part I could possibly get out of them. Not buying any since 
1932, they were pretty well worn out. 

Mr. Montgomery. That is the first time since 1932 you had spent 
money on sheets ? 

Mrs. Belester. Yes. 

Mr. Montgomery. How much did you spend for sheets last year? 

Mrs. Belester. Last year the bill came to $4.86, I believe, on the 
sheets, and these I bought at a sale at a new store that just opened 

Mr. Montgomery. How did you determine what sheets to buy? 

Mrs. Belester. Well, I couldn't very well i U. I just took a 
chance on the sheets I bought last year. I have a little ticket here 
with me yet. I still have one of the new ones. The only description 
is "torn size, 81 by 90," so I took a chance in buying the sheets. 

Mr. Montgomery. Did it have the brand name on the ticket ? Has 
the sheet a brand name? 

Mrs. Belester. This is the 1938 brand that I bought, a Midwood, 
unadvertised. I never heard of the sheet before. 

Mr. Montgomery. You didn't know what that name meant? 

Mrs. Belester. No ; I never heard of it before. 

Mr. Montgomery. What kind of sheets did you buv in 1932? 

Mrs. Belester. I bought Fruit of the Loom in 1932. They were 
widely advertised, and I was informed they were of good quality. I 
paid $1 and a few cents for those sheets a pair, or each, rather. The 
sheet that I bought last year I paid 69 cents for. 

Mr. Montgomery. So I understand in 1932 you selected the sheets 
by buying a b^^and that was familiar to you, a name that you had 
heard ; and this year you went out and bought on the basis of price, 
buying from a retailer you didn't know, a new store, and buying a 
brand you never heard of? 

Mrs. Belester. I had to, because I had a limited amount to spend. 



CONCENTRATION OF ECONOMIC POWER 3295 

Mr. Montgomery, In which year do you think you got the better 
value for your money ? 

Mrs. Belester. Well, as a matter of fact, Mr. Montgomery, I 
couldn't very well judge. The sheets I bought in 1932 may have been 
a better quality, but I won't be able to tell until a few years later, when 
the quality of the sheets I purchased last year will show their wear. 

Mr. Montgomery. Weren't you given any facts in either case which 
would indicate what the sheet was made of, how long it would wear, 
and so forth ? 

Mrs. Belester. No ; neither one of them showed anything pertain- 
ing to the grade of the sheet. 

Mr. Montgomery. Wliere, in general, do you look for information? 
What do you have to rely upon when you go put to spend your money 
for these things you can only buy once, say, in every 6 years ? 

Mrs. Belester. Well, I look up the papers, as I have mentioned 
previously, because sometimes I can judge if it is a brand that is well 
known, and also look on the labels. Being a cautious buyer, I try to 
make a good choice. Sometimes I do; sometimes I don't. It is just 
taking a chance. I also ask the sales clerks, because they are familiar 
with the goods. 

Mr. Montgomery. How much help do you get from all that ? 

Mrs. Belester. I get very little help from the advertisements. 

Mr. Montgomery. You brought some advertisements down. Will 
you briefly point to each of those and give an idea of what it 
means to you or doesn't mean to you ? Before you talk about each one, 
will you identify it? 

(The advertisement referred to was marked "Exhibit No. 506" and 
appears on p. 3296.) 

Mrs. Belester. Here, for instance, is a shirt. When I go to pur- 
chase a shirt for my husband, which I know many housewives do, I 
usually look for the style of the shirt, a good-looking shirt, but I also 
want to know whether it is a good grade and if it will last. Here is 
this shirt. It -tells you it is a special white broadcloth, collar at- 
tached, neckband style shirt, sold regularly at $2.50 and $3. I look 
for a bargain, but I would also like to get better information; for 
instance, tlie fabric of the shirt, and what the thread counts are. 

The Chairman. It says "broadcloth." 

Mrs. Belester. Yes; but we have a variety of grades in broad- 
cloth. 

Mr. Montgomery. Will you show the next ad you brought ? What 
is that? 

(The advertisement referred to was marked "Exhibit No. 507" and 
appears on p. 3297.) 

Mr. Montgomery. What does that ad show ? 

Mrs. Belester. Here is a vacuum cleaner. It is something th© 
housewife buys very rarely and we have to be very careful. This 
ad shows you a streamlined vacuum cleaner, and it tells you that it 
keeps the colors fresh, and it tells you that that springtime look in 
your house after housecleaning is fresh, clean color of new rugs, of 
new drapes. "If this new color is worth having, it is worth keeping." 

It also goes on to tell you about the dog : 

If you have a dog, you love dogs, but you don't love dog hairs, and you find 
this vacuum cleaner is yours and Cooky's best friend. It is the one sure way 
to keep the dog and get rid of the hair. 



3296 



CONCENTRATION OF ECONOMIC POWER 
Exhibit No. 506 




SPECIAL 



White (Broadclotn and yacquard 

Collar Attached and Neckband Style 



SOLD REGULARLY AT $2^0 AND $3.00 

BOX OF (^for $5 




Fine Whites and a Lar^e Assortment ol Patterns Worth 
$2 and $2,S0 — In a Value'Paeked, MoneySoving 

SHIRT SALE 




8 cetlart to mAfcA— «rAo plalm wkue «cA6« 



Select group of fresh, new shirts in the latest and most fashion- 
able patterns, materials and collar styles. The lustrous fabrics 
assure you amazing savings for months to come. Many are San- 
forized shrunk — all are guaranteed not to shrink out of size. 



CONCENTRATION OF ECONOMIC POWER 



3297 

Wliat is 



Mr. Montgomery. Tliose are the funny parts of the ad. 
the information ? 

Mrs. Belestek. That is just the point. I want better information 
than that; I want to know whether this particular vacuum cleaner 
would be a comparative value to some other vacuum cleaner I will 



Exhibit No. ii07 




be comparing it with, and also how much current it would use and 
what its wearing quality would be. Those would be the most essential 
facts. 

The Chairman. Couldn't you test those facts out in the store? 

Mrs. Belester. How could you if you only have the one ? If you 
had several vacuum cleaners together, there may be some possibility 



3298 CONCENTRATION OF ECONOMIC POWER 

of doing that; but if you were just having a demonstration on one, 
it would pick up the dirt, but you couldn't tell if it was better than 
another. 

The Chairman. I would think a purchaser of a vacuum cleaner 
would be like the purchaser of an automobile — go from one dealer 
to another until he found the instrument that suited his desires. 

Mrs. Belester. But how could you tell, when it is a new vacuum 
cleaner ? 

The Chairman. You can tell by trying them. 

Mrs. Belester. I know it was impossible for me to tell when I was 
purchasing my old vacuum cleaner, and I am really in need of another. 

The Chairman. How could you tell by the advertisement? 

Mrs. Belester. It is very hard to distinguish. It doesn't tell the 
facts I want. 

Mr. Montgomery. What could the advertiser put in there that would 
help you out ? 

Mrs. Belester. I would say that there should be a grade, also, in 
vacuums as well as on any commodity. It should be standardized. 

The Chairman. Oh, I see. You are recommending a diflferent 
method of marking goods, so that by law they shall be graded or 
standardized, is that the idea ? 

Mrs. Belester. Yes, sir; that is what a housewife would be very 
greatly in need of. 

Mr. Henderson. It Avouldn't have to be by law, would it, Mrs. 
Belester, if the manufacturers themselves adopted standards? All 
during the twenties there was a big standardization movement going 
on as to things which manufacturers buy. Purchasing agents them- 
selves use standards in buying material for industrial concerns, and 
that is not required by law. It wouldn't have to be by law^ would it? 

Mrs. Belester. Well, the best way to get around it, I believe, would 
be by the law, for this reason : There is so much competition in much 
of our commodities. In vacuums you know we have various brands 
on the market, different concerns put them out, and they are compet- 
ing, and if we had a standardized law, then we would be sure of getting 
quality. 

The Chairman. I might remark, for Mr. Henderson's benefit, that 
the manufacturers of wool, for example, have very vigorously resisted 
the law now pending in Congress requiring the labeling of woolen 
goods, upon the ground that it would be an injustice, at least to the 
manufacturer, to compel them to distinguish between virgin wool and 
reworked wool. I have never been able to understand that argument, 
but it is quite obvious from the activity that the wool manufacturers 
could not be compelled to label their goods except by law, so that the 
consumer would have no possibility of knowing whether a particular 
garment was made of virgin wool or shoddy or reworked wool, except 
by statute. 

Mr. Montgomery. I might say that I can promise the committee 
some interesting information from a later witness about some of the 
things a consumer doesn't know when she buys a vacuum cleaner.^ 
We are coming to that this afternoon. 

The Chairman. My suggestion was prompted by the fact that the 
mere addition of new material in an advertisement would not of itself 
be of any assistance. 

1 Infra, p. 3331 et seq. 



CONCKNIKATION OF lOCONOMIC POWER 



3299 



Mr. Montgomery. It might depend on what kind of information it 
was, but I think this witness can illustrate. Mrs. Belester isn't expert 
in these commodities. She knows the things she pointed out in the 
advertisement don't tell her the things that mean economy, and she 
would like to get help. 

Mrs. Belester. The next advertisement is for linoleum, and I am 
in doubt as to what kind to buy in this line. I am in the market for 
one. 

(The advertisement referred to was marked "Exhibit No. 508"' and 
appears below.) 

Exit I HIT No. o<>S 




Mrs. Belester. This announces a sensational lower-priced inlaid 
linoleum, with a built-in rubber cushion, and it tells me you will find 
no more beautiful patterns in any linoleum, "and the prices are so 
marked you will hardly believe your eyes," 



3300 



CONCENTRATION OF ECONOMIC POWER 



Well, that is all very well, I would like to have beautiful linoleum 
on my floor. Women usually do like pretty things. But the thing 
I am interested in is the quality, along with the beauty of it. We 
can have the beauty and also have equality. How are we going to 
distinguish that ? Price is a factor with me, and I am in the market 
for this. What we want, what I would like to know, is also the same 
description on linoleum as on any other commodity. 

Mr. Montgomery. What is your next? 

(The advertisement referled to was marked "Exhibit No. 509" and 
appears below.) 

Exhibit No. 509 




YOlHi RAVg ABOUT THIS UlEW, mP^Oynt> SiiNDi 




CONCENTRATION OF ECONOMIC POWER 3301 

Mrs. Belester. The next is coffee. Here we have an advertise- 
ment of coffee. We have a group of people sitting around a seashore 
or country home, and they are commenting on the swell coffee. Then 
we find that it is endorsed by one of the movie stars, and that the 
coJBfee is delicious. 

Mr. Montgomery. Why don't we give the movie star a break? 
What is his name? 

Mrs. Belester. I wasn't going to reveal his name, but if you wish 
it, I will. His name is James Stewart — 

The biggest star in Hollywood. Its rich, mellow goodness is the talk of the 
town. 

Wlien I buy coffee I don't go according to seeing a picture like 
that. This doesn't give me the information I want. Each coffee has 
a different taste. Of course, I want fresh coffee, but we all vary in 
tastes. That ad is useless to me. 

Mr. Montgomery. All you can do about coffee is to be sure it is 
fresh. I take it your taste and Mr. Stewart's taste might not agree? 

Mrs. Belester. It may not. Him being a movie star, we have dif- 
ferent things in common. 

Now I want to relate an experience that I had a few years ago 
when I was in the market 

Mr. Montgomery. Just a moment; identify that for the record. 

(The advertisement referred to was marked "Exhibit No. 510" and 
appears on p. 3302. ) 

Mrs. Belester. Here is a picture of an electric refrigerator, and 
the housewife being very amazed, and it says, "The amazing shelf- 
lined inner door." It is true that I was taken up by this inner-door 
business, because it states it is a space saver. 

I was very much taken up with this, but I happened to think, well, 
there is no other identification on it any different to what the other 
refrigerators would give me ; it gives you just the ordinary informa- 
tion such as quick ice-cube release, meat storage, oversize freezing 
unit, but it doesn't tell me about the insulation, whether it is well 
insulated in comparison to other ice boxes or about the amount of 
current it would use and how long it would stand up, and those are 
very big items that a housewife should really look for. This is an- 
other item that we should have some standardized measures for in 
order to be able to judge by. 

Mr. Montgomery. Are those all the advertisements you have? 

Mrs. Belester. Those are all, Mr. Montgomery. I didn't have 
time to get more. I could have gotten hundi^ds more but I know 
the committee wouldn't have time to go through all these adver; 
tisements. 

Mr. White. Would it be your opinion that in these advertisements 
there should be information which in itself would be definitely com- 
parative as between one product and another? 

Mrs. Belester. That is what I would suggest should be also done. 

Mr. White. Do you think that a maniifacturer could appropri- 
ately put anything in his advertisement which would compare his 
own product with his competitors? 

Mrs. Belester. Well, how can you judge unless this commodity 
was inspected by an impartial body and compared with the other? 



3302 



CONCENTRATION OF ECONOMIC POWER 



Mr. White. Well, I wondered if that wasn't what you were think- 
ing about. 

Mrs. Belester. I was. 

Mr. WiHTE. And also wondering whether or not that would be an 
appropriate thing for the manufacturer to do or some other agency. 

Mrs. Belester. I suggested it through my other information that 

Exhibit No. 510 




it should be standardized the same as any other commodity, because 
it is something that the housewife buys very rarely. 

Mr. BaLlinger. You don't care particularly whether he compares 
his pr.'-duct with another manufacturer; you merely want them to 
state some performance tests in the end, such as, for instance, how 



CONCENTRATION OF ECONOMIC POWER 3303 

much electricity would be consumed in so many hours of operation 
of the vacuum cleaner and things like that. 

Mrs. Belester. Yes ; the actual operating cost, and also the quality, 
how long it will last me. 

UNITED CONFERENCE AGAINST THE HIGH COST OF LIVINO 

Mr. Montgomery, I think you have given the committee a pretty 
clear story, first of the necessity that you are under to spend money 
very carefully and to know what you are getting, and you have told 
about the confusion that you get in the market. What are .you 
doing about it? 

Mrs. Belester. Well, a few years ago I used to ponder when I was 
on my shopping tours in the stores and wonder whether something 
couldn't be done in order to give us the facts that the housewife is 
looking for, the facts on the values, facts on prices so that when we 
go to the store we can get our money's worth and buy according to 
the needs of the family and our pocketbook, and it dawned on me, my 
husband bein^ a union man, why couldn't we housewives have an 
organization similar, a homemakers' union. He was in the union, he 
was able to bring his grievances before his local, and I thought, why 
wouldn't it be a good plan for the housewives to do that. So I got 
together a few other women that had the same problems as I did, 
and we were the originators of the organization that now exists in 
Chicago. 

This organization carried on educational campaigns through the 
hard work of these housewives, in order to be able to get this in- 
formation that we were seeking, but we have found it rather difficult, 
being that the consumers' movement is just new and consumers them- 
selves don't really realize that they are consumers. Now, our organ- 
ization has 190 organizations that make up the council of this or- 
ganization which covers a membership of between 75,000 to 80,000 
people. Then we have a number, about six, neighborhood groups 
throughout varioiis sections of Chicago, study groups were estab- 
lished, and here we take up the consumer problem. We use the Con- 
sumers' Research Bulletin, the Consumers' Union Reports, and the 
Consumers' Guide ; we get considerable information from them. We 
also carry on educational tours ; for instance, 2 years ago we carried 
on a housing tour on the South Side, which was badly in need of 
housing. We compared that section with one of our better sections 
of the city, and we took a moving picture of that and showed it at 
many of our meetings, which was very interesting. Today on the 
South Side there is to be a Federal Housing project. 

We have lectures, speakers, discussion groups, one of our neigh- 
borhood groups in particular was interested in weights and meas- 
ures. In one instance one of the women discovered that the store 
was selling a boxed cookie that was formerly sold for 17 cents, and 
was then selling it for 13 cents, and she discovered that it was a 
smaller box, and the storekeeper said, "Oh, you're the first woman 
that recognized this." Well, it happened that she was in this con- 
sumer organization and she was on the alert. She- told the group 
when she came back and they made sure that this storekeeper saw 



3304 CONCENTRATION OF ECONOMIC POWER 

that he put out the proper information where he did use this infor- 
mation regarding the cookies. 

Mr. Montgomery, What did he do { 

Mrs. Belestee. He has to put the weight onto it. 

Mr. Montgomery. How much difference was there? 

Mrs. Belester. There was 4 ounces. It was originally'' a pomid 
box, and the new box was just 12 ounces, three-quarters of a pound. 

The Chairman. How long ago was that? 

Mrs. Belester. This was the year before last, or the beginning 
of 1938. 

Mr. Montgomery. Do you remember what the difference in price 
Avas? What was the special price? 

Mrs. Belester. Thirteen cents. 

Mr. Montgomery. What had it been selling for? 

Mrs. Belester. It was selling for 17 cents. 

Mr. Montgomery. Figure that out. It was a reduction of 4 cents 
on a l7-cent item, w^asn't it? 

Mrs. Belester. Yes. 

Mr. Montgomery. And the weight was reduced 4 ounces on 16 
ounces. 

Mrs. Belester. There wasn't a special on that; I wouldn't con- 
sider it a special. 

Mr. IMoNTGOMERY. I think if you figure that out you will find the 
small box cost a little more than the big one. 

Mrs. Belester. A penny, and all these pennies do count. 

The Chairman. I suppose you are aware that the duty of a divi- 
sion of the Department of Agriculture is to maintain some sort of 
standards for containers. 

Mr. Montgomery. They are just getting to work to get that bill 
into effect next June unless Congress delays its effectiveness. 

The Chairman. The regular Department of Agriculture appro- 
priation is now before the Senate and contains a fairly good appro- 
priation for that division of the Department of Agriculture. 

Mrs. Belester. That would be a boon to the housewife, because as 
a rule the average housewife does not look on the package, but since 
the consumer movement is growing they are getting very conscious 
of doing these things. 

This organization was endorsed by the Chicago Federation of 
Labor, being that there were a number of unions in it. 

The Chairman. What is the name of the organization ? 

Mrs. Belester. The name of the organization is the United Con- 
ference Against the High Cost of Living. 

The Chairman, And when was it organized ? 

Mrs*. Belester. It was organized in the spring of 1935. 

The Chairman. How many members did you start with? 

Mrs. Belester. We started with eight housewives. 

The Chairman. In your neighborhood? 

Mrs. Belester. No ; we started a conference in my neighborhood 
with three women, and then got to ariother part of the city, friends 
of ours, and we joined those conferences together, and from those 
two conferences avc approached organizations because we knew that 
by approaching these organizations we could reach many people who 
were in the same 



CONCENTRATION OF ECONOMIC POWER 3306 

The Chairman (interposing). Were these women with wlioni you 
started in the same income group as you are? 

Mrs. Belester. Yes; they were on about the same level. 

The Chairman. And what can you say now with respect to the 
present membership, which I understand you to fix at between 75,000 
and 80,000? 

Mrs. Belester. We have a diversified group now in our organiza- 
tion. The organizations are churches, unions, fraternal organiza- 
tions, women's clubs, and miscellaneous groups such as small neigh- 
borhood organizations, even the improvemeut clubs such as civic 
clubs, and they vary^ but we have 

The Chairman (interposing). Forget the organizations. I am 
thinking about the individual members of your organization. Do 
you know anything about the income levels which they occupy ? 

Mrs. Belester. A good percentage of our members are living on 
incomes much lower than mine. 

The Chairman. You say a good percentage. What percentage? 

Mrs. Belester. Well, I would say about two-thirds of them. 

The Chairman. And your income last year was less than $700? 

Mrs. Belester. The income that my husband brought in, yes. 

The Chairman. But added to your income it made? 

Mrs. Belester. $1,140. 

The Chairman. So that most of the 75,000 to 80,000 men and 
women who belong to this organization have incomes at least not 
more than that? 

Mrs. Belester. I know *bf a particular family that is living on 
$55 a month, with a family of six children. 

The Chairman. You could give many individual instances. I 
wanted to get the picture of the whole group. Most of them are 
receiving that income or a smaller one? 

Mrs, Belester. Yes. The majority of them are wives of men 
in these organizations because the unions are predominating in our 
organization, -and I would say that many of these men that are in 
the unions are unemployed, on relief, and on W. P. A., but outside 
of those we have some in the higher brackets. 

The Chairman. But most of them are in this income bracket? 

Mrs. Belester. Yes; they are in the lower income bracket, around 
$700 and^$800 per year. 

Ths Chairman. Would you say that two-thirds of them are in 
that group? 

Mrs. Belester. I would say close to two-thirds. 

Ths Chairman. Are you getting very much attention from mer- 
chants? Are they paying attention to what you are trying to 
accomplish ? 

Mrs. Belester. Yes; I will say they are in the neighborhoods 
where the women are very active; they do take attention of that. 
They are very careful and they have even remarked, "I wonder 
where all these women are getting their information from." Their 
ears have pricked up now when they find the housewife. is getting 
information. 

The Chairman. What are you getting them to do, for example? 
Let's have that story. 

Mr. Belester. One of our groups conducted a conference on 
health, and this particular group was very interested in obtaining 



3306 CONCENTRATION OF ECONOMIC POWER 

a nursery so as to give the children a little better food — rather some 
of these nurseries are giving food and this was very essential for 
these nurseries to be established in several neighborhoods, but this 
particular group carried on this activity for a nursery and also a 
conference for health. They are interested in the health of the 
community. Then, we had another group that participated in 
housing. Then, we have a group that — ; — 

The Chaibman (interposing). You misunderstood me. I wanted 
to know what the merchants have been doing in response to your 
pressure. 
Mrs. Belester. The merchants in particular neighborhoods? 
The Chairman. Wherever you know, as a result of the activities of 
this group of 75.000 to 80,000 women. 

Mrs. Belester. One of the campaigns that we have carried on and 
are still carrying on is a campaign for meat grading, compulsory meat- 
grading ordinance for Chicago. We are petitioning the mayor for 
compulsory meat grading ordinance, and we have Y,000 signatures 
already. 

The Chairman. Now that is something that you are trying to do. 
I haven't made my question clear. What have you actually induced 
the merchants to do ? 

Mrs. Belester. I am trying to get onto that by telling you that the 
meat grading has been introduced in several neighborhoods because 
the housewives are demanding thai, and that is one of the things that 
we have accomplished. 

Then we also carried on a campaign against a sales tax. That was 
to be placed on our utility bills ; and because we rose up in arms the 
sales tax wasn't placed on the utility bills. Also the increase on gas 
rates, which we are hoping will be a victory — it has so far, yet we 
are still paying the 30 cents a month. 

The Chairman. I might interrupt you to say that the New York 
papers please copy. I noticed in the New York Times this morning 
that a sales tax is being promoted in New York State. Pardon me 
for the interruption. 

Mrs. Belester. The sales tax is an added burden to the small-income 
groups because they spend most of their income on the necessities of 
life, x^lthough we still have our sales tax in Chicago, or rather in 
Illinois, this sales tax was eliminated from our utility bill, and there 
are many fronts that the housewife has got to keep her eyes and ears 
open on, and that is why we are asking for assistance on this. 

The Chairm.nn. I am interested in your saying that you have suc- 
ceeded in establishing in some localities in Chicago a system of meat 
grading. What is that system and how does it operate ? 

Mrs. Belester. The grading of the meat is by the Government. 
It is a Government meat-grading system, and the meat that is graded 
is graded, of course, by an impartial body, and we feel if this meat 
grading was compulsory the housewife would be able to get her 
money's worth, because we find that sometimes during the year the 
choice meats are scarce and the inferior qualities can be sold for choice 
meats. The average housewife isn't able to distinguish the difference 
in one or two grades, and we find a variation in meats. For instance, 
there are advertised choice steaks, such as sirloin, for 16^2 cents. Now, 
we know that there is a great difference between 16V^-cent and 35-cent 



CONCENTRATION OF ECONOMIC POWER 3307 

steak. We would like to have, not standardized quality but com- 
pulsory meat grading for that reason. We could purchase the meat 
that is best suited to our needs, and that is why several of the neigh- 
borhoods have already been able to get the Government graded meats, 
bfecause they demanded it, and it has been a help to them and the store- 
keepers are complying with their wishes. 

Mr. MoNTGOMERT. Are there any other things you want to tell about 
your similar organization work ? 

Mrs. Belester. I just wanted to say that the organization is carry- 
ing on an educational campaign among consiuners in the consumer 
interest, because consumers in the past have been going around blind- 
folded, and I have brought the message to this committee to take this 
into consideration and investigate on the report that I have presented 
to you and see that some of these things are remedied so that we will 
be able to have standardized merchandise, grades, and quality, also 
regarding prices, because the loM'-income family has to be very care- 
ful in spending its money, and I belong to one of the lower-mcome 
brackets, and I am very careful, and I ask this committee to take it 
into consideration for the thousands of housewives that I represent in 
Chicago. We know the consumer movement is growing rapidly; 
you have been told about the delegation that came here last year to 
Washington, and I am acquainted with various other leaders. This 
movement will grow. 

The Chairman. The consumer power of your group is really very 
great, isn't it? Although you have only a small individual income, 
when the aggregate is considered the purchasing power is really very 
substantial. 

Mrs. Belester. We spend most all of our money on the necessities 
of life, and naturally it should have a great bearing on the store- 
keepers and the manufacturers, because without the consumers^ how 
could they operate ? It would be impossible for them to operate. 

Mr. Montgomery. I want to go back for just one other question, 
Mrs. Belester. I think I went too quickly over the cost of medical 
care. You said your husband was in the hospital during the year. 

Mrs. Belester. Yes, Mr. Montgomery. 

Mr. Montgomery. Tell us what was the total cost. How much did 
it cost to get him out of the hospital ? 

Mrs. Belester. $85.60. 

Mr. Montgomery. That is the hospital bill. 

Mrs. Belester. That was the hospital bill for 7 or 8 days. 

Mr. Montgomery. Do you know what the doctor's bill was for that 
illness ? 

Mrs. Belester. The doctor's bill for mv husband was $45 — ^$50, 
and the balance of that doctor's bill was on myself ; I needed atten- 
tion also. Fifteen dollars was all that was paia the doctor; he is still 
waiting for $45, which I hope I will be able to pay him this year. 

The Chairman. When you were listing j^our debts at the beginning 
of the testimony, you spoke of your total indebtedness at the end of 
the year as something in excess of $4,000. 

Mrs. Belester. $4,473. 

The Chairman. How much of that was really invested in your 
house ? 

Mrs. Belester. $872. 



3308 CONCENTRATION OF ECONOMIC POWER 

* 

Mr. Montgomery. No. What is the mort^a^e on your house? 

Mrs. Belestek. The mortgage on the house is $3,770. 

Tlie Chairman. So that actually your indebtedness for living ex- 
pense was what? You had to borroAv $510 in order to take care of 
certain medical expenses, the husband's hospital bill, and so forth, and 
your own? I am trying to get the exact figure on your living ex- 
penses because that is the significant thing. 

Mrs. Belester. What :would you mean by living expenses? We 
spent $210 on food. 

The Chairman. You gave food, coal, utilities, transportation, auto- 
mobile, what would that all total ? 

Mrs. Belester. It amounted to $700. 

Mr. Montgomery. Your total expenditures. 

Mrs. Belester. The total expenditures were $1,642 for the year. 

The Chairman. $L642, and your income was $1,120? 

Mrs. Belester. $1,140. 

The Chairman. So that left a balance of $502 that you were unable 
to meet. 

Mrs. Belester. Yes. 

The Chairman. Out of your income. 

Mrs. Belester. Yes. 

The Chairman. And you borrowed to meet that. 

Mrs. Belester. $510 we borrowed. 

The Chairman. Let me ask, are your medical expenses included in 
this $1,642? 

Mrs. Belester. Yes ; it is all included. 

The Chairman. So that you are deducting the medical bill, which 
was how much ? 

Mrs. Belester. $107.10. 

The Chairman. There was something more, wasn't there? 

Mrs. Belester. That included the doctor's bill. 

Mr. Montgomery. That doesn't include the part of the doctor's 
bill you haven't paid yet. 

Mrs. Belester. No ; I have $45 outstanding for the doctor's bill. 

The Chairman. Well, $152.10 would have to be deducted from this 
$1,642, wouldn't it, in order to get your actual living expenses ? That 
was an emergency expense. 

Mrs. Belester. Yes. 

The Chairman. And even then your expenses would be $1,490 as 
against an income of $1,140. 

Mrs. Belester. Yes. 

The Chairman. Are there any other questions to be asked of this 
witness ? 

Mr. Henderson. I would like to say that I made a study of the 
report of- the Committee on the Cost of Medical Care. This report 
shows that the type of expense which you called an emergency and 
deducted, occurs about once every 2 years in the ordinary wage 
earner's lamily. 

The Chairman. I would expect that there would be medical ex- 
penses every year, but I was eliminating that merely for the purpose 
of showing that the actual living expenses and illness were still 
greater than, the income, the combined income of the husband and 
wife in this instance. 



CONCENTRATION OF ECONOMIC POWER 3309 

Mr. Montgomery. I have no other questions, Mr. Chairman. I 
thank Mrs. Belester very much. 

(The witness, Mrs. Belester, was excused.) 

Mr. MoNTGOMEitT. Could we adjourn now? 

The Chairman. The committee will stand in recess until 2 o'clock. 

(Whereupon, at 12 noon, a recess was taken until 2 p. m. of the 
same day.) 

AFTERNOON SESSION 

(The hearing was resumed at 2: 15 o'clock upon the expiration of 
the recess.) 

The Chairman. The committee will please come to order. Mr. 
Montgomery, will you proceed? 

Mr. Montgomery. My first witness is IMrs. Roller. 

The Chairman. Do you solemnly swear that tb.e testimony you are 
about to give in these proceedings will be the truth, the whole truth, 
and nothing but the truth, so help you God ? 

Mrs. Roller. I do. 

TESTIMONY OF MRS. PAUL S. ROLLER, BERWYN, MD., CHAIRMAN, 
CONSUMERS' SECTION OF COLLEGE PARK AMERICAN ASSOCIA- 
TION OF UNIVERSITY WOMEN; CHAIRMAN, CONSUMERS' SEC- 
TION OF PRINCE GEORGES COUNTY GENERAL FEDERATION OF 
WOMEN'S CLUBS 

Mr. Montgomery. Will you tell j'our name, please? 

Mrs. Roller. My name is Mrs. Paul S. Roller. 

Mr. Montgomery. Your address? 

Mrs. Roller. Berwyn, Md. 

Mr. INfoNTGOMERY. Mrs. Roller, tell us what your occupations are. 

Mrs. Roller. I am a housewife. I have been married 10 years 
and have 3 children. 

Mr. Montgomery. What other occupations do you have? 

The Chairman. There are three occupations already. - 

]\frs. Roller. Four — I have a husband. 

I have been doing work in the American Association of University 
Women. Wlien I say that I have been doing work, I mean that I 
am a member and have been leading a consumer study group in the 
organization. Of course; you understand by this I am not paid in 
any way, I am just a regular member, but because of my qualifications 
I have been asked to lead this consumer study group. 

Mr. Montgomery. By the wa}^ on that question of being paid, do 
you happen to know from your experience whether most of tlie people 
like yourself, working in the consumer movement, are getting paid 
for it? 

Mrs. Roller. I haven't found one yet. That is one of the reasons 
the consumer movement moves as slowly as it docs, because we don't 
have any money, and when we start spending too much ourselves our 
husbands object. 

Mr. Montgomery. Well, now, Mrs, Roller, we heard this morning 
from Mrs. Belester 

Mrs. Roller (inter])osing). May I mention another organization? 

Mr. Montgomery. Yes. 

124491— 39— pt. S S 



3310 CONCENTRATION OF ECONOMIC POWER 

Mrs. Roller, I am the chairman of Consumer Problems for Prince 
Greorge's County, Md., General Federation of Women's Clubs. That 
organization has about 40 local clubs and I am the consumer chair- 
man for all of them. 

Mr. Montgomery. Any other organization work? 

Mrs. Roller. No other. 

MISLABELING OF CONSUMER GOODS 

Mr. Montgomery. Mrs. Roller, we heard from Mrs. Belester about 
the general subject of confusion on the part of the consumer trying 
to get her money's worth for the money she has. You have made 
quite a stud/ of a lot of these questions. What particular parts 
of it do you want to tell us about ? 

Mrs. Roller. One of the first things that confuses the consumer is 
the names of some of the commodities that are sold. Would you like 
an example? 

Mr. Montgomery. Give us an example of that. 

Mrs. Roller. Under jewelry, we find jewelry being made of Ger- 
man silver, and German silver has no silver in it. I checked that 
and found that it contains 55 percent copper, 25 percent zinc, and 
20 percent nickel, and still consumers buy things called German silver 
and think they are getting something made of silver. In the jewelry 
line, American ivory and French ivory are also items that are sold 
and that really are not ivory at all, but some composition product. 

In millinery there are hats that are sold made of a rice-paper 
product which is an imitation of genuine Panama. These hats are 
called Toyo Panama and Formosa Panama. The Federal Trade 
Commission has had cease-and-desist rulings on- this sort of thing, 
because the practice is so flagrant and consumers have been misled by 
these terms. 

Mr. Montgomery. Is your information on this Panama hat ques- 
tion based on the Federal Trade Commission cases? 

Mrs. Roller. Yes; I looked it up and I have the numbers of the 
rulings here. 

Mr. Montgomery. That is all right. I don't think we need those. 

Mrs. Roller. Then under furniture we see furniture advertised as 
Philippine mahogany. Right here in Washington I have seen ads 
of furniture called Philippine mahogany, and I understand that 
Philippine mahogany isn't mahogany at all and that the Federal 
Trade Commission has had a ruling on that saying that that prac- 
tice should be stopped. That is another example of a misleading 
term. 

Some of the fabrics have misleading terms, and those of us who 
make our own clothing are certainly misled by them. French linen 
is a product that is sold and is not linen and doesn't come from 
France. Austrian wool and Saxony wool don't come from Austria 
or Saxony and are not wool products. Silk floss has no silk in it; 
it is a vegetable fiber. Baronette satin is another material sold and 
the consumer seeing that name would think it was a silk product, 
but there is no silk in it. 

One of the interesting ones was 

Mr. Montgomery. Where did you get your information on those 
textiles you spoke about? 



(CONCENTRATION OF ECONOMIC POWER 33II 

Mrs. Roller. I got my information on tliese textiles from leaflets 
put out by the Better Business Bureau. I have them with me here. 
One of the ways that names are made misleading is by modifying 
the spelling or by adding diminutives to suggest that an article is 
something that it really isn't. For instance, "rabbit" is called "sea- 
lion" or ''beaverette." Beaverette is not made from beaver but is 
just a treated rabbit skin. 

Jewelry is called "silverine," and has no silver in it. Fabrics — I 
was surprised when I made this study to find that linine does not 
contain any linen. I have bought linine and.linette for years. 

Mr. Montgomery. How do you spell that? 

Mrs. Roller. L-i-n-i-n-e. I always thought it was a linen product, 
but made out of very fine threads, and when I made this stucly I was 
surprised to find that there is no linen in linine. 

Then one of the other things that is confusing besides names is 
misleading terms, such as "linenized," "linen-finished" ; "all but linin" 
is a term that is used on a fabric that contains linen. Wool-finished, 
wool-spun, silk-finished, all of these terms suggest that either wool 
or silk or linen is in the product, and there is none in any of these 
products. 

Terms that are on the market that are misleading that I have seen 
or that have been pointed out to me by my friends include such 
terms as waterproof, water-repellant, water-resistant, weatherproof, 
and showerproof. Just what these mean I don't know. Also such 
terms as run-proof and run-resistant. Only recently, within the 
past 2 weeks, I went out to buy some underwear in Washington and 
the salesgirl herself didn't know the difference between run-proof 
and run-resistant, and when I pinned her down she admitted that 
neither term meant that the underwear would not run — this was a 
knitted fabric. 

Then I have been collecting a list of new finishes on the market, 
and I would like to read this list. 

Mr. Montgomery. Finishes for what? 

Mrs. Roller. Finishes on textiles ; and I think this list is so funny 
that I would like to read it. These are terms for textiles and 
finishes for new textiles that are on the market today — bellmanizing, 
martinizin^, sanforizing, superizing, duralizing, tebilizing, shelton- 
izing, vitalizing, warconizing, salinizing, aqua-sec, slip-naught. These 
are terms that are oh the market today and when consumers see them 
they are supposed to know what they mean and to be able to choose 
a materal on the basis of these names. 

Mr. Montgomery. Sounds like a cho*rus from Pins and Needles. 
Won't you turn that card over to the reporter, because I don't think 
she could spell those. Have you anything else on the question of 
names given to products, or finishes ? 

Mrs. Roller. I have an interesting list here of Federal Trade Com- 
mission notices. It seems that IJarris tweed is a term that has been 
used by manufacturers to mislead the consumer and lead him to be- 
lieve that the material that he is selling is an original Harris tweed. 
Under the Federal Trade Commission hearing No. 2519 they have 
had a cease-and-desist order against representing tweed, other 
than hand-woven and manufactured in the outer Hebrides, Scotland, 
shall not be called Harris tweed, imported British wool, Harris tweed, 
type, or loomed from imported Harris tweed wool. 



3312 CONCENTRATION OF ECONOMIC POWEU 

They also have riilin^js on Bemberj?. Bemberg is a rayon product, 
and under this Federal Trade Commission ruling it can't be 
implied that it is not all rayon. These are just examples of what the 
Federal Trade Commission has picked up. There are many terms 
that are on the market that coufuse the consumer, and those terms 
have not been picked up. Some of the terms that have been picked 
up by the Federal Trade Commission are still being used. An 
example of that is Philippine mahogany. 

BKANDS NOT A STANDARD FOR QUAIJTY 

Mr. Montgomery. Now, Mrs. Roller, you said you have some in- 
formation for us on the subject of brands. That is, I understand that 
a good many consumers are sold goods on the basis that they are to 
find out what brand they like; then are to buy it on the basis of that 
brand; that that is the thing that sells it to them. Now, what studies 
have you made on that question that would show the committee what 
happens to a consumer who relies on a brand exclusively in buying 
goods ? 

Mrs. Roller. Before I tell you what my study has shown, I would 
like to tell you what seems to me to be the general practice. What 
happens is that so little information is available, consumers have a 
feeling that they should rely on brand name, so what they do is go 
to the store and try out a few brands and then when they find one 
that seems to suit their needs, they stick with it. That is what the 
general tendency is, but my studies have shown that that isn't always 
the best procedure. 

For one thing, there are so many brands on the market, it is 
very difficult for us to go into the store and try out every brand that 
is available. 

Mr. Montgomery. Give us examples of tlie numbers of brands on 
the market. What information have you on that? 

Mrs. Roller. The Milwaukee Journal newspaper, published in Mil- 
waukee, has a survey every year. They ask housewives and consumers 
to submit lists to them of names of commodities that they buy, and 
for this list each one is given a bag of samples, free samples. 

Mr. Montgomery. Never mind that; give us the information about 
the number of brands. 

Mrs. Roller. Well, they publish this consumer analysis and we 
have looked at the consumer analysis for 1938. In Milwaukee, 31 
cans — 31 brands — of canned milk are sold, 142 brands of coifee, 95 
brands of tomato juice, 177 brands of table butter, and even peanut 
butter has 109 brands. Those are some of the foodstuffs that I took 
from this list. 

I knew that there would be men at this hearing, and so I looked 
at a couple of things 1 thought men would be interested in. I found 
that in Milwaukee alone 235 brands of cigars are sold. Just how a 
man is going to tell which brand of cigar suits his need is more than 
I can figure out. 

There are 188 brands of safety razors sold in Milwaukee; there 
are 134 brands of electric washing machines. When a consumer gees 
out to buy an electric washing machine she spends a considerable 
sum and she wants to make sure that she is getting the very best 
that she can. She is placed in a very bad position ' when she has 
to go out and make a selection from 134 brands. 



CONCENTRATION OF ECONOMIC POWER 3313 

Mr. Montgomery, Suppose she has made her selection amonff 
these so many brands and finds that she likes a certain brand and 
decides to stick with it. What happens then? 

Mrs. Roller. Well, for one thing, there is what the informed 
consumers know as a turnover. We can go to a store and decide that 
a certain brand is a brand that happens to suit our particular need, 
and then when we go back for that brand we find that that brand is 
not available. 

Mr. Montgomery. Has that ever happened to you? 

Mrs. Roller. Now that isn't true usually of nationally advertised 
brands. I have never seen it happen with a nationally advertised 
brand, but there are so many brands that are not nationally adver- 
tised and that very often does happen and has happened to me. 
I will go to a sale at a chain store, for instance, and like a certain 
product that is on sale, or it may not even have to be on sale, 
and when I go back for it a few weeks later or at the next sale 
I won't find that particular brand. 

I studied the chain store inquiry carried on by the Federal Trade 
Commission, and they had something to say on that very subject of 
turnover. Can I read you what that is? 

Mr. Montgomery. Yes, if it is short. 

Mrs. Roller. All right. They were testing quality of canned 
goods, and they went around and selected a number of cans and 
brands that they wanted to test. Two months later they went back 
to buy the brands and they found that all of the brands that they 
wanted were not available. This is what they said in the report: 

The failure to procure a higher proportion of the samples ordered was due 
in part to the fact that it was not possible to place the orders until more than 
two months after the close of the pricing period for which the brand names 
had been obtained. The merchandise involved does not flow steadily from 
producer to the consumer and the brands purchased by distributors vary con- 
siderably from time to time. 

Mr. Montgomery. Now, Mrs. Roller, suppose you found your way 
through all these brands, got the one you want, and you got a 
brand that seems to be perfect. You were in pretty good shape, 
weren't you? 

Mrs. Roller. No ; because I have found that brand is not always a 
guide to quality. 

Mr. Montgomery. Have you got some examples of that ? 

Mrs. Roller. Yes; in my own personal experience, I have bought 
canned peaches in a chain store and then at a later date bought the 
same brand in another store that was not a chain, and found that 
the quality was absolutely different. Even I as a consumer could 
see it. 

The Chairman. How are you going to avoid that, Mrs. Roller. 
Even before we had the canning of peaches, of fruit, the canning of 
soup, transferred from the home to the factory there was no uni- 
formity in the product of various homes. 

Mrs. Roller. Well, the point is that if we expect to buy a certain 
brand and believe that that is a fancy product, that means a grade A 
product, then if we buy that same brand at another time, surely 
we have a right to expect that the same product will have that same 
grade A fancy quality. 



3314 CONCENTRATION OF ECONOMIC POWER 

The Chairman. Even the housekeeper doesn't always give him 
the same high-grade meals at home. 

Mrs. Roller. Yes, that is true, but when we buy things we want to 
be able — first of all, canning is done under highly mechanized and 
careful conditions, and we shoi^ld get a fairly uniform product. If 
the product isn't uniforjn, then we should have the right to know it. 

Mr. Ferguson. Mrs. Roller, the housewife doesn't advertise her 
meals, does she ? 

Mrs. Roller. No. 

The Chairman. You would be surprised. 

Mrs. Roller. The point is that if we get a meal that isn't up to 
par we hear about it from our families, but if we buy a grade that 
isn't equal to what we have been accustomed to buying, we have no 
. redress. 

The Chairman. It doesn't seem to me, as a practical matter, that 
you can expect to have uniformity in food products, or even in cigars. 
Different materials are used, different methods are used under differ- 
ent circumstances. Isn't there bound to be a difference in the product ? 
Some manufacturers are very careful, some are very clean, some are 
very scientific, and some are just the reverse of 'that. 

Mrs. Roller, That is true, but the particular instance I am think- 
ing of right now is a brand that happens to be a high-grade nation- 
ally-advertised brand that many housewives have a great deal of con- 
fidence in, and if I can go to the store and find that I am getting a 
high-grade peach under their label, and then go to the store and find 
that I am getting a low-grade peach of an altogether different size 
under the same label, then I think I have a right to kick. 

The Chairman. Are you paying the same price for it ? 

Mrs. Roller. Yes; often I pay the same price. 

The Chairman. A producer who would do that would speedily 
lose business. 

Mrs. Roller. The point is that many consumers aren't vocal. As 
I mentioned before, we don't have any money, we don't have any 
organization, we have no way of letting our needs be known, and 
we have no way of voicing our protests. 

The Chairman. When you found that this brand of peaches was 
not up to the standard you had anticipated, you didn't buy that 
brand a second time? 

Mrs, Roller, No, I didn't; and since I have had experiences of 
that sort, I am very careful to try and buy graded canned fruits and 
vegetables whenever possible. But this process of educating the 
consumer is a very slow one, and it takes money, which we don't 
have, and the result is that the consumers don't know. 

Mr. Montgomery. You have been pointing out, Mrs. Roller, that 
one way the consumers do select goods is by brand, and when they 
do buy on a basis of brand they may not be getting always the same 
quality. 

Mrs. Roller. Exactly. 

Mr. Montgomery, I think the chairman agrees with you on that. 
You have some charts you were going to show us on this question of 
variation in quality? 

Mrs. Roller. Yes; I have. 



CONCENTRATION OF ECONOMIC POWER 



3315 



While he is getting the chart out I would like to read to you a quo- 
tation that I tbok from this Federal Trade Commission report on 
canned goods. One of the paragraphs-^in the report said : 

Wide variations in the quality of canned vegetables and fruits packed under 
identical labels were found in the case of a number of brands. This type of 
variation was found alike in the brands of chains, manufacturers, wholesalers, 
and cooperatives. 

Mr. Montgomery. Now, let me ask you some questions about that 
chart. Tell us what that chart is. 

(The chart referred to was marked "Exhibit No. 511" and appears 
below.) 

Exhibit No. 511 



VARIATIONS IN QUALITY OF 

CANNED FRUITS AND VEGETABLES SOLD UNDER THE 

SAME BRAND IN THREE CITIES 

RESULTS OF GRADING DISTRIBUTED BY NUMBER OF GRADES AND CANS SAMPLED 




KnSSVsN samples of the same brand classified in 2 OR MORE GRADES 

BHBh all SAMPLES OF THE SAME BRAND CLASSIFIED IN SINGLE GRADE 

•ASH) OW: REPORT OF THE FEDERAL TRADE COMMISSION RELATIVE TO QUALITY OF CANNED VEGEIA^ .S AND 
FRUITS (CHAIN STORE INQUIRY) SENATE DOCUMENT NO. 170, 116 CONGRESS, id SESSION, JANUARY 10, /WJ 

Brand is not a reliable guide to quality of canned fruit and vegetables. When only 2 cons of given brands 
were tested there was a high degree of uniformity in quality (Bar 1). But as more samples of each brand 
were tested uniformity decreased ond disappeared entirely when 1 or more cons of given brands were tested 
(Bars 2, 3, and 4). For almost 3 out of 10 of the brands tested, quality was not uniform (Bar 5). 



3316 CONCENTRATION OF ECONOMIC POWER 

Mrs. Roller. This chart shows what happened when brands were 
graded by the Department of Agriculture. In this column we see 
what happens when two samples of the same brand were tested. 
When two samples of one brand were tested, 86.7 percent of the 
brands tested fell into one grade and only 13.3 percent of the brands 
tested fell into more than one grade. 

But when four samples of each brand were tested, we have a slightly 
different story. The percentage goes down, and we find that only 
31.4 percent of the brands tested fell into one grade and 68.6 percent 
of the brands tested fell into two or more grades. 

Mr. Ferguson. Who made these tests ; the Food and Drug Admin- 
istration ? 

Mrs. Roller. No; the Bureau of Agricultural Economics. 

When six or eight samples of each brand were tested, only 21.4 
percent Avere uniform and 78.6 percent of the brands fell into two or 
more qualities. This tends to show that the more samples of a par- 
ticular brand that are tested the greater the variety of quality you 
find under that particular brand. 

In this column, when 10 or more samples of a particular brand 
were tested, we have 100-percent variation. That means that all the 
samples fell into more than one brand. 

Mr. Montgomery. More than one grade. 

Mrs. Roller. I mean more than one grade. Thank you. 

This shows that brand is not always a reliable guide to the quality 
in canned fruits and vegetables. 

(The chart referred to was marked "Exhibit No. 512" and appears 
on p. 3317.) 

Mrs. Roller. The next chart shows what happens when we con- 
sider the same problem, not from the point of view of brand, but from 
the point of number of cans tested. I think that the last column here 
is the most important one. Here we have the total. When you con- 
sider the total number of cans that were graded we find that 51.5 per- 
cent of the total number of cans fall into one grade and that 48.5 
percent fell into more than one grade, so that when you consider it 
from the point of view of the number of cans rather than brands, 
you find that you have a greater percentage of variation in number 
of cans tested. 

Mr. Montgomery. That black area on that chart shows, doesn't it, 
in that column, the number of cans in which there was uniformity of 
grade under each brand tested? 

Mrs. Roller. Yes. 

Mr. ivioNTGOMERY. You Said they were all in the same grade. You 
didn't mean that. 

Mrs. Roller. This black bar shows that 51.5 percent of the cans 
tested fell into one grade. This area above shows that 48.5 percent 
fell into, were classified into, two or more grades. 

The Chaurman. In other words, when classified by cans instead 
of by brand, you had less variation than when classified by brand 
alone. 

Mrs. Roller. No; just the reverse is true. When you consider the 
brand you have 71.2 percent that v.ere uniform and 28 percent that 
were not uniform, but when you consider cans 



CONCENTRATION OF ECONOMIC POWER 



3317 



The Chaibman (interposing). Let me get that clear. In that last 
column you have 215 brands. 

Mrs. Roller. That is right. 

The Chaikman. Does the column indicate that those 215 brands 
were all of the same grade? 

Mrs. Roller. Yes. 

The Chairman. On the second chart you have 474 cans, and they 
were all of the same grade? 

Mrs. Roller. That's right. 

The Chairman. But you don't indicate how many different brands 
there were among those. 

Exhibit No. 512 



VARIATIONS IN QUALITY OF 
CANNED FRUITS AND VEGETABLES SOLD UNDER THE 
SAME BRAND IN THREE CITIES 

RESULTS OF GRADING DISTRIBUTED BY NUMBER OF GRADES AND CANS SAMPLED 
(BRANDS WEIGHTED BY NUMBER OF CANS SAMPLED) 





SAMPLES OF THE SAME BRAND CLASSIFIED IN 2 OR MORE GRADES 
ALL SAMPLES OF THE SAME BRAND CLASSIFIED IN A SINGLE GRADE 



BASCD ON: REPORT OF THE FEDERAL TRADE COMMISSION RELATIVE TO QUALITY OF CANNED 
VEGETABLES AND FRUITS (CHAIN STORE INQUIRY) SENATE. DOCUMENT NO. 170, 7Jd 
CONGRESS, U SESSION, JANUARY 10, 1933 

Summarizlns tKe results of the same survey by number of cons, it Is found that for almost 
half of the cans purchased brand was not a reliable guide to quality. 



3318 CONCENTRATION OF ECONOMIC POWER 

Mr. Montgomery. It is the same samplcj Mr. Chairman. 

Mrs. Roller. The interesting thing here is the percentages. When 
you consider the percentages and consider it by can, you find you 
have 48.5 percent that classified in two or more grades. When you 
consider brand, you find that you have only 28.8 percent that showed 
a variation. Do you get that? 

The Chairman. Yes; I hear what you say. Now what is your 
conclusion from that? 

Mrs.RoLLER. I think it is really bad to draw a conclusion, because 
I don't believe enough cans were sampled, and enough brands. 

The Chairman, lou are telling us to pay no attention to the 
charts which you have brought before us ? 

Mrs. Roller. I want to be very careful in what I say, and I don't 
want anyone to think that I am an extremist in any way. 

The Chairman. You do have a conclusion, don't you ? 

Mrs. Roller. The conclusion that I have to make is that this 
shows a tendency. The tendency is that the greater the number of 
cans per sample, the greater the number of cans per brand that are 
tested, the greater the variation you find of grade in the brand. 

Somebody doesn't get it, so I would like to say it again. 

The Chairman. Proceed, then. 

Mrs. Roller. There are certain grades that have been set up; A, 
B, C, and Substandard. When these cans were tested they fell into 
different grades. They fell into A, B, or C, or Substandard. Now, 
when 226 brands were studied, it was found that 196 brands, or 86.7 
percent of the brands, fell into one grade. That means that the two 
samples for each of these brands, each of these 196 brands, rated the 
same. For instance. Smith Co.'s brand, two of the samples both fell 
into the same grade. Thirty brands, or 13,3 percent of the number 
that were tested, showed a variation. Two cans were tested, one of 
them fell into one grade and one of them fell into another, so that you 
didn't have a consistency of grade. 

The Chairman. So that the more cans you tested the more varia- 
tion there was? 

Mrs. Roller. Yes. 

Mr. Montgomery. I don't think it is necessary to go through all 
those figures again. Your fourth column shows what ? 

Mrs. Roller. The fourth column shows that when 10 or more 
samples were taken of 11 brands, you have a 100 percent variation. 

Mr. Montgomery. That is, on no brand was there uniform grade ? 

Mrs. Roller. Exactly. 

Dr. LuBiN. Does this mean if anybody wants to buy any of the 
canned products that you covered there, the chances are that no two 
cans necessarily will be alike, even though you pay the same price for 
the contents? 

Mrs. Roller. Yes ; I think that is true. 

Mr. Montgomery. Now, what is the package that you had there, 
Mrs. Roller. Tell us what that is. 

Mrs. Roller. This package is a package of cans that is available 
to home-economics people and to homemakers. It is sent out by 
one of the large canners in the country. This exhibit shows that 
you can have one name and one slogan on more than one grade, and 
it is a very difficult thing for the consumer to tell which grade she 
is buying. 



CONCENTRATION OF ECONOMIC POWER 3319 

This chart comes with this little display, and explains to the 
person who has the display just how to read the labels. 

The chart says that anything packed under the black label is 
"Fancy." 

This canner labels his cans. Now, when the consumer goes into 
the store and wants to buy a "Fancy" product or grade A, she is 
supposed to know that this black band on the can means "Fancy." 
In other words, when we go out we need this chart to help us buy 
the grade. 

This can doesn't have that little black mark, otherwise the label 
is the same. You see this blue triangle and the name of the packer. 

This chart says that what is packed under the blue and white label 
is either "Choice" or "Deluxe." There is a difference in size in the 
"Choice" product and the "Deluxe," but of course we have no way of 
telling that, because they haven't put another bar on here to show 
that. 

Mr. Montgomery. Are the "Choice" and "Deluxe" products of the 
same grade? 

Mrs. Roller. "Choice" and "Deluxe" are the same grade, but they 
are not as good a grade, according to this, as the "Fancy." 

Incidentally, the can says, on this can of pears, which is either 
choice or de luxe 

Mr. Montgomery (interposing). Second grade, according to the 
chart ? 

Mrs. Roller. Second grade, according to the chart. Can I read 
the names of the brands? Well, it is not necessary [reading from 
the label] "The brand is also your guarantee of receiving our highest 
quality," and "highest quality" is in larger type. That leads you to 
believe that this is the highest quality, and, of course, this isn't the 
highest quality, because it doesn't have the black bar. So that if 
we buy by brands we have to go out with charts and tables to help 
us buy thB grade that we happen to need. 

The Chairman. Who makes the chart available? 

Mrs. Roller. The chart is available to anyone. I wrote a letter 
and received one free. 

The Chairman. Sent out by the packer? 

Mrs. Roller. Yes; sent out by the packer. You write to the 
packer's home economics department. 

The Chairman. And any consumer may obtain this chart ? 

Mrs. Roller. Yes. Incidentally I have had this chart for some 
time and I still haven't learned all I am supposed to know accord- 
ing to this. 

Mr. Montgomery. You have sample exhibits of towels you made 
up, Mrs. Roller. Will you show us those? 

Mrs. Roller. Yes. This exhibit is a picture of what faces the con- 
sumer when she goes into a store to buy towels. We see all these 
towels on the counter with all these different prices and that is all 
that we know about the quality. We have no way of telling whether 
one quality is any better than the other, or just how much better. 

Mr. Montgomery. Do they have a brand on them? 

Mrs. Roller. They all have a brand on them and they all have 
the same brand. This is a case of one brand putting out a product 
of many qualities. 



3320 (CONCENTRATION OF ECONOMIC POWER 

Mr. Montgomery. To get that into the record, will you state what 
the price variations are within a single brand? 

Mrs. RoLLEu. One brand is shown on this upper part of the chart. 
The prices are 38 cents, 50. cents, 59 cents, 75 cents, and $1 — all these 
towels were the same size. 

Here we have another brand; all the labels are identical and they 
don't say anything except the name of the brand, and in a few cases 
"color guaranteed fast." 

In the lower part of the chart the prices are 14 cents, 15 cents, 25 
cents, 39 cents, 50 cents, and $1. 

Now, it is very difficult for a consumer to buy towels, for a number 
of reasons. First of all,, there are no facts of quality on the label 
and the sales person doesn't usually know the facts of quality her- 
self. I was interested in this problem and spoke to people in the 
textile division of the Bureau of Home Economics, and they told 
me that one of the best ways to tell the quality of a towel is to cut 
a strip from it. Now, just how consumers are going to buy by cut- 
ting strips is more than I can see, but that is the only way that we 
can tell quality today. 

Mr. Montgomery. What information did you* get from the Bureau 
of Home Economics about the variation of quality under a given 
brand ? 

Mrs, Roller. I have a chart on that. 

Mr. Montgomery. Will you shoAv us that? 

(The chart referred to was marked "Exhibit No. 513" and appears 
on p. 3321.) 

Mrs. Roller. This chart shows the variations in construction and 
weights of two brands of cotton Turkish towels purchased on the 
Washington retail market during 1934. 

From here to here we have a list of brand A. All these towels 
were in one brand [referring to left column- in top section]. They 
ranged in price from 14 ceiits to $1.00; 14 Cents, 23 cents, 25 cents, 
29 cents, 50 cents, 79 cents 

Mr. Montgomery (interposing). Don't go into the details. 

Mrs. Roller. These towels were tested bv the Bureau of Home Eco- 
nomics and they found that there is a difference in the construction 
of these towels, that the thread count, which means the number of 
threads per square inch, varies all the way down the line. You can 
have any place from 23 to 41 threads, 42 threads in the ground, and 
a variety of numbers of threads in the pile, and in the filling. The 
more threads that you have, of course the better the towel. 

They showed me that the type of ply — the ply means this thread 
that runs down through the length of the towel — can be either single 
ply or double ply. Double ply means that two threads have been 
wound closely together and are used as one thread. When you have 
a double ply you have a better towel. When the consumer goes out 
to buy a towel she has no way of telling whether the towel is double 
ply or single ply, or what the thread count is. In other words, we 
have no way ov telling what the construction is, and so have xio way of 
making an intelligent purchase. 
, Mr. Montgomery, Wliat is the last column? 

Mrs. Roller. The last column is weight per square yard, and that 
is a very important column because the heavier a towel is the more 
absorbent a towel is. 



CONCENTRATION OF ECONOMIC POWER 



3321 



Exhibit No. 513 



VARlATIOtiS IN CONSTRUCTION AND WEIGHTS OF 2 BRANDS OF COTTON 
TURKISH TOWELS PURCHASED ON THE WASHINGTON RETAIL MARKET DURING 1934, 



BRAND A 



PRICE 


1 


FHREAD COUNT 


TYPE OF PLY 
IN GROUND 


WEIGHT PER 




GROUND 


PILE 


FILLING 


SQUARE YARD 


(DOLLARS) 




• 






(OUNCES; 


.14 


23 


45 


26 


SINGLE 


7.5 


.23 


23 


46 


26 


" 


9.2 


.25 


22 


42 


25 


" 


8.6 


.25 


22 


44 


25 


" 


8.9 


.29 


42 


41 


33 


II 


10.2 


.38 


25 


51 


32 


II 


13.3 


.39 


23 


45 


26 


n 


12.4 


.39 


42 


42 


36 


II 


11.0 


.39 


42 


42 


36 


II 


11.2 


.56 


41 


41 


37 


" 


10.4 


.55 


38 


37 


39 


n 


13.4 


.59 


. 40 


39 


42 


DOUBLE 


13.6 


.79 


38 


38 


40 


II 


11.1 


1.00 


41 


: 41 


45 


H 


14.5 



BRAND H 



PRICE 


THREAD COUNT 


TYPE OF PLY 
' IN GROUND 


WEIGHT PER 




GROUND 


PILE : FILLING- 


SQUARE YARD 


(DOLLARS) 










(OUNCES) 


• 50 


37 


37 


40 


DOUBLE 


12.5 


.59 


38 


38 


35 


•' 


11.4 


.75 


28 


55 


37 


" 


15.4 


1.00 


31 


31 


43 


" 


13.5 


1.25 


32 


31 


42 


" 


14.6 



Source: M. 8. Hayes and R. E. Elmqoist 
(Bureau of Howe Economics, U. S. Department 
OF Agriculture) "Physical and Chemical 
Properties of Some Turkish Towels." Journal 
OF home Eco n omics . Vol. 27, No. 9, November, .1935 

These two examples illustrate that the brand name on a towel Is not a designation of 

^ 1-or each brand there is a wide range of price, thread count, and weight per square yard 
(which measures the capacity of a towel to absorb water). 



3322 CONCENTRATION OF ECONOMIC POWER 

The Chairman. Haven't all these samples been graded actually 
according to their price? 

Mrs. Roller. Here? 

The Chairman. No; on the other chart; for example, the 38-cent 
towel is a less well constructed^ towel than the towel that sells for 
75 cents or the towel that sells for a dollar. 

Mrs. Roller. Well, we have an example of that. If you don't 
mind, I won't take the 38-cent one but the 59 and the 79. Here you 
have a towel selling for 59 cents; here you have a towel selling for 
79 cents, the same brand. In the ground in the 59 we have a thread 
count of 40, in the 79 a thread count of 38, not as good. We have a 
thread count in tlie pile of tlie 59-cent one of 39 and of 38 in the 
79-cent one. 

The Chairman. Is there any factor that is in the 79-cent one that 
is not in the other which would account for that difference? 

Mrs. Roller. No; there isn't. When I went over these charts I 
asked about that, and I was told that there is no other factor that 
would affect it. Possibly style might; but if it is a difference in 
style, then the consumer has a right to know that she is paying for 
style and not for quality. 

The Chairman. You can see style, can you not? 

Mrs. Roller. Yes; but how do I know that it is style that I am 
paying more for? There isn't a sample of that here, but all of these 
towels that were tested were selected because they were pretty much 
the same. They w^ere white towels with a slight colored border, so 
that style is approximately the same, and, of course, the size was 
the same; and, according to this chart, the weight on the more ex- 
pensive one is less than the weight on the cheaper one, so that the 
less expensive one is more absorbent than the more expensive one. 
When you go through that, this shows that the cheaper one is a 
better quality than tlie more expensive one ; -and, of course, when we 
go out to buy it we don't know that. 

The Chairman. Well, how about the quality of the material it is? 
Though the count of the thread may be less, the thread itself may 
be of a superior quality. Is there any possibility of that? 

Mrs. Roller. Well, so far as I understand, towels are made pretty 
much in the same way and with the same material. The only differ- 
ence is 

The Chairman (interposing) . Have you, yourself, examined these 
towels ? 

Mrs. Roller. I have examined these and 

The Chairman (interposing). Those samples? 

Mrs. Roller. Those samples. 

The Chairman. Where did you get the samples ? 

Mrs, Roller. From the Bureau of Home Economics; and I have 
studied their charts and their written publications, and they have 
set up a proposed specification of construction on towels and they 
don't mention the material that it is made of, so I imagine that it is 
made out of pretty much the same material. 

The Chairman. How about that, Mr. Montgomery? Let's get the 
Bureau of Home Economics here and let them answer it. 

Mrs. Roller. I have their table here, if anyone would like to see it. 

Mr. Montgomery. These are the figures they gave you, aren't they, 
Mrs. Roller, as indicating the quality of the towel ? 



CONCENTRATION OF ECONOMIC POWER 3323 

Mrs. Roller. These are the figures. 

Mr. Montgomery. This is the test made by them, isn't it ? 

Mrs. Roller. Yes. 

Mr. Montgomery. These are the figures they used as indicating the 
different qualities of the towels ? 

Mrs. Roller. Yes. 

Mr. Montgomery. Didn't they tell you the most important factor 
is that in the last column ? 

Mrs. Roller. This is the most important factor. We all want 
towels that will absorb, and the more a towel will absorb the better it 
is, and it is quite obvious that the towel whose weight is 13.C will absorb 
more than a towel whose weight is onl} 11.1, because tests have proven 
that the greater the weight, the mOre absorbent the towel is. 

Dr. LuBiN. Mrs. Roller, according to that chart, then, if tlie last 
column is the most significant factor, the brand H selling at 75 cents — 
brand H — is the best product — far better than anything that sells for 
more than that price in either brand ? 

Mrs. Roller. Yes; that is true. Brand H sells foj- 75 cents and has, 
a weight of 15.4 ounces per square yard, as against 14.6 for $1.25 
towel. There is a saving right there of 50 cents on one item, and 
that is a whole lot. 

Mr. Montgomery. Wliat is the information vou have on blankets, 
Mrs. Roller? 

Mrs. Roller. This again is an example of using one brand name 
on a variety of products having different qualities ; that is, one com- 
pany will put out any number of blankets of different quality and 
use the very same label, so that the consumer has absolutely no way 
of telling when she goes in to buy a blanket which one is the best 
quality. Now, this is a chart that was taken from the publications 
of the Bureau of Home Economics and this chart shows the three types 
of blankets that were tested. 

(The chart referred to was marked "Exhibit No. 514" and appears 
on p. 3324.) 

We have one brand that was all cotton, another brand that was part 
wool — and that was 5 to 25 percent wool — and a third brand that was 
all wool. Now, this chart shows the variations in weight per yard 
in breaking strength and in heat transmission of various blankets put 
out under one brand name, and no indication of this, of course, is 
given to the consumer. 

The Chairman. Are the blankets offered at different prices? 

Mrs. Roller. I don't know anything about the prices. That infor- 
mation wasn't given to me, but whether the prices were identical 
or not identical doesn't seems to me to be the important point here. 
The important point is that the consumer has absolutely no way of 
telling when she is going out to buy what the quality is and what the 
construction is. 

Now this all-wool blanket, for instance — we have three blankets 
put out by one brand. Now one of them may be more expensive than 
another, it is true, but that may be heavier and it may be lighter 
than another one — and some people need light blankets and some 
people need heavy blankets, so the price isn't the important factor. 

Mr. Montgomery. Isn't it true that the brand is the only designa- 
tion the consumer gets about those blankets — about each of those three 
blankets ? 



3324 



CONCENTRATION OF ECONOMIC POWER 



Mrs. Rolij:r. Yes; the only thing that we get is the little brand 
label and all that that tells us is what the name of the company is. 

Tlie Chaiiiman. Is it supposed to tell you anything else? 

Mrs. Roller. It isn't? 

The Chairman. I say, is it ? 

Mrs. RoiXLR. Well, I as a consumer would certainly like to know 
when I buy a blanket how heavy it is. I happen to like a heavy 



blanket. 



Exhibit No. 514 

VARIATIONS IN WEIGHT, BREAKING STRENGTH AND 
HEAT TRANSMISSION OF THREE BRANDS OF BLANKETS 



Brand of Slanket 


Weight Per 
SQUARE Yard 


: Breaking Strength Grab 


Heat 




• Warp 


Filling 


: Transmission 




Ounces 


LBS. 


LBS. 




BPANO 1 
{All Cotton) 










A 


4.3 


22.0 


10.4 


.156 


e 


5.0 


41.2 


14.2 


.164 


c 


•5.1 


41.4 


13.2 


.170 





5.2 


40.1 


13.7 


.161 


E 


5.6 


28.4 


12.9 


.134 


BRAND ! 1 
(Part Wool) 










A 


6.5 


27.3 


11.4 


.130 


B 


6.7 


27.0 


11.0 


.119 


C 


7.6 


26.6 


14-.8 


.106 


D 


9.8 


28.8 


18.4 


.089 


E 


10.1 


32.4 


29.1 


.120 


BRAND HI 
(All Wool) 










A 


12.3 


38.2 


20.9 


.093 


B 


12.5 ' 


31.5 


21.5 i 


.058 


C 


13.0 


39.7 : 


51.9 : 


.065 



Based on : M. B. Hays, "Suggested consumer specifications for six classes of blankets," 
Kayon Textile Monthly, February 1939. 

Tliese examples show tliat brand names of blankets are not designations of quality. 

Neither weight, strength, nor warmth were uniform. 

This was true for brands used on cotton, part-woo), and all-wool blankets. 

Mr. Montgomery. That isn't an answer to his question. The chair- 
man asked whether the brand was supposed to tell you anything else 
than just the name of the person who made it. 

Mrs. Roller. The brand isn't, no ; but the label I think should. 

Mr. Montgomery. You have seen a good deal of advertising and 
so on that tells you to rely on a certain brand? 



CONCENTRATION OF ECONOMIC POWER 3325 

Mrs. Roller. Yes ; I certainly have. As a matter of fact, in one of 
the most recent issues, May issue of one of the women's magazines, 
there is an article telling consumers that they should rely on brand. 

Mr. Montgomery. And what you are showing here by your ex- 
hibit 

Mrs. Rolij:r. I am showing that brand doesn't tell you a thing. I 
am trying to show you here that brand doesn't tell you a thing, and 
that we really need more information than brand. 

The Chairman. Didn't I understand you to say a little earlier in 
the afternoon that so far as certain nationally advertised brands are 
concerned, that isn't true? 

Mrs. Roller. What isn't true? 

The Chairman. The conclusion- which you have just expressed. 

Mrs. Roller. What I am trying to bring out is that none of these 
things have anj' specifications and that we would like to buy accord- 
ing to the specification, and that is true not only in blankets and 
towels and sheets and things of that sort, but also true in the case of 
canned goods. 

The Chairman. Well, the whole purpose of your testimony, then, is 
to indicate the desirability from your point of view of standard 
grades, regardless of brand? 

Mrs. Roller. Yes ; and I would also like to point out that we want 
more information about the things that we buy. 

Mr. Montgomery. You didn't testify earlier this afternoon, though, 
did you, that certain nationally advertised brands are a guarantee of 
uniform quality? 

Mrs. Roller. No; I testified 

The Chairman (interposing). I don't know the word that was 
used, but there was some statement. 

Mr. Montgomery. I think she said that national brands can always 
be found in the store. She was talking at the moment of the ques- 
tion of getting used to a brand and then it would disappear. Isn't 
that correct? 

Mrs. Roller. Yes ; I was talking about turn-over. I said that when 
you go into a store to buy something, if you buy a nationally ad- 
vertised brand you can be pretty sure that it will be in the store the 
next time you come in ; but if you buy one that isn't, you don't know 
whether you will find it there. 

Mr. Montgomery. I think that is enough of that exhibit, with that 
general explanation. The figures and the record will speak for 
themselves. 

NEED FOR STANDARD SIZES 

Mr. Montgomery. You said you had tw^o samples of loaves of 
bread, didn't you, that illustrated this question of difference in 
brands? What w^as the difference there? 

Mrs. Rolu:r. These two loaves of bread I purchased this morning 
in a local grocery store. Now here we have one brand. 

Mr. Montgomery. The brand is the same ? 

Mrs. Roller. The brand is the same and the label is absolutely 
identical. The interesting point here is that this small loaf weiglis 
16 ounces and sells for 9 cents; this large loaf weighs 18 ounces an^ 
sells for 12 cents, so that you get only 2 ounces more for 3 cents. 

124491— 39— pt. 8 -4 



3326 CONCENTRATION OF ECONOMIC POWER 

1 get more bread for my money by buying the small loaf than I do 
by buying the large loaf of the same brand. It pays me to buy two 
of these small loaves instead of one of these large ones. 

Mr. Montgomery. You had some cans of applesauce, too, didn't 
you? Let's see the applesauce. 

Mrs. Roller. This is an example of brand as a guide to quantity. 
When we go into the store — I have seen this can on the shelf. This 
is applesauce and it sells for two 

The Chairman (interposing). Are you referring to the testimony? 

Mrs. Roller. I am referring to the contents of the can. This can 
sells for two for 15 cents, and it contains 1 pound 5 ounces. When 
they have special sales on in the stores this can comes off the shelf; 
this can [indicating another] comes on the shelf ; looks exactly the 
same, has the same identical label, and this can contains 1 pound 

2 ounces as against 1 pound 5 ounces. That is a case of deliberate 

Mr. Montgomery (interposing). What is the price on special sale? 

Mrs. Roller. On the special sale this can sells for 5 cents. The 
point is that the consumer would like to know when those substi- 
tutions are being made, because unless we see the two cans right up 
next to one another, even if they are far apart like this I don't think 
you can tell the difference. 

Mr. Montgomery. Do you know that consumers have been fooled 
by that? 

Mrs. Roller. Yes ; I certainly do because some of the women in the 
clubs that I belong to have pointed things out like this to me. 

Dr. LuBiN. What is the price of the big can ? 

Mrs. Roller. Two for 15. 

Mr. Montgomery. Do you have those boxes of crackers? 

Mrs. Roller. Yes; there were supposed to be two boxes of cookies 
but one got lost on the way up here. This box sells for 5 cents and 
it contains 1% ounces. Now, the same cookie in a larger box sells 
for 10 cents and — — 

The Chairman (interposing). 'Was it the larger box that got lost 
during the noon hour? 

Mrs. Roller. That is the larger box. 

The Chairman, During the noon hour? 

Mrs. Roller. I believe so; I saw it at 11 o'clock. Well, this small 
box contains II/2 ounces and the large box contains 2i/^ ounces of the 
same crackers. In other words, if I b^y two of these boxes for 10 
cents, they are a nickel apiece; I would be getting 3 ounces of this 
cracker; if I buy the 10-cent box I would be getting only 2i/^ ounces 
for 10 cents. Now that may not seem very much, but when you 
consider the fact that there are only I14 ounces in this box, the extra 
half-ounce difference means a third of the box, so that if I buy two 
of these for 10 cents I am getting a third of a box more than if I am 
buying one of the larger size for 10 cents. 

The Chairman. So the person who spends the nickel has the ad- 
vantage over tlie person who spends the dime? 

Mrs. Roller. Exactly. 

Mr. Montgomery. Has the committee any further questions of Mrs. 
Roller? We have had the dessert now and we can close the testimony 
on that. 

Mr. Ferguson. Mrs. Roller, I have been very much interested in 
your testimony, not only as a member of the committee but also as a 



CONCENTRATION OF ECONOMIC POWER 3327 

melnber of the Federal Trade Commission, because the Federal Trade 
Commission has for many, many years undertaken as best it could to 
prevent mislabeling, misbranding, and false and misleading advertis- 
ing. The Commission can only act in the intei-ests of the public, 
and we consider the consumer is a very major portion of the public. 
I just wanted to ask you whether or not in your investigations and your 
studies you hadn't found that the Commission had issued orders 
and had stipulations to cease and desist from thousands of cases of 
misbranding and mislabeling and false advertising of all kinds of 
products. 

Mrs. Roller. Yes, I have • but I have also seen many cases where the 
Federal Trade Commission s rulings were just disregarded. I think 
the case of Philippine mahoganj' 

Mr. Fergupon (interposing). Have you ever brought those to tne 
attention of the Commission ? 

Mrs. Roller. No; I haven't. That is one of the many things I 
didn't know I could do. 

Mr. Ferguson. You know that any person or individual has a per- 
fect right to bring matters of that kind to the attention of iha Com- 
mission ? 

Mrs. Roller. No ; I didn't know that. 

Mr. Ferguson. And that the Commission has not sufficient funds or 
personnel to police the whole United States and undertake to or 
couldn't possibly discover every case of misbranding or misleading 
advertising, and ordinarily unless something happens to come to our 
attention that we can only act on information that comes to us from 
the public? 

Mrs. Roller (nodding head, ''Yes"). 

Mr. Ferguson. And the Commission would welcome information 
from you or any organization that you represent or any housewife at 
any time where anyone is misbranding the goods or misrepresenting 
their goods ? 

Mrs. Roller. Well, I will remember that. 

The Chairman. Do you happen to know whether the canrier of the 
applesauce has distributed diagrams such as that which you showed 
with the previous cans to advise the consumer how to choose the best 
bargain ? 

Mrs. Roller. No, I don't ; but this business of the two cans of apple- 
sauce seems to me to be an example of this problem of the number of 
cans that are available, the number of sizes of cans that are available, 
aild it is one of the problems that consumers face. The consumers that 
I know are very much in favor of standardization of can sizes. We 
feel that we need a variety of sizes, but certainly not such small dif- 
ferences as this [indicating the two cans of applesauce]. I think it 
was about 2 weeks ago I attended a meeting in Beltsville, a little sec- 
tion not very far from where I live, and the speaker there was a 
representative of the National Canners' Association, who was down 
here in Washington attending the food and drag hearings, and at that 
meeting in Beltsville he said that the National Canners have to go to 
bat every year — have had to go to bat every year for the past couple 
of years to fight measures which would tend to unify can sizes; and 
he said that he was fighting with the consumer because he believed 
that the consumer wanted this wide variety of sizes that we find today. 



3328 CONCENTRATION OF ECONOMIC POWER 

Tliat absolutely isn't a fact because all the consumers that I know, 
feel that the great number of sizes that are available today simply 
tend to confuse us and if there were a standardization of sizes that 
we could buy very much more intelligently. We did not agree with 
this man who came from the National Canners' Association. 

Mr. Montgomery. You mean that he was saying the Canners' As- 
sociation was against the standardization of canned sizes? 

Mrs. EoLLER. Oh, yes ; he said they came to Washington to fight any 
bill to standardize sizes of cans. 

The Chairman. Any further questions of this witness? 

Mr. White. I wonder if I might ask a question, going back to that 
packet which you had there prepared for educational purposes by a 
large canner. Thgre are a number of cans there and on those I no- 
ticed — I think I notice from here — a rectangular area set aside on 
which there was considerable information which I take it is to give 
information about the contents of the can. I would like to know 
what you think about that type of information on a label. 

Mrs. Roller. 1 think that this type of information is very nice 
but that it doesn't give you the important thing. For instance, this 
can of peas, which happens to be a grade A pea and has the black 
band, has a picture here of the various sizes ranging from size 1 
to size 6 extra large, and there is an arrow pointing that this is 
size 4, medium large. 1 think that is very nice to know, but I don't 
think that is terribly important. I think what would be much more 
important would be if they said fancy grade A, "so that w^e could tell 
the grade ; and on this one that doesn't have that black bar, the only 
informative labeling here is "the brand is your guaranty of our high- 
est quality," and then it says : 

Approximately 50 to 59 cherries of uniform size packed in heavy syrup. 

Doesn't say whether they are pitted or not; doesn't say what the 
grade is, and according to their own chart the cherries can be ont of 
tw'o sizes. 

Mr. White. Your opinion, then, is that that is better than many of 
the other labels, but not as satisfactory as you would like to see it ? 

Mrs. Roller. Yes; that is true. 

Mr. Ferguson. Mrs. Roller, you said that you knew of cases w^here 
the Commission's orders had been violated. Do you mean that they 
had been violated by the person against whom an order had been 
issued, or that some other person had done the same thing. 

Mrs. Roller. I happen to have read this digest of important rul- 
ings of the Federal Trade Commission and in that it gives a list of 
rulings that the Trade Commission has made, one of them against 
broadcloth; says that English broadcloth material cannot be labeled 
or sold as English broadcloth unless it actually comes from England. 
Now I know I have bought material that certainly wasn't English. 

Mr. Ferguson. When you say the order has been disobeyed or vio- 
lated, you don't mean by the person against whom the ordc^r had 
been issued but someone else had done the same thing? 

Mrs. Roller. Exactly. 

Mr. Montgomery. Thank you, Mrs. Roller. 
(The witness, Mrs. Roller, was excused.) 



CONCENTRATION OF ECONOMIC POWER 3329 

TESTIMONY OF DEXTER J^ASTERS, DIRECTOR OF PUBLICATIONS 
CONSUMERS UNION OF U. S., INC., NEW YORK CITY 

Mr. Montgomery. I have to apologize for Mr. Masters' voice; a 
sudden attack of laryngitis has pretty nearly silenced him, and we 
hope the microphone will make up the difference. Will you gi\'e your 
name, please, Mr. Masters? 

Mr. ISIasters. Dexter Masters. 

Mr. Montgomery. Your address, please? 

Mr. Masters. Consumers' Union, New York City. 

Mr. Montgomery. What is your occupation with Consumers' 
Union, Mr. Masters? 

Mr. Masters. Director of publications. 

Mr. Montgomery. Tell the committee briefly what the Consumers' 
Union is, will you please? 

Mr. Masters. It is a nonprofit membership organization, the 
members of which are also subscribers to publications put out by the 
service. The organization buys goods, tests them, and gives the re- 
sults of its tests m the form of ratings by brand name in its publica- 
tions. 

Mr. Montgomery. How many members do you have? 

Mr. Masters. We have about 80,000 now. 

Mr. Montgomery. What is the average subscription cost to these 
members? 

Mr. Masters. We get outtwo services, one at $3 and one at $1. The 
cost probably averages between $2 and $2.50 per member. The great 
majority of the members are subscribers to the $3 service. 

Mr. Montgomery. You, of course, are very familiar with the stories 
these other consumer witnesses have been telling about — their difficulty 
in knowing how to spend their money, and how to spend tlieir money 
wisely. How far do you think the Consumers' Union service meets 
that problem? 

Mr. Master's. Well, it doesn't go far enough, and doesn't go nearly 
so far-as the problems go. It is a temporary thing; it is a stopgap to 
control or to provide a balance to the upset in distribution. That 
creates the problems. The Consumers' Union method of actually 
going into the market, buying products, as any consumer buys them, 
testing them, and serving only the consumer interest, is a circuitous 
one; it is the long way around because it means that to be effective — 
ideally effective — we would have to cover every brand in the coun- 
try and that is, considering our funds, out of the question. But 
the chief problem that is created is that an advertisement says such 
and such a product is such and such a quality, or the salesman say.s 
the same thing, or general propaganda creates the same impression. 
We use our method to check up on the advertisement, on the salesmen, 
and on the propaganda. 

No individual can do this for himself. The question lias arisen 
here as to just how much a consumer, how much a housewife, can 
^PP^y? ii^ tlie direction of wise selection, her own knowlediie. To 
do that at all adequately she would have to be a biologist, a chemist, 
a physicist, and a number of other things. We attempt to do the job 



3330 CONCENTRATION OF ECONOMIC POWER 

collectively and give the individual consumers the benefit of that 
information. 

I might compare the Consumers' Union or any organization oper- 
ating on that basis to insulin is. the control of diabetes ; that is, 
insulin does control it by providing a counterbalanoe, but the im- 
portant thing would be to prevent the diabetes. Whether the upset 
in distribution is as incurable as diabetes, I don't know. 

PRICE NOT A GUIDE TO QFALITY 

Mr. Montgomery. Mrs. Koller was discussing the difficulty of the 
consumer who tries to buy commodities simply by relying on the 
brand. You said you are going to present some testimony show- 
ing whether or not consumers instead of relying upon brand can 
make their selections on the basis of price. Will you give us some 
specific examples of the difficulty that the consumers will run into if 
they attempt to make their purchases on the basis of price? What 
is the first one you are going to bring? 

Mr. Masters. The first thing I would like to say is that I think it 
is virtually impossible for the consumer to use price as a reliable 
guide. The first illustration of that that I would like to bring forth 
here is milk. 

Mr. Montgomery. The committee had testimony last week from 
the milk companies about the quality of milk and what they were 
doing to improve the quality.^ Your exhibits go intc that question, 
don't they, of the same companies? 

Mr. Masters. I think they do. 

Mr. Montgomery. Will you tell us what your P'^aminations have 
shown f 

Mr. Masters. The basis of my testimony here is two separate tests 
we have m^vde to discover the difference, if any, between grade A and 
grade B milk in New York City. Grade A, as you Imow, costs 3 
cents per quart more. The first test we made, in February of 1936, 
we took 57 samples of grade A and grade B of the two leading 
brands distributed in New York City. In bacteria count, which is a 
reflection on the handling of the milk, the purity of it, we found no 
difference. Grade A for New York City has a minimum require^ 
ment of 10,000 colonies per cubic centimeter for both grade A and 
grade B — or 30,000, I beg your pardon. Both grades A and B ran 
about 10,000 colonies per cubic centimeter. In one instance the grade 
B brand far exceeded th^ minimum requirement, showing 120,000 
colonies. Similarly, one grade A brand exceeded the requirements 
and also exceeded brand B and showed 240,000 colonies. With those 
exceptions, which are too exceptional to be typical, it can be said 
that the grade A and grade B, literally speaking, showed no differ- 
ence in bacteria count. 

Mr. Montgomery. They both were, on the average, well above ? 

Mr. Masters. Both, on the average, were well above — or well below, 
rather, the minimum requirement. 

Mr. Montgomery. Better than the minimum requirement 

Mr. Masters. Better. 



1 See Hearings, Part VII. 



CONCENTRA'J'ION Ol'' ECONOMIC POVVEU 333] 

Mr. Montgomery. What did the test show on the question of butter- 
fat? 

Mr. Masters. On the question of butterfat, our first test in February 
of 1936 showed an average for one brand grade A of 3.67 percent. 
New York City, incidentally, requires 3 percent for both A and B. 
Grade B of this same brand showed 3.52 percent, and the other brand, 
grade A, showed 3.71 percent, and the grade B 3.53 percent. The test 
we made 6 months or a year later showed a little more butterfat all 
around; it showed almost exactly the same relative proportion. 

The New York City Health Department last year made a test of 
one of these brands, and not the other, and show^ed again the same 
proportion, or even less difference. Their figures on 85 samples were 
3.96 percent butterfat for grade A, 3.83 percent for grade B. A way 
of making the exact meaning of this graphic is to point out that the 
average difference in butterfat between grade A and grade B was 
about half a teaspoonful of butter — that is, equivalent to that. 

Mr. Montgomery. Half a teaspoonful per quart of milk? 

Mr. Masters. Per quart of milk. On that basis, if you bought 
butter at 3 cents for half a teaspoon, it would cost about $8 a pound. 

Mr. Montgomery. Eight dollars a pound for butter ? 

Mr. Masters. Yes; if you can allow the 3 cents difference between 
grades A and B to the actual excess butterfat you get in A. 

Another thing that should be pointed out is that this 3 cents applied 
to a quart of milk daily would come to well over $10 a year. 

Mr. Montgomery. The difference in butterfat between these aver- 
ages and these different tests is what ? 

Mr. Masters. Two-tenths of 1 percent. The grade A is not sold 
nearly as widely as grade B, but that is no fault of the companies. 

Mr. Montgomery. Now, this morning there was some discussion of 
vacuum cleaners when Mrs. Belester was talking about the picture 
that she showed, and the question was raised as to how the consumer 
could be informed about the difference in vacuum cleaners. Has your 
organization made any tests the results of which would illustrate how 
those differences in vacuum cleaners could be measured and how they 
might be shown to the consumer, if the manufacturer were so disposed? 

Mr. Masters. If he were so disposed he could show some /things 
to the consumer that would be useful. He could make two tests of 
vacuum cleaners. The first and the most significant result we have 
found is that one very well-known brand selling at $29 rated far 
higher in actual cleaning ability than one well-known brand selling at 
$80 and another brand selling at $60. 

Mr. Montgomery. Give us some idea of how you measure the 
cleaning ability of a vacuum cleaner. 

Mr. Masters. The method we use, or the method used in the lab- 
oratory that made the tests for us 

Mr. Montgomery (interposing). What laboratory was that? 

Mr. Masters. Electrical Testing Laboratories. 

Mr. Montgomery. That is a large, established testing organization ? 

Mr. Masters. Yes; very Avell known. The method was to prepare 
a special test dirt, very oily dirt, and grind it thoroughly into a 
standard piece oi caipet. The vacuum cleaners were then run over 
it under identical conditions for identical periods of time. The idea 
was to test both speed of removal of the dirt and also thoroughness. 



3332 CONCENTRATION OF ECONOMIC POWER 

In the instance of the former, in 3 V^ -minute test periods the $29 ma- 
chine removed 72 percent of the dirt which had been ground into 
the carpet, the $80 machine removed 48 percent, and the $60 machine 
removed 47 percent. Now there was a difference between the ma- 
chines. The $29 one lacked some gadgets, the stream-lining was not 
quite so proficient as on the $80 machine, but in all material respects 
and all important respects on the basis of use value, the purpose for 
which a vacuum cleaner is bought, the $29 one was not only a better 
cleaner at the price but a better cleaner at any price. 

Mr. Montgomery. Did the Electrical Testing Laboratories report 
go into the question of construction as bearing upon durability? 

Mr. Masters. Yes-; they did. In the $29 machine, the durability, 
the probable stamina of the motor, the general construction, all rated 
high. In the $80 machine they rated high with one exception, with re- 
spect to bearings and part of the motor that would wear out. The 
$60 machine was well built. 

Mr. Montgomery. Your conclusion from that, then, is that the 
price would not be a good guide. 

Mr. Masters. My conclusion is that price is a totally unreliable 
guide there and that it is unreliable to the extent of costing you 
$60 on a single purchase. If these tests can be relied on, and we see 
no reason to believe that they can't, you would get a worse vacuum 
cleaner for $80 than you would for $30. 

Mr. Montgomery. What other cormnodities have you tested along 
that same line, to show what price will do in determining the qual- 
ity you get ? Do you have a test of soap ? 

Mr. Masters. Yes; we just recently tested soap, tested it about 3 
years ago and just tested it over again. At this time we tested 
about 130 brands. Federal specifications exist for soap. They don't 
for vacuum cleaners. We have a standard point of departure in 
regard to soap. 

We found m 130 brands that the price which we figure on, a per 
pound dry-soap basis, taking out the variables, taking out the mois- 
ture, weighing the actual soap — moisture and air go out — varies. 
In some of the types of soap, incidentally, the moisture may come 
up to -30 percent of the volume, so it is a considerable amount, a 
considerable item. We found that the cost of soap, as opposed to the 
price of the cake, the actual cost of the soap in the cake runs from 
9.7 cents per pound of dry soap to $1.97. 

Mr. Montgomery. All of those soaps met the Government specifi- 
cations for soap? 

Mr. Masters. Not all of them. The $1.97 soap fell down in one 
specification. It wasn't too important a one, but the soap didn't meet 
all of the Government specifications. Most of the other soaps did. 
The only really important Government specification is that limiting 
free alkali, and none of them was seriously deficient in that • although 
a soap that was deficient in that respect, since that is an important 
one and is a condition in the soap that needn't exist, and is a Gov- 
ernment specification, would be rated not acceptable. 

The soap selling at $1.97 sold for 35 cents a cake, $1 for three 
cakes. That figures out $1.97 per pound of dry soap. That soap 
fell down on one spe -ification, and compared with a soap very much 
like it that sold at 5 cents a cake and figured out to 20 cents per 
pound of dry SQap. 



CONCENTRATION OF ECONOMIC POWER 3333 

As I say, we tested about 130 brands. The only conclusion we 
could eoiiie to was that most of the soap on the market is ])reity 
good, that about nine-tenths of it is overpriced, and that if yoii 
are buying, 5 cents can be a ftuide in getting a good buy in soap. 
You can let low price be your guide. You get a better soap for 
less price, actually, than you do for a high price. 

Incidentally, the ingredients that go into the soap would not ever 
justify a price such as $1.97. 

Mr. Montgomery, You mean the additional ingredients, such as 
perfume, oatmeal, and cold cream? 

Mr. ]Ma8tei?s. Cold cream, oatmeal, rolled oats, and other things 
that go into soap. 

INIr. ISfoNTGOMERY. Even if a person wanted them in his soap they 
would be paying a pretty high price for them ? 

IMr. Masters. Yes. 

Mr. MfWTGOMFRY. Have you got any figures like that on the ques- 
tion of cosmetics? We still have some ladies left in the room who 
are interested in this part of the story. 

Mr. Masters. That is a very fertile field. 

Mr. Montgomery. We Avant to introduce a chart showing variations 
in sizes and retail prices of cosmetics in Maine. 

(The chart referred to was marked "Exhibit No. 515" and ap- 
pears on p. 3334.) 

Mr. Masters. We have tested a number of cosmetics; we found a 
fairly rigid common denominator to the test findings in regard to 
all of them. That is, of all of the products on the market cosmetics 
are those in which the gap between cost and price is greatest, in 
which a fair relation between cost and justifiable price is most rarely 
reached. 

This chart which shows the results of an inquiry by the State 
of Maine, w^hich has a good department of health, is significant in 
that it blows up these costs and prices, the diflFerences in cost and 
price, into figures that begin to sound like something. 

Take lip paste and lipsticks, for instance, selling at $1, The size 
indicated on the chart figured out, if you applied that retail price on 
a pound basis, to about $448 per pound for the ingredients. Those 
ingredients, in the case of Elizabeth Arden, I don't know. In the 
case of Springtime in Paris, I know what the ingredients were at 
the time the test was made.' 

Mr. Montgomery. What is the cost per pound ? 

Mr. Masters. The cost per pound is relatively low — $142.40. The 
ingredients used in the li]>stick, based on official figures by which the 
drug manufacturers purchased at the time of this survey, could not 
have cost the manufacturers of Springtime in Paris more than 3 
cents at the outside ; that is, if you figure that out on a pound basis, 
I think it would come to around $20, instead of $142.40. 

I think there is an omission in this chart in that it doesn't take 
into account the container cost, and it is true of cosmetics generally, 
particularly a cosmetic like lipstick, that the container costs more 
than the ingredients. That is standard practice. 

In the case of Springtime in Paris, the container would cost the 
manufacturer a maximum of 5 cents, and the ingredients, as I hVtid, 
a maximum of 3 cents. 



3334 



CONCENTRATION OF ECONOMIC POWER 



Exhibit No. 515 

VARIATIONS IN SIZES AND RETAIL PRICES 
OF A SELECTED LIST OF COSMETICS IN MAJNE 





: SIZE 


retail price 


retail PRICE 




: Per Oz. 


: Per Pound 




: Oz. 


Dollar 


: Dollar 


: OOLLW 


OUSTING POWDER: 










COTY 


i *'-'' 


.75 


0.1596 


: 2.55 


Eliz. AnoEN 


: 11.244 


3.00 


0.2668 


• 4.27 


H. H. AVER 


: 10.170 


1.65 


0.1622 


2.60 


Dagqett & Ramsoell 


4.883 


.85 


0.1741 


2.79 


Evening in Paris 


5.02 


1.10 


0.2191 


3.51 


FACE POWDER: 










COTV 


1.82 


.75 


0.4121 


6.59 


Eliz. Aroen 


5.35 


3.00 


0.5607 


8.97 


H. H. Ayer 


2.2615 : 


.60 


0.2653 


4.24- 


Daggett & Ramsdelc 


2.934 : 


.85 


0.2897 


4-64 


lyux Factor 


4.5836 : 


.75 


0.1636 


2.61 


Helena Rubenstein 


2.6444 : 


1.00 


0.3782 


6.05 


Richard Hudnut 


2.479 


.55 


0.2219 


3.55 


Luzier's 


1.872 : 


1.00 


0.5342 


8.55 


LIP PASTE & LIPSTICKS: : 










Eliz. Arden : 


.0357 ! 


1.00 . 


28.01 


448.16 


Springtime in Paris 


.1404 : 


1.25 : 


8.90 


142.40 


BOURJOIS 


.0700 ! 


.55 : 


7.86 


125.76 


ROUGE: 










Cream: 










H. H. Ayer 


.03148 ; 


.55 : 


17.47 '■ 


279.52 


LUZIER 


.3171 ; 


1.00 : 


3.15 


50.40 


Pla^n: 










Coty 


.148 : 


.38 ; 


2.57 


41.12 


irtAx Factor 


.30c : 


.38 i 


1.27 


20.32 


ASTRINGENT: 










Coty 


4.0 '• 


1.00 '• 


0.25 


4.00 


H. H. \YER 


11.993 : 


1.75 : 


0,1459 


2.33 


Primrose 


4.0 ; 


.85 : 


0.2125 . 


3.40 



Based on State of Maine Legislative Document 683 -- February 26, 1935 



The consumer can tell very Utile nbout relative costs of cosmetics. 
Many Items which seem to be cheaper are really much more expensive. 
A $1 lipstick costs $448.16 per pnuiiil, while a %\.2'\ lipsticlt costs $142.40 per pound. 
A ^1.75 astringent coats considerably ies.'s per pound than a $1 and an 85-cent astringent. 
One 88-cent padta^e of rouge coats $41.12 per pound, wh-le another 38-cent package 
costs $20.32 per pound — less than half the price of the competitive item. 



CONCENTRATION OF ECONOMIC POWER 3335, 

The Chairman. You are speaking only of the cost of the in- 
gredients. Is there any other cost that goes into the finished product? 
Mr. Masters. Many other costs — advertising, labor costs, manu- 
facturing costs. The only point we can make about the disparity 
between cost and price is that a mark-up of, in some cases, 1,800 per- 
cent, doesn't seem necessary to cover what are known labor costs and 
manufacturing costs. That is one aspect of the problem. 

Another aspect is that there are cosmetics on the market which 
don't have quite such sizable mark-ups. While it is true that, say, 
7 out of 10 brands of cosmetics will have a mark-up of anywhere 

from two or three hundred percent on up, the other 3 out of 10 

The Chairman (interposing). You mean there is no justification 
whatever for the mark-up ? 
Mr. Masters. Profits. 

The Chairman. Of course. I was excluding that. The fact that 
an effort is being made to carry on business on a national scale — 
would that have any effect, in your opinion ? 
Mr. Masters. Yes. 

Here are two lipsticks, and it seems to me they tell the whole story 
of cosmetics as we get it from testing them. One is not included in 

this survey, one is. If you care to examine these 

The Chairman (interposing). I don't know anything about them. 
Mr. Masters. Neither does the consumer. That is the significant 
point. The consumer goes into a store and buys these. They look 
alike; you can see that. They are both well made, the type of con- 
tainer is identical, its shade ^o far as anyone can see is the same. We 
have tested them both. We know neither contains impurities. We 
know that the ingredients in neither cost over 3 cents, and we know 
the container does not cost over a nickel. 
The Chairman. Could they be made locally ? 
Mr. Masters. I don't understand. 

The Chairman. Could they be made in every city in the country? 

Mr. Masters. I doubt it, but they both have national distribution. 

The Chairman. I understand that, but I am wondering whether 

lipstick" itself , forgetting the brand and forgetting the quality, could 

be made in every city of the country commercially. 

Mr. Masters. A city which provided manufacturing facilities for 
the making of any reasonable commodity would allow for the making 
of lipstick. 

The Chairman. Every city doesn't provide manufacturing facili- 
ties. In other words, what I am trying to find out is whether there 
are not some particular reasons why a product of this kind is more 
readily manufactured for the national trade than it could be manu- 
factured locally for local trade. 

Mr. Masters. I don't think it is peculiarly true of products of thi§ 
kind. Isn't that true also of automobiles and virtually any other 
consumers' goods involving mechanical manufacture that you can 
think of? 

The Chapman. Automobiles, of course, lend themselves very 
clearly to centralized manufacture, and most industrial products lend 
themselves to centralized manufacture. As a matter of liict, industry 
has brought about concentration of population, so I am wondering 
whether this particular product is also one that can best be manu- 



3336 CONCENTRATION OF ECONOMIC POWER 

factured under a centralized economy and, if it can, whether that fact 
itself does not add a factor which explains to some degree, at least, 
this big mark-up. 

Mr. Masters. Well, I think 

The Chairman (interposing). In other words, there are other 
factors than the mere cost of the ingredients. 

Mr. Masters. That is true, but I haven't yet got to the distinction 
between these two that look so much and are so much alike. 
Mr. Montgomery. They both have national distribution ? 
Mr. Masters. They both have national distribution, they are both 
made in the area of New York, where most of this stuff is made; 
neither will hurt you and both will put what you want on your lips, 
but the one costs $1.25 and the other costs a dime. 
Mr. Montgomery. What are those prices again? 
Mr. Masters. $1.25 for ti)is one and 10 cents for this one. We 
can't answer that. We can test them and find out what is in them, 
and we can look around and check up, investigate, and find out what 
the container would cost. We can read the trade papers and find out 
what the advertising appropriations are, and we can estimate manu- 
facturing costs and we can figure what profit should be. We can't, 
in a million years, justify $1.2o for one of these whereas 10 cents is 
fair. We don't believe that the manufacturer of the 10-cent brand 
is going broke. 

Mr. Henderson. Maybe we can get at that in a little bit different 
way. In the manufacture of cosmetics is there any huge investment 
for a plant and equipment necessary, or is it possible to make them 
in almost any laboratory? 
Mr. Masters. That is true. 

Mr. Henderson. The problem, after once a mix has been made, is 
merely of getting them into the container. 
M.r'. Masters. That is all 

Mr. Henderson. So it isn't an important industrial one. Isn't it 
true that a number of the manufacturers of cosmetics really started 
as what you call a one-horse shop, sometimes in a back room? 

Mr. Masters. Yes ; and on a number of occasions those that started 
that way ran into the Food and Drug Administration or the F. T.-C. 
and would close up and start up elsewhere. It was that easy. 

The Chairman. Then your answer to my question would be not 
the one you gave, but that lipstick could be manufactured locally? 

Mr. Masters. I was giving an answer based on the fact of how 
they are manufactured. 
The Chairman. Of couioe, that isn't what I asked you. 
Mr. Masters.' What I said in reply to your question was that any 
city that would provide manufacturing facilities would allow the 
manufacture of lipstick. 

The Chairman. Then you compared it to the automobile industry. 
Mr. Masters. Because it is centralized. 

The Chairman. Now, I understand the fact to be that these can be 
manufactured in any little laboratory.. 

Mr. Masters. Yes, that is true; but it just happens that most of 
the little laboratories are located all in one area, along with the big 
ones, too. 

The Chai&man. You are giving a different answer to me from that 
which you gave to Mr. Henderson. 



CONCENTRATION OF ECONOMIC POWER 3337 

Mr. Masters. One is true in regard to the fact and the other is true 
in regard to what it could be. 

Mr. Henderson. Could we put it this way : A laboratory sufficiently 
complete to make lipstick would not require much investment and 
could be located in almost am^ city of reasonable size. 

Mr. Masters. So far as the contents go; yes. That is generally 
true, of course. The only difficulty of manufacture in the case of lip- 
stick would be the containers, and there is the question of the con- 
tainer makers, the paper-box makers for powder, and so forth. 

Mr. Henderson. They are not manufactured by thte cosmetics man. 
They are bought from a container manufacturer. 

Mr. Masters. Yes; and if you are close to the source of supply, it 
It cheap ; but $1.25 for lipstick will allow considerable for freight. 

Mr. Montgomery. I think that is all on lipstick, I take it the 
jioint you wanted to make is that the consumer buying on the basis 
of price probably isn't getting any more by paying $1.25 than by 
paying a dime. 

Mr. Masters. I think it is only fair to say that cosmetics are out- 
standing in this regard. Surveys made within the trade itself, in the 
advertising business, have shown that when a cosmetic is introduced, 
when it first comes out, the advertising expenditure is often as high 
as 100 percent of sales, to get it established, because that is one vital 
thing to a cosmetic. None of them, of course, will do what most of 
them claim they will do. The lipsticks won't nourish the skin, as 
some of them claim to do^, or other things of that sort, so it isn't 
necessary to get any real substance into their form of advertising. 
For their brand name they will put a tremendous percentage into 
advertising and, as I said before, I don't think there is much necessity 
to go into cosmetics in detail, because I think these two here carry 
the whole story. 

Mr. Montgomery. Now, Mr. Masters, if you will explain your shoe 
exhibit to us, we will let 3'ou off. Your voice is quite a trial for 3^ou. 
Will you tell Us what this shows ? On this same question of whether 
or not .buying by price is a guide to quality. 

Mr. Masters. These shoes in various states of disrppair are sam- 
ples of two different brands that we tested. The item on top is the 
shoe before testing, and all of this is the other shoe, in the process of 
testing. The significance of the display is that they both cost $5.50, 
as I recall, or one was $5.50 and the other $5.55. 

Now, on all counts, starting with the heel, which in this one had a 
w^ood filler and in this one was leather, continuing to the sole, which 
in this one broke much more quickly under the abrasion machine to 
test the wear of the sole, on down through the other parts of the 
shoe, the one selling at $5.50 w^as an inferior shoe. The one selling 
at $5.55 was simply a much better buy. Here was a case where pri^e 
was a guide to quality almost in reverse; the price was the same; you" 
had the right to expect closely comparable results, but they ywere not 
closely comparable. 

The Chairman. Were these shoes put out by the same' manufac- 
turers? 

Mr. Masters, No; two different manufacturers. 

The Chairman. And are you giving the retail price ? 

Mr. Masters. Yes; that is the price at which we bought them in 
the stores. 



3338 CONCENTRATION OF ECONOMIC POWER 

Mr. Montgomery. Do you know what brands those were, without 
naming them ? 

Mr. Masters. Yes. 

Mr. Montgomery. They are both sold, aren't they, under a fixed 
retail price controlled by the manufacturer ? 

Mr. Masters. One is, I believe, and the other is not. I would like 
to point out / 

The Chairman' (interposing). Which was not controlled? 

Mr. Masters. This one. 

The Chairman. The cheaper one ? 

Mr. Masters. Yes. A similar exhibit could be got up on tires and 
might be more graphic than this one. They make the same point. 
Tires are bought for virtually any price, depending on the current 
state of tire wars in the industry, but their list price is pretty stand- 
ard. It is $13 for a standard-sized tire. 

The Chairman. Before you go to the tires, tell us about the inner 
soles. What is the difference between the inner soles ? You described 
the heels and soles. 

Mr. Masters. This one, unfortunately, has broken off in transit ; we 
put these on a tensile strength testing machine to pull them apart to 
see how many pounds are required to break them. This broke at 284 
pounds. 

Mr. Masters. Yes ; and the other one broke at 630 pounds. On this 
particular count the $5.55 shoe was almost three times as strong. 

The Chairman. And was the inner sole made of leather in each 
instance ? 

Mr. Masters. Yes. 

The Chahiman. What about the uppers? 

Mr. Masters. The same there. 

Mr. Montgomery. Give us the measures on the soles. 

Mr. Masters. On the soles themselves, the figures indicate the 
number of strokes necessary to wear through the soles. On the $5.50 
shoe, 50,900 strokes were necessary; on the $5.55 shoe, 55,900 were 
necessary. 

Mr. Montgomery. About 10 percent more ? 

Mr. Masters. About 10 percent more. 

The Chairman. I didn't quite get that. The cheaper shoe had how 
many strokes ? 

Mr. Masters. Fifty thousand nine hundred. 

The Chairman. And the more expensive shoe had how many? 

Mr. Masters. Fifty-five thousand nine hundred. The sole on the 
cheaper shoe w^s 0.225 inch thick, and the sole on the shoe that cost 
5 cents more was 0.325 inch thick.. 

The Chairman. Is the stroke of which you speak so regulated as to 
simulate the effect of a step ? 

Mr. Masters. Vaguely, but that isn't an important consideration in 
the way the machine is set up. There are various types of machines. 
This ©ne, I believe, Kad four spokes coming out with abrasive ends 
that went around in a circle on the sole. 

The Chairman. Then you wouldn't say that this cheaper shoe 
would wear out in 50,000 steps ? 

Mr, Masters. No; we couldn't say that. On all of the counts, on 
every single one which went into the basis of ratings of them, the shoe 
that cost a little less, but practically the same, was definitely inferior. 



CONCENTRATION OF ECONOMIC POWER 3339 

• 

If you had two people going in to buy those two brands of shoes, 
paying the same price, one would get a good pair, and one would get 
a bad. 

The point I want to make on tires was that the same thing is true 
throughout. As a comparison, that extends to all points of tires, but 
the saving is a more graphic exhibit because the saving on 4 tires 
costing $13, as compared with 4 others costing $13, could be as 
much as 100 percent in the driving life of the tire. In that case, 
the person who goes in to buy k set of 4 tires, which, at $13 apiece, 
would come to $52, may get 13,000 miles on the set. Another person 
going in and paying exactly the same for a brand just as reputable 
m name, but no more, will get, say, 33,000 miles. One will pay at the 
rate of about 3.6 cents per hundred miles of driving; the other will 
pay at the rate of about 9 cents. 

Mr. Montgomery. You mean under the same conditions of use in 
both cases? 

Mr. Masters. Under identical conditions. Of course, two different 
drivers wouldn't supply identical conditions, but under test-control 
methods that is true. 

Mr. Montgomery. Are there any questions from the committee? 

Mr. Henderson. Is this the finish of this? 

Mr. Montgomery. Yes. 

Mr. Henderson. I wanted to ask a question about a rumor that 
I have heard from time to time. Is ii true that the leading news- 
.papers will not take the advertising of Consumers' Union? 

Mr. Masters. That is true of a good many of them; yes; also 
magazines; also radio stations. 

Mr. Henderson. What is the explanation that is given in a case 
like that? 

Mr. Masters. Our own explanation? 

Mr. Henderson. No; I mean the explanation that is given. 

Mr. Masters. That the newspapers give ? 

Mr. Henderson. Yes. 

Mr. Masters. Some of them say pressure from advertisers does not 
allow them to accept our advertising; some of them say we deal in 
controversial matters, and that their advertising policy does not per- 
mit the (discussion of controversial matters in their advertising col- 
umns; others say that they aren't sure of our integrity or competence 
and would have to have us investigated and given a good rating 
before they will accept us. In the case of one newspaper that made 
that statement, we suggested that we proceed with the investigation 
and they offered the National Better Business Bureau as an investi- 
gating agency. We refused, we turned that down, because the Na- 
tional Better Business Bureau has on its board of directors a number 
of advertising agents, retail store executives, advertisers, people, in 
other words, who are identified with products some of which we 
have rated as not acceptable. We suggested to the papers that they 
appoint a person, we appoint a person, and the two appoint another 
to perform the investigation, meantime telling them they could all 
come down and investigate us themselves if they wanted to, but that 
offer has never been taken up. 

Mr. Henderson. That is the explanation they give you. Now, what 
is the expla nation you give. Is it different from that ? 



3340 CONCENTRATION OF ECONOMIC POWES 

Mr. Masters. The explanation we 2:iYe is — wcI;, it can be divided 
into two parts. In some instances of this refusal it is pressure from 
advertisers, specific, overt, and tangible. In other cases it is because 
the publisher finds himself more in agreement '.vith the advertiser 
than with us and doesn't need to have pressure applied. That is, 
he thinks that way to begin with. After all, in c^na sense we can't 
blame the paper. If the paper is apt to loso advertising, and they 
say they are if they accept ours, to insist that they accept ours would 
be to ask them to work against their own ecorx<;:iiic interests. We do 
resent the fact that the publisher's economic interest can determine 
the policies of the paper to that extent. 

Dr. LuBiN. Mr. Masters, do you know of any other instances where 
advertisers have been investigated to check upon the integrity of their 
products ? 

Mr. Masters. I can't think of any offhand, but I am pretty sure 
there would be some. Some of the papers do make definite attempts 
to keep out advertisers that they think are bad in any sense. 

Mr. Henderson. I know that is true with certain lines of adver- 
tising in the New York Times, of course. 

Mr. Masters. Yes. 

Mr. Henderson, When I was at the Sage Foundation we were con- 
sulted almost constantly by advertisers offering hnancial opportuni- 
ties and things like that. 

Mr. Masters. On the other hand, the New York Times has led in 
other advertising which wouldn't receive that same bill of health. 

Mr. Henderson. I was responding to Dr. Lubin's question. 

Dr. LuBiN. I wonder if as a manufacturer of shoes I put out a 
product that sold at $5, would any newspaper advertising depart- 
ment want to check up on the quality of my shoes or the integrity of 
the firm if I could pay for my advertising? 

Mr. Masters. I think it would be highly unlikely. 

Mr. Montgomery. I am glad you brought up the question of invit- 
ing somebody to come down and investigate your investigating 
service. You are investigating products for consumers and giving 
them the results of your tests about which brands are good and which 
are not, and so on. There are many other kinds of service of that 
sort available to the consumer, seals of approval of all sorts, where 
one agency or another is purporting to do the same thing for con- 
sumers. 

Mr, Agnew, of the American Standards Association, has brought 
the question out very well, where he said that consumers won't know 
whether they should rely on these seals of approval and these testing 
services like Consumers' Union and^ others, unless somebody is to 
certify that he is. In other words, we need there, too, a standard 
of the way goods are tested and investigated. I am very glad to 
hear that the Consumers' Union has already invited such an investi- 
gation. I dare say you would welcome the establishment of a 
standard for the performance of the kind of work you are doing. 

Mr. Masters. We would be delighted with that. 

The Chairman. Yours is a nonprofit organization, I understood 
you to say. 

Mr, Masters. Yes. 

The ChaijukIan. Supported by what? 

Mr. Masi-ers. The tees ot its members. 



CONCENTRATION OF ECONOMIC POWER 3341 

The Chairman. How many members? 

Mr. Masters. About 80,000. 

The Chairman. How was it organized? 

• Mr. Masters. It was organized 3 years ago, incorporated in New 
York State imder the nonprofit membership incorporation laws. 

The ChairiMan. Wliat was the reason for its organization? How 
did it come about? 

Mr. Masters. There .vas a strike at an agency performing similai- 
service, then in existence. Those who went on strike, in answer to 
a considerable request from members of the then existing agency to 
set up an agency to do similar work, but that would be pro-labor, 
led to the formation of this. 

The Chairman. Wliat sort of an agency was that? 

Mr. Masters. Pro-labor. 

The Chairman. What sort of agency was it which went on strike? 

Mr. Masters. The employees of the agency. 

The Chairman. The same as Consumers' Union ? 

Mr. Masters. Yes. 

The Chairman. And the employees of that agency went on strike? 

Mr. Masters. That is right. 

The Chairman. And they, the striking employees, formed this 
organization ? 

Mr. Masters. Yes. 

The Chairman. And how did they get their members? 

Mr. Masters. A good many of the members of the organization, 
the employees of which went on strike, formed together into a 
council (I think it totaled about 2,000 before Consumers' Union 
started) urging that certain of the employees of the other agency 
set up one which would be pro-labor in its outlook, and do testing, too. 

The Chairman. How many employees went on strike? 

Mr. Masters. Forty-four out of a total of about sixty-five. 

The Chairman. How many of those 44 formied in the new organ- 
ization? 

Mr. Masters. When the new organization set up, business was not 
very extensive and 10 of them came in to work. Since then the staff 
has grown to 50, and I think at the present time about 20 of these are 
former employees of the other agency. 

The Chairman. How did these organizing employees go about 
forming this new union? 

Mr. Masters. How did they go about it? 

The Chairivian. How did they go about forming this new Con- 
sumers' Union, this new agency? 

Mr. Masters. The details of incorporation are that end of it. 

The Chairman. I don't mean that. You now have 80,000 mem- 
bers. How did you go about getting them in ? 

Mr. Masters. To get the members? 

The Chairman. Yes. 

Mr. Masters. We went about doing it>. by using direct mail, by 
telling people, by sending out speakers to consumer clubs, to trade - 
union meetings, by advertising. You see, when we first started we 
were not considered a threat because we were new, we were small, and 
we hadn't been heard of before. The papers took our advertising, 
which they don't do any more. 

124491—39 — pt t 5 



3342 CONCENTRATION OF ECONOMIC POWER 

The Chairman. You must have had a little capital with which 
to do this. 

Mr. Masters. Very Kttle, which we got from members. You see, 
before we actually started publication the membership made up 
almost entirely of membcx-s of the other organization that were 
sympathetic to the strikers — I think numbered about 2,000. On the 
basis of their fees, that would come to around $5,000. 

The Chairman. This staff, of course, is a paid staff? 

Mr. Masters. Yes; it is. 

Tlie Chairman. Just as the staff of the other agency was a paid 
staff? 

Mr. Masters. That is right. 

Mr. Montgomery. Would you mind telling some of the salaries 
on that staff? I think it might be interesting. I don't know what 
they are; I understand they are not very high. 

Mr. Masters. Woll, the salary was level all around for the director 
of the organization and everyone else. When they started the or- 
ganization it was $10 a week, and it remained there for several 
weeks, and then was jumped way up to $12.50. After a time it 
moved up to $14.50, and then at $16 differentials were first intro- 
duced. At the present time there is a minimum, under our closed- 
shop contract, of $20, which is the lowest we pay, and $60 is the top 
salary. 

The Chairman. Are there any other questions? 

Mr. Montgomery. Mo, sir. 

Dr. LuBTN. Mr. Masters, has your organization been following 
with any degree of interest the attempts to modify the Pure Food 
and Drug Act? 

Mr. Masters. Yes, indeed. 

Dr. LuBiN. Have you received any aid, or have you found much 
interest in getting anything done to get the public conscious of what 
the act is attempting to do through the press? 

Mr. Ma'^ters. Quite the contrary. The press distinguished itself 
in the 5-year fight for food and drug legislation (1) by saying 
virtually nothing about it from the consumer point of view, or what 
we conceive to be the consumer point of view, (2) by doing fairly 
yeoman work in support of the advertisers' point of view. Again, 
we think it is entirely understandable, but we think it should be 
known. 

Dr. LuBiN. Was there any medium at all other than organizations 
such as yours to notify the consumer of the iinportance of the law to 
their welfare ? 

Mr. Masters. There were organizations which later turned out to 
have been set up by advertising groups which had "consumer" in the 
title and were known generally by rather long names to indicate that 
they were for disseminating sound and constructive information on 
food and drug legislation. But aside from those, which were simply 
liot consumer organizations, and aside from more or less spontaneous 
organizations set up in some cases by consumer groups, and by trade 
unions, I can't think of any in particular now. 

Mr. Montgomery. T tliink that there should be introduced in the 
record there honorable mention for two large newspapers that did 
take a very diffoicnt stand in that respect and did give very honest and 



CONCENTRATION OF ECONOMIC POWER 3343 

full reporting of the food and drug fight, namely, the St. Louis Post- 
Dispatch and William Allen White's Emporia Gazette. They were 
very outstanding as an exception to this general treatment of the 
question in the metropolitan press. 

The Chairman. Are there any other questions? 

(The witness, Mr. Masters, was excused.) 

The Chairman. The committee has received from Seton Porter, 
president of the National Distillers Products Corporation, a list of 
all the subsidiaries of National Distillers Products Corporation as of 
1924, 1933, and 1938, together with a statement of the brand names 
controlled by Nat'onal Distillers Products Corporation as of those 
dates. This material was requested by the committee at hearings on 
March 14, 1939. It may be printed in the record. 

(The letter referred to was marked "Exhibit No. 516" and is in- 
cluded in the appendix to Hearings, Part VI, p. 2745.) 

The Chairman. The hearings are finished for this afternoon, until 
10 o'clock tomorrow morning. The committee will go into executive 
session. 

(Whereupon, at 4: 15 p. m., a recess was taken until Thursday, May 
11, 1939, at 10 a. m.) 



INVESTIGATION OF CONCENTRATION OF ECONOMIC POWER 



THURSDAY, MAY 11, 1939 

(Jnited States Senate, 
Temporary National Ecx^nomic Oommi ttee, 

Washington^ D. C. 

The committee met at 10:45 a, m,, pursuit nt to adjournment on 
Wednesday, Maj 10, 1989, in the Caucus Eoom, Senate Office Building, 
Senator Joseph C. O'Mahoney presiding. 

Present: Senator O'Mahoney,, chairman; Eepresentative Williams; 
Messrs. Lubin, Hinrichs, O'Conneli, Henderson, and Lo'^reli J. 
Chawner, Chief of Division of Ecor omic Research, Bureau of Foreign 
and Domestic Commerce, alternate for Mr. Patterson. 

Present also: Messrs. D. E. Montgomer3^ Consumers Counsel, 
Agricultural Adjustment Administration; Willis J. Ballinger, Fed- 
eral Trade Commission; Anderson Tackett, Federal Trade Com>nis- 
sion ; Wilf ord L. Wl'?ite, Department of Commerce ; Milton Katz and 
James C. Wilson, Department of Justice; and Thomas Blaisdell, 
Securities and Exchange Commission. 

The Chairman. The committee will please come to order. Mr. 
Montgomery, are you ready to proceed ? 

Mr. Montgomery. Mr. Chairman, I would like first this morning to 
put on the record an apology. Yesterday I stated that there were 
I wo newspapers that deserved honorable mention with i-eference to the 
food and drug news coverage that had been refei-red to.^ I think I 
was wrong; I should have included the Christian Science Monitor, 

The Chairman, I am sure there are a lot of newspapers all through 
the country which deserve a little accolade in that respect. 

Mr. Montgomery. Mr. Chairman, yesterday we Avere showing 
tlirough these witnesses the general picture of consumer confusion 
which results from the conditions under whicli tJiey make their pur- 
chases. Today we want to go into new fields and get away from tliat. 
Before we do, our first witness will give you o)ie more picture of that 
confusing situation which summarizes the whole story pretty well in 
ojie concrete case. I would like to call Dr. Ayres, 

The Chairman. Do you solemnly swear that the testimony you are 
about lo give in these proceedings will be the truth, the whole truth, 
and nothing but the truth, so help you God? 

Dr. Ayrfs I do. 

TE5TiM0NY OF DR. RUTH AYRES, ECONOMIST, NEW YORK, N. Y. 

Ml". Montgomery. State your name, please. 

Dr, AyKSs- Euth W. Ayres. 

Mr. Wontqomery. And your addressj 

^ Supra, p aS43. 

^ , 3345 



3346 CONCENTRATION OF ECONOMIC POWER 

Dr. Ayees. 410 Riverside Drive, New York City, 

Mr. Montgomery. What are your occupations or experiences in 
this field, Dr. Ay res? 

Dr. Ayees. I am an economist, and happen to have, done work in 
the consumer field for several different companies, and I am in volun- 
teer work with several organizations working on consumer problems. 

CONFUSION OF BRANDS, SIZES, AND PRICES 

Mr. Montgomery. Your first point that you want to discuss is this 
exhibit of cans of tomato juice. Will you explain to the committee 
what these are and then go on and tell your story about them? 

Dr. Ayres. We have here tomato juice which was purchased in one 
store here in Washington in one day, and I just want to show a 
problem, if each of you will think in terms of how you would buy as 
you realized the choices which were before you. I go into the store 
and ask about tomato juice and I want to get the relative prices in 
relation to the best quality, or if I want to get a second quality 
tomato juice I want also to be able to know that. 

So I go into a store and ask what they have for tomato juice and 
I find tliat there are 21 different containers of tomato juice repre- 
senting 11 different brands. These containers sell at 15 different 
prices. There are 17 different sizes when measured by size of con- 
tainer; there are 15 different sizes if measured by volume; there are 
16 different rates of price if you relate it to 10 ounces of tomato 
juice. 

Mr. Montgomery. You mean there are different costs per unit of 
contents ? 

Dr. Ayres. Yes; different costs per unit of content. So my job is 
to come in in the morning and buy tomato juice for the rest of the 
week for my family, and in order to do that successfully I have to 
build a statistical table giving me the range in price per unit of all 
of these 21 different containers, and then following that I have to 
know which one represents good quality and which one represents 
bad quality. 

Mr. Montgomery. How many different grades are there? I don't 
think you mentioned that. 

Dr. Ayres. There is no grading on this ; in other words, there is no 
way except to try the 11 brands before I can tell whether by brand 
there is any difference, and then whether there is any difference in 
relationship to the brands of a single grade. By experience I have 
discovered that grades vary within a single brand, so that the oppor- 
tunity for me to buy this one item of tomato juice intelligently just 
doesn't exist unless I spend the day on this one problem. 

I think it really represents the total of the confusion which the 
housewife meets in buying really hundreds of different commodities. 
We simply chose this because it is one which is so commonly used. 
In other words, there is no way because of the multiplicity of can 
sizes that I can 'judge of the relative costs per unit of the article that 
I am going to buy. Then that is added to the fact that I have no 
way 01 telling the relative quality of the material in the cans with- 
out trying out all of the brands, and- if I went to two or three more 
stores in the same block the number of brands would jump 35 or 50 
percent, probably, because I know a lot of the brands I have tried 



CONCENTRATION OF ECONOMIC POWER 3347 

out aren't here. What can the housewife do with the time element 
involved ? 

Given all knowledge, given the problem that the material is here 
if we want it, how in terms of common sense can the housewife 
use it? 

The Chairman. How many of these containers of dilTerent sizes 
are turned out bj' the same canncr or the same producer ? 

Dr. Atkes. Four is the largest in this group. There are only four 
sizes to one brand and obviously there are 11 brands, and that mul- 
tiplies it. There is a chart up here. 

Mr. Montgomery. May I introduce this chart in the record at this 
point ? 

The Chairman. The chart may be received. Please identify the 
chart, Dr. Ayres, by citing the title. 

Dr. Ayres. This is tomato juice, sizes and prices, in one Wash- 
ington store, purchased in 1 day. 

(The chart referred to was marked "Exhibit No. 517" and appears 
on p. 3348.) 

Dr. Ayres. This gives the brand, the size of the can, the fluid 
volume, the price and the price per ounce, which varies from 3i/^ 
cents to 71/2 cents in units of 10 ounces, so that for 10 ounces of tomato 
juice you could pay as low as Sy^ cents or as high as 714 cents. 

The Chairman. Not in the same brand. 

Dr. Ayres. Not in the same brand. 

One of the other confusions which we meet is very well illustrated 
because the cheapest buy is in the largest-size can, the most expensive 
is in the smallest-size can ; but when we come to the two interme- 
diate-size cans the thing is simply reversed, and it is cheaper to buy 
in the second quality than in the third. 

The Chairman. Do you draw the inference that there is no reason 
or logic in the manner in which the producers prepare these ? 

Dr. Ayres. Well, I am sure there is logic for them, but the problem 
is that as I buy I can't find the logic and I don't know what form of 
logic to follow unless I go to the store and ask for the price of every 
one of the items that they carry. In other words, I can t be sure that 
the larger container is the better buy. Even if I take two prices, 
say I take this brand, ask the price of the cheapest which is a very 
large can, ask the price of the most expensive which is the very small 
can, and then say I will take an intermediate can, I can't know that 
I am getting a relatively better price.' In other words, that is just 
another confusion showing another problem that I have to go through 
before I have to buy intelligently. 

The Chairman. Do you have any reason to believe that the form 
and size of the containers are manipulated for the purpose of increas- 
ing profits? 

Dr. Ayres. I presume it is what the market will take. I think it 
must be based on that; that is, it can't be based on economies in 
sale because if it were there would be a definite relationship between 
size and price. So it must be what the market will take, and for some 
reason or other this particular producer believes, or in this particular 
case the store may believe, that the best way to sell this is on that 
basis. 

The Chairman. Now we had some testimony yesterday, illustrated 
by cans also, which tended to show that a small-size can was put out 



3348 



CONCENTBATION OF ECONOMIC POWER 



for the purpose of enabling the seller to obtain at least as large a 
price at sales as would be oDtaiiied at the ordinary transaction, if I 
make myself clear. 



Dr. Atres. Yes, yes. 



The Chairman. Do you have any evidence of that? 

Dr. Ayees. Among the consumers with whom I have worked I 
liave had several of them tell me tliat same thing, though personally 
fis a buyer I ]iever happened to notice that I have run into it. I never 



Exhibit No, 517 

- TOMATO JUiCE - 

SIZES AND PRICES 

»N ONE WASHINGTON STORE 



ZQ 
21 



NAME 


: SIZE 


: FLUID VOLUME 


: PRICE 


PRICE PER 
10 OZ, 








(CENTS) 


(CENTS) 


PHILLIPS 


• 211 X 315 


lOi OZ. 


.2 FOR 09 


4.4 


HCINZ 


211 X 411 


12 OZ. 


07 


: 5.8 


DEL MONTE 


211 X 413 


12 OZ. 


i 07 


• 5.8 


BEECHNUT 


211 X 414 


12i 02. 


:3 FOR 25 


6.7 


CAMPBELL'S 


300 X 407 


14 02. 


: 07 


5.0 


CROSSE AND 6LACKWELL 


300 X 407 


14 02 


■2 FOR 17 


6.1 


L'iBBY 


300 X 408 


14 0?. 


.3 FOR 19 


': 4.5 


COLLEGE INN 


BOTTLE 


1 PT. 


12 


: ^-5 


CAMPBELL'S 


303 X 509 


1 PT. 4 OZ. 


2 FOR 17 


4.2 


AUNT NELLIE 


307 X 512 


1 PT. 8 02. 


10 


4.2 


STOKES - GRADE A 


307 X 512 


1 PT. 8 OZ. 


08 


3.3 


COLLEGE INN 


BOTTLE 


1 PT. 10 OZ. 


17 


6.5 


CROSSE AND BLACKWELL 


BOTTLE 


1 QT. 


21 


6.6 


DEL MOMTt 


404 X 61 5 


1 QT. 14 OZ. 


21 


4.b 


L 1 BBY 


404 X 708 


1 (JT. 18 OZ. 


19 


3.8 


BEECHNUT 


502 X 505 


1 QT. 18 OZ. 


25 


5.0 


CAMPBEIL'S 


502 X 505 


1 QT. 18 OZ.: 


22 : 


4.4 


CROSSE AND BLACKWELL 


502 X 510 


1 QT. 20 OZ. : 


25 : 


4.8 


RlTTER 


BOTTLE : 


2 QTs. : 


27 ; 


4.2 


LI BBY 


603 X 700 : 


3 QTS. : 


39 ; 


4.1 


CAMPBELL'S : 


603 X 700 ; 


3 QTS. 3 02.: 


35 : 


3.9 



Purchased At Giant Market, 15tm & H St. N. E. , Washington, D. C. 



In one store ou one day in Washington tomato Juice waa purcbc.sf'd in 21 different 
packages, which included 11 different brands, 17 diflterent sizes, 15 different net weights, 
and 15 different prices. 

In no two packages was the combination of size, net weight, and price identical. 

Sizes varied by as little as Vs inch ; net weight varipd by as little as ^A ounce. 

Elaborate calculations must be made to determine which product cosf^ less per ounce, 
and by how much. For e.xample, what is the dlffirence Jn cost per ounce of IO14 ounces 
at 2 for 9 cents and 12% ounces at 3 for 25 cents 

Item 14 apparently costs 2 cents more than item 15. Actually it costs 4 cents more, 
when allowance la made for difference in net weight. 



CONCENTRATION OF ]']CONOMIC rOVVER 3349 

noticed that I have because I don't compare every single can I buy. 
1 buy either by the case or in a hurry and don't look. When I bu} 
by the case I try to buy very carefully, which I do witli most (;f my 
marketing, and then when I come to the individual cans and it is just 
because I am in a hurry, and a can of this medium size and off I go, 
so I can't say it's ever happened to me, although I have many 
friends 

The Chairman (interposing). It would be an important thing to 
know from the point of view of the consumer whether or not sub- 
stitutions of smaller sizes were made at sales in order to defeat the 
purpose of the sale. 

Dr. Atees. Well, now there is no question but that is done in other 
off sizes of all kinds. I don't think it applies to this type of can 
here, because there are so many that, unless there is a particular sub- 
stitution in a sale of one can for another where the consumer is in the 
habit of buying a certain kind. In terms of this kind of an exhibit 
there is no standard, and therefore I can't go in and say I want a quart 
or a pint or a cup and expect that that is the usual basis upon which to 
buy because there isn't any usual basis, but when wc come to other 
types of articles, and I have some very interesting material on that 
and I think we might skip and come right on. May I liave tlio ex- 
hibit on tea and also the chart for dried vegetables? 

Mr, Montgomery. Do yon want to introduce this chart into the 
record ? 

Dr. Ayees. Yes, I do. I think it is the one. It is on off-sized pack- 
ages. 

Mr. Montgomery. Let us get this clear. There is a point of con- 
fusion with respect to this. Now you are going to talk about what? 

Dr. Atres. This is a different question. This is reall}' what I be- 
lieve is deception and it is an entirely different nature from this which 
I don't think most of it is intended as deception except in these par- 
ticular cases. 

Mr. Montgomery. Excuse me. For the purpose of the record, this 
is the chart that is being introduced at this point. 

(The chart referred to w^as marked "Exhibit No.. 518" and appears 
on p. 3350.) 

Dr. Ayees. Now here we have a series of commodities which come 
in boxas. Green peas, pea beans, red kidney beans, lentils, and so on, 
and we find that there is a standard size, 16 ounces for many of them, 
and that a single — these here represent the distributors [indicating] — 
and that a single distributor will put of these things five or six items 
all in a standard size and then he will have one item which is off size 
and short an ounce or half an ounce or an ounce and a half, and now 
it is perfectly obvious that when we get the habit of buying in boxes 
that are very nearly alike and almost all of them on tlie niarket rep- 
resent exactly the same content, when we come to one that is different, 
there is deception there. 

Take, for example, this tea which I bought yesterday after the com- 
mittee meeting adjourned. I was told that this was happening here 
and I went out to see what I could buy. Here is a j^opular brand of 
tea which is marked in very large size on the front 3iA ounces net 
weight. Well, none of us ever buy tea except by pounds and quarter 
pounds and half pounds. I mean, you wouldn't buy eggs and go in 



3350 



CONCENTRATION OF ECONOMIC POWER 



and ask for 10 eggs; you ask for a dozen or a half doi^en. You 
wouldn't ask for a third of a dozen. I mean there are certain things 
by common practice which are understood to be the way in which buy- 
ing is done, and that is the case of tea; vou buy in half pounds or 
quarter pounds. 

So I went in and asked for this tea by brand name and said I would 
like a quarter pound, and this is what I was given in three different 
cases. 

Mr. Montgomery. Did the retailer say he was giving you a quarter 
pound, or did he say he was giving you 314 ounces? 

Dr. Atres. Well, I had a series of different experiences, I went in 
and simply asked for the brand name and asked for a quarter pound, 
and in one instance the retailer told me, "This is a 19-cent package." 

Exhibit No. 518 

DRIED VEGETABLES 
VARIATION IN LABELED WEIGHTS OF COMPARATIVE PACKAGES 



COMMOD 1 TY 


Net Contents In Ounces 


As Put Up By Distributor 




A 


B 


c 


D 


E 


F 




GREEN SPLIT PEAS 


15 


16 


16 


16 


16 


16 




PEA BEANS 


Ui 


14») 
16 j 


16 


16 


16 


16 




RED KIDNEY BEANS 


14i 


13 


16 


16 


16 


16 




LENTILS 


16 


16 


16 


16 


16 


16 




BARLEY 


14i 


16 


16 


16 


16 


16 




MARROW BEANS 


Hi 


13 


16 


16 


15 


16 




FARINA 


13 


»« 


16 


14 


14 


14 




YELLOW SPLIT PEAS 


16 


16 


16 


16 


16 


16 




LIMA BEANS 


14 


13 


»» 


16 


14 


16 





» Two Different Weights - Identical Packages. 
«» Does Not Pack This Commodity In A Comparative Package. 

Source : Address of Hon. Alex Plsciotta, Director of Bureau of Weights and Measures, 
City of New York, at the ant.ual conference of the New Jersey Weights and Measures 
Association, September 9, 1938. 

Distributor C packs uniformly in pound packages. 

Distributors D and F put up only Farina in off-pound packages. 

Distributors E has 3 off-pound packages ; B has 4 ; while A packs only 2 of the 9 items 
in full-pound packages. 

In another instance the retailer simply said, "Here it is," and in 
another instance I was told, "Well, now, this is not actually a quarter 
pound, but it always sells for a quarter pound," and in another 
instance I was urged that there was no difference. But these particu- 
lar packages were sold to me as quarter pounds. 

Mr. Montgomery. Let me get the record clear. How many pur- 
chases of that brand of tea did you make ? 

Dr. Ayres. I made three — two in quarter pounds and one which was 
supposed to be a half pound and was 7 ounces. 



CONCENTRATION OF ECONOMIC POWER 3351 

Mr. Montgomery. And I understand in none of those cases did the 
retailer call your attention to the fact that it was an off size? 

Dx- Ayees. In none of those instances. 

Mr. Montgomery. Then, I understand, you made two other requests 
for it, but the retailer in those two cases told 3'ou it^as not the size 
you were asking for. " 

Dr. Ayres. That is correct. 

Mr. Montgomery. And you have there? 

Dr. Ayres. We get here another brand of tea which sold for the 
same price, and it happened to come in this size package, which shows 
that in terms of size of the package there is no indication to me that 
this is smaller than some other tea. There is a wide variety of sizes 
in the way tea is sold, but, in terms of the standard by which we buy, 
here, I believe, is something which leads without any question to 
definite deception. 

Mr. Montgomery. What are the weights of those two packages you 
are holding in your hand ? 

Dr. Ayres. This is 4 ounces and this is 3% ounces. They are so 
labeled, but when I went in and asked for a quarter of a pound of tea 
by this brand name this is what he gave me. A friend told me I could 
do that in Washington ; I didn't believe it, and I thought this morning 
it would be very interesting to spend a short time here in Washington 
to see what I could develop. 

The Chairman. That was the act of the retailer? 

Dr. Ayres. But the consumer's problem is this — that these off- 
standard sizes make that thin^ possible. In other words, the fact that 
this happens is the thing which is important to the consumer. 

The Chairman. Not the motive which causes it to happen. 

Dr. Ayres. There might be all kinds of motives. 

The Chairman. The important thing is the fact and not the 
motive. 

Dr. Ayres. The important thing to the consumer is the fact, in 
trying to find out where we stand and why the problem exists prob- 
ably includes the motive. 

The Chairman. Your point of view is that there ought to be a 
standard size for all such containers, or standard sizes? 

Dr. Ayres. It would be a great help, and this is just one instance. 
We could go into hundreds of this kind of thing if we wanted. 
I have in the room two or three other exhibits showing the same 
problem in a slightly different way, if the committee wants to go 
into that. There is this in illustration of the problem. There are 
slack containers, slack fills, deceptive bottoms, and a series of ways 
of selling goods, some of them which are perfectly obviously in- 
tended for deception, some of them on which the benefit of doubt 
may be given to the distributor or producers, but all having the 
same effect so far as the consumer is concerned, that it happens that 
the consumer thinks in the ordinary course of purchase that one 
thing is happening, and actually another is. 

Mr. Montgomfry. Before you leave this subject of general con- 
fusion, have you anything more you want to say on that question? 

Dr. Ayres. I would simply like to summarize the fact that when 
you put all of these confusions together, while in many instances 



3352 coN<'i':i^rivA'i'iON of i;<"on()mi(' power 

it is theoietiqally possihir for tlio. lioiisowife to determine many oi' 
the questions of buying which it is necessary to determine if one 
is to be u o^ood buyer, the chance of any individual being able (o 
do it within the thne allowed is ])racticaily — it simply rules it out. 
because after all, we bave (o l)iiy almost all of the connnodities with 
wliich wv make a home, and that meitus tliat the problem of buying 
is an ever mounting (.)iic a^ our exthauge society becomes moi"e 
com]>l('lt'ly an exchange society, so we are involved ove. jieriods of 
time 111 try'uig to get this material. It seems to me ihat until we 
have some basis of judgment, some staiitlards in teims of sizes, and 
some grades in terms of (Quality, we Avill neAer be able to do our job 
as intelligent buyers and housewives. 

3[r. Montgomery. Do you kiyiw whether mamifactureis or any 
kind of business concern buying goods for its own use buy goods 
under the same confusing situation? 

Dr. Ayres. No; I wouldn't say that none do, but the general 
practice in terms of buying at wliolesale is based on an entirely dif- 
ferent theory. We see first that all (Jovemnnent instituti<ms buy 
by grade. We find that all large institutions such as hospitals and 
train companies and steamship companies buy By grade. 

This is just limiting it for the moment to the food line. We find 
that canned goods are nearly all graded, only we don't know it. It 
has come through a process, because in the case of getting collateral 
it is impossible; in the course of the busiiiess transaction it is re- 
quired that the warehouse receipt tell the grade of the canned goods 
on which the collateral is given, so it isn't a matter that it can't b> 
done; it .isn't a matter that it isn't being done; but it simply isn't 
being made available to the consumer, and all of the technical ])rob- 
lems which we might think Avould arise in terms of standards Ivwv 
been solved — not that there can't be better standards, more carefiniy 
worded and better worked out, but the basic job has been dour and 
it is being used commercially. 

Mr. Montgomery. You mean that the basic job has been doiv with 
respect to these canned goods. 

Dr. Ayres. Yes. Not all canned goods go through the large ware- 
houses. There are canned goods being sold which ha^e never been 
graded. But the major proportion of the canned goods in the cour.'-e 
of trade have already been graded and simply the consumer can't get 
that information. 

The Chairman. Of course, unless a standard were fixed by public 
authority of some kind there would be no way of securing uniformity 
in the sizes of these various containers. 

Dr. Ayres. Exactly, exactly. 

The Chairman. Now, as a consumer, do you have anything to say 
upon the comparative benefit to the consumer of buying connnodities 
of this kind, foods, in containers, and in the old-fashioned way in 
bulk? 

Dr. Ayres. That raises a new problem. I don't have with me any 
statistical material on that problem, but I think I can say very briefly 
that the container always adds cost. That is a service charge to the 
consumer. When the consumer can only buy in container, obviously 
it is forced upon him, and he has to pay :for a service whether he 
wants it or not. Also, the container opens the door to all of the 



CONCENTUATION OK ECONOMIC POWER 3358 

slack fill cases, because you can't sec wluit is insido. Yo.i can't tell 
what you are buying. On the other hand the container in many in- 
stances helps to bring a more sanitary product, so that you can't 
put it in a clear-cut term and say there should be one oi', ti\e other. 
But so fa]- as the consumer is concerned, the right to choose whether a 
con.sumer buys that service is very important, and the second point, 
that if the consumer buys through that service, thai the consumer 
have .some way of knowing what it is she is buying within that 
package. That is also very important. 

The Chairman. But it is more sanitary to distribute foods in 
containers than in bulk. 

Dr. Ayres. It depends upon the product. 

The Chairman. It also depends upon the retail store, does it not? 

Dr. Ayres. Not entirely. I have bought stuff — oh, let's not go into 
that. I have bought stuff in boxes that I wouldn't put on my table, 
and because it was hidden I couldn't see as I bought it what was 
inside, and it was infinitely less sanitary than what I would have 
turned down in the case of a bulk product. 

The Chairman. It is really a very important question from the 
point of view of the consumer whether a better standard is main- 
tained in factory distribution, factory packing, than in bulk dis- 
tribution and retail packing. I speak of retail packing as including 
just shoveling tea out of a big bin and pouring it into a paper bag, 
handling it with the hands of the retail salesmen and all of that. 
There is quite a question there, isn't there ? 

Dr. Ayres. Well, again there are a whole series of questions, as to 
whether the thing is to be cooked, and so on. In other words, there 
are hundreds of things that don't make the slightest difference, ex- 
cept esthetically, and since we don't know a lot of things the es- 
thetics may not be better. 

The Chairman. You have no definite conclusion to cite in that 
regard ? 

Dr. Ayres. I do not feel an expert in it, but I feel the consumer 
ought to be in a position to choose whether or not he or she should 
pay for an extra service, because if he or she can't afford that extra 
service it means paying out for something which is not of value in 
the budget allowed, and not having that same money to put on 
something which is of value. 

Mr. Montgomery. Have you observed, Dr. Ayres, from your experi- 
ence, whether there is an increase in the extent to which goods are 
being sold only in the packaged form ? 

Dr. Ayres. In my neighborhood it is almost impossible in New 
York to get many commodities except in packaged form, and even 
at the stores where both are sold the retailer pushes the packaged 
form because the packaged form is the form in which the margms 
are larger in almost all cases. 

The Chairman. How do you know that? 

Dr. Ayres. Now, this is material which I didn't come with, I didn't 
come with my statistical material, and that is a matter of opinion. 
I have gone through a considerable amount of material which leads 
me to believe that, and I simply have to stand on my belief. This is 
off the subject I came prepared to talk on and I don't have with me 
material on that. On the other hand, it is perfectly obvious that 



3354 CONCENTRATION OF ECONOMIC POWER 

when we get into these varying sizes it is very much easier for the 
deception to be practiced in terms of these off sizes and so on which 
come about in packaged goods and can only come about with bad 
scales if you buy it on tlie other basis. Of course, you come into 
the question of adequate weights and measures laws if you are going 
to buy in bulk. So it isn't an easy path on either basis; there are 
problems. 

The Chairman. You think there is as much danger of the distribu- 
tor weighing his hand at the factory as at the counter. 

Dr. Ayees. Yes. 

The other question in regard to this is that the prices that I pay for 
packaged commodities are always higher in terms of the price per 
pound than for that same commodity in bulk, and usually higher by 
more than I would believe the container to be worth. Your container 
is worth anywhere from a cent or a cent and a half to 5 cents, usually, 
and if you get a price above that, obviously it is in problems of ineffi- 
ciencies or larger margin of distribution. 

Mr. Montgomery. When you came back from your shopping tour of 
tea yesterday you had the package — I don't know whether you brought 
it with you or not — that was put up as tea balls.* There you had addi- 
tional packaging. Do you remember what the weight and price were 
on that ? 

Dr. Ayers. It was 0.64 — in ounces it Avas 0.64, and I paid 10 cents. 

Mr. Montgomery. About two-thirds. 

Dr. Ayres. About two-thirds of an ounce for 10 cents. 

Mr. Montgomery. That is 31/2 for what? 

Dr. Ayres. This is 31/2 and the price would range from 18 to 20 
cents. In other words, there was a tremendous difference simply due 
to the packaging, for the same brand. 

Mr. Chawner. Have you determined the actual content of those 
packages, the actual weight of this marked "3i/^ ounces" and "7 
ounces"? 

Dr. Ayres. No ; I haven't. 

Mr. Chawner. The manufacturer, I take it, would be subject to 
prosecution if there were misrepresentation. 

pr. Ayres. I am not claiming that. The interesting thing about 
this particular exhibit is that it is in the very large size type, Si^-ounce 
net weight. 

Mr. Chawner. Is there any likelihood in that case that the manu- 
facturer may have printed a weight less than the actual content in 
order to be perfectly safe as far as avoidance of prosecution is con- 
cerned ? 

Dr. Ayres. All the other people who sell tea don't do it. I don't 
want to say all, but all of those that I happened to ask about — all of 
the others were put up in size near a quarter pound,. in what was 
marked on the box a quarter pound, and within the likelihood of toler- 
ances there is no reason why this should be a particular case here. 

Mr. Montgomery. If the manufacturer wants a tolerance to protect 
himself against that, he could have a tolerance above 4 ounces as well 
as a tolerance aboA^e 3i^. 

Dr. Ayres. Perfectly well. In other words, "not less than" often 
comes on the package. Of course, the fact that tea is put up in a dried 
form means there is not very much likelihood of any great change of 
weight between the time it is packed and the time it is sold. 



CONCENTRATION OF ECONOMIC POWER 



3355 



Mr, Montgomery. You had some tcstiiuony you niiuted to give 
on the subject of coiisuinor credit. Will you iutroduce that'^ 



CONSUMER CItEDiT 

Dr. Ayres. The sul)ject of consumer credit is a ]ar<!;e oue and 1 
want to give you some detailetl material on one aspect of it, on 
which there has been a rather careful study. This material was 
collected by the ^nissjichusetts Connnittee on Consumer Credit. 

Mr. JNIoNTGOMi'R r. We offer this chart for the record. 

The Chairman. It may be received. 

(The chart referied to was marked "Exhibit No. 519" and appears 
below.) 































14 


























































































o o 






























































1- 




























X S 


2 




























S& 


5 






o 


















_o 




-£ Sl 


o 




















_J 


h- 


























J — 


^ 


UJ 




























IT) 


o 


























.i -O 


Z 


UJ 




o 


















_ o 






























8 J 


<x> 


Q. 


























,c " 


o 


U3I 
























s 


1% 


2 


UJ 




g 


















„ 0(A 


r-' 


J » 


















'5 


in 


UJ 






















J- 


< 


-E J 


o 

< 

_1 


5 

CO 
UJ 




< 


















o»- 





1 " 




















' K* 


< 
CD 


5 




o 




















o 


O _c 


g 


UJ 


1- 

UJ 


^ 




















5 


151 


aS~ 


















WQ. 


2 


a: 


X 






















1 


- a S 


:d 


UJ 
























S« <^ 




H 


o 








^^^B 














2 


-7 Jl 


o 

ID 


Q 

UJ 

o 


< 

< 






- 


* 












O 




Z 



1i b; 


~ 




^^ 








UJ 






1. 




J. 






1 


J. 




— o 


c 

J 

5 



J — 

1 ? 


2 

UJ 




z 
»- o 


















!i 


•^l! 


o 

UJ 
Q. 


X 

o 

X 

5 




UJ z 
Q. < 


f- 


R 


5 


o 


2 . 


f* 


r- 


1 




I 
< 

< 


- Q sr 


■= -c 

— ~^ ^ 

III 

"5> t ^ 


cn 


z 
























s 


"0 -D 6» 


< 






0:12 




















o 


i c — 


UJ 

a: 


z 
o 




as 

Z u. 
O 


tO 


s 


■2 


£i 


2 


a. 


«> 


' 






S E 3 


< 


o 


























2 S^ 


X 


< 




tn 






















g — r: 


o 


01 




(^ 






















- "^ _g 


>- 


z 
< 
fr 






o 

t 
o 

-J 


1 

o 


1 
o 


1 

o 


1 
o 


1 
o 


o 
o 


o 

o 

o 






s^ J 


DC 






"i — 


^ 


.^ 




^ 


?? 


CJ 


(O 


tn 






"^ 5 


o: 




























3 "^ TJ 


< 






o 
























o 




























E 3 "6 

1 i ' 



335G CONCIONTKA'L'ION OF ECONOMIC POWER 

Dr. Aykes. This material is taken from a report of the Massa- 
chusetts Committee on Consumer Credit, of February 17, 1936. It 
IS one of the few wide field studies wliich have been made on con- 
sumer problems in terms of credit, and it is on various phases of 
installment buying. The point I want to bring out particularly is 
the question of interest rates charged on installment buying and the 
problem which faces the consumer in that field. 

This study covered 21 Massachusetts towns and villages and cov- 
ered 500 connnodities and some 300 stores, so it was done on a very 
careful field-survey basis. There were 177 of the commodities which 
were advertised as being sold with carrying charges for time pay- 
ment based on 5, 6 and 10 percent. We took the detailed material 
us put out by the Massachusetts committee and simply put together 
all of the cases of C percent and then figured what rate was actually 
being cluirged, and the first thing we did was to take the payments 
still to be made ; that is, the amount due, and the charge, and figure 
the percentage relation of those, and we got some rather startling 
figures. Taking 6 percent first, because that was the one that came 
out most clearly in the largest number of cases, we find that in between 
5 and 6 percent of the cases the actual rate ^vas below the 6 percent that 
was advertised. However, when we come on up, about 60 percent 
was over 9 percent and about 26 percent was over 18 percent, and 
that is just in terms of the flat percentnge relationship between the 
payments due and the carrying charge. 

I would like to introduce at this time the chart for computed 
rates of interest based on a yearly figure. 

The Chairman. It may be received. 

(The chart referred to was marked "Exhibit No, 520" and appears 
on p. 3357.) 

Dr. Ayres. This is the rate paid in terms of a year for the actual 
loan 

Mr. Henderson. The simple interest rate. 

Dr. Atres. The simple interest rate, but it is figured not on the 
total outstanding but on the fact that that total outstanding dimin- 
ishes as the payments are made. 

Mr. Henderson. The computation of the amount of money out- 
standing for any given period. 

Dr. Atres. Yes; so that is then averaged for the total period and 
I he interest rate figured on that basis, 

1 want to compare these, if I may. We find that in only two of 
the cases was the interest rate below 9 percent. 

Mr. Montgomery. How many cases? 

Dr. Ayres, One hundred and six. 

Mr, Montgomery. Two out of one hundred and six. 

Dr. Ayres. Two out of one liundred and six were below 9 percent, 
and as we come on up we find that between 12 and 18 percent wei'e 32 
percent, and then we come to the final figure and we find that 7 of those 
cases were actually over 100 percent when figured on an interest basis. 

There are similar, stories tor the material at 5 i:)ercent and at 10 
[)ercent, 

Mr, Montgomery. I offej for the record this next chart. 

Tlie Chairman. It may be receiv-ed. 

(The cluul icferred to Vvus marked "Exliibit No. .'521" and ap})ears 
i.n [>. 3358.) 



(■UN("i;NTliAri(t.\ l\V r.rOSOMW I'OWKK 



'6'S[)7 



Dr. Ayres. We come back again to the percentage ratio first which 
is the simple rehition of the amount outstaniing and the charges, and 
we find that where it is advertised that 10 percent is chargvd, about 
45 percent come below 1-2 [nncenl ; that is a pretty good ligure in 
terms of tlio ivst of wliat we have here. 























-2? 


































































. o 






















» »rt 














































































































5: c 


(D 




o 














o 


2 £ 


>£ 
















o 




















"O •- C 


1— 




















C T3 O 
O c *- 


o 




















s^ S 


< 1- 


















o 


1^1 


"' 














go. 


















9 














u^l 




< 














5 


ae — *- 

< y £ w 


5 




2 














y 


3 2 c i 


_) liJ 




2 




tt^M 










< 


u. a — ^ 


_i Q: 
< Ixl 




■-0 




^^H 










rji- 


° ! 2 s 


u."^ 




I^B 










K> 


^5 




o 




^H 










o 


s ? fl 


- en 




^ 




H 










2 




cc 


CO 

1- 
en 
o 




T 


^■_ 










njf. 


8 lU 


1" 












1- 


a: 


it) 




IH 


H" 


wt 


^ 


^_ 




" 


z S ■» s 


IxJ 


LlI 


< 




^^^1 


^HB 






^^^H 




^^^H 


^ jr Q. r^ 


CC 


1- 


5 




^^H 


^^H 


^^1 


^H| 


^^H 


EHB 


^^H 


(= c -O 


u 


2 






^H 


^B 


H 


■ 


■ 


H 


H 


|O^K c 




Q 




^o-^^ 


_JH_ 


Bh_ 


H. 


_■ 


_■_ 


_■_ 


-Hl-o 


















LiJ 




ifei - 


fO 


<^ 


r 


o 


m 


^ 


uj 


1 ij- 


^ z> 




a 5 
















25 - §2 


(/ic' 




s 
















< o _ -a 

INI 

1 Sit 

"I'll 


y 2 








<7 


- 


z 


iji 


>fl 


- 


»— — 




















V. » t; 


r> 




UJ 
















- "^ 8 


Q. 




0<- CT) 


in 


m 


fP 


Ci 


0^ 


o 


o 


-€ _c — 


5 
O 






t 


1 


S 


w 


^ 


o 

o 


o 


c 

— ^ "S 


o 






1 
o 


1 


1 
o 


1 

o 


i 
o 


1 
o 


a 


o 5 o 












a> 


V 


o 




> 








t- '" * 






















^ 
















Jg g - 
-£ 1 * 



The Chaiuman. JBek»^v what? 

Dr. Ayres. Be](jv\ 12. Not onj^n interest rate basis but on a per- 
centage basis, and tlien wc finCl that there are 32 percent between 12 
and 18, and between 19 and 20 percent come between 18 and 24. 

When we get the next cliart, however, it l<->o3vS very bad again, 

Mr. Montgomery. AVe offer this chart for rhe record, at this point. 

The Chairman. Tlu; chart n.ay be received. 

(The chart referred to was marked "Exhibit No. 522"' and ai)peHr.s 
ou p. 3850.) 



3358 



CONCENTRATION OF ECONOMIC POWER 



Dr. Ayres. This chart sliows the interest rate on these loans which 
were advertised at 10 percent, and we find that there were only 31 
cases in the study which fell in tliis category, 10 percent, and only 1 
of those was below 12 percent. A major line, as you see, comes up- 
ward as we get to tlie higher categories; 25 percent were paying be- 
tween 18 and 24 percent; we skip again; 19 percent were paying be- 



1- 




z 


Ul 


5 


-J (- 


-1 2 


,< UJ 


h; o 


to a: 


2 LU 


Q. 


ro 91 


?i.i 


tr 


If) UJ 


UJ 5 


o 


5 00 


< LU 


^t? 


m cc 


Q H- 


< CO 


(i Ul 


z: or. 


Z) Ul 


h- 


Ll. -Z. 


O 


Q 


(O 


Ijj 


til 


H- 


o 


O 


< 


■-> 


1— 


o 






ll 1 




f) 


J. 


vr 


o 


hj 


T 


a.£i§ 


CO -^ 


< — 


CO !$ 


i^Q 


cc 1- 


< o 


-T- < 


o SD 


.r. < 


^ CC 


^ 1- 


>- 


c^ 


en 


< 


o 





5 -R 



Sg- 




go. g 
S 



■1 £ K 

v.- O _ 



I I 



;? s s 

^ *0 D 



tween 30 and 50 percent, and 5 ])ercent were paying between 50 and 
100 percent, and here again two cases were paying actually more than 
100 percent. 

Mr. Henuekson. Dr. Ayres, let me see if I get this correctly. In 
those two cases where the interest rate was over 100 percent, have 
you any information as to the amount of money that was involved in 



CONCENTRATION OF ECONOMIC POWER 3359 

that particular transaction? I don't want to put you to too much 
trouble. 

Dr. Atres, Let me see if I can get this dug out for you and come 
back to it: I have the individual case stories here. I don't remem- 
ber oflFhand, but we will see if we can get that in a moment. 




Mr. Henderson. Could you tell me on these transactions, were 
refrigerators and clothing included? 

Dr. Ayees, This study covered a series of commodities which are 
ordinarily sold. The most important were automobiles, furniture, 
refrigerators, radios, all kinds of household labor-saving devices, 
men's clothing, typewriters, coal, and then it petered down to a lot 
of other items as well. 



3360 CON(^ENTKATION OF ECONOMIC; POWER 

The Chairman. Was this table made upon the basis of 31 trans- 
actions? . 

Dr. Ayres. This particular table was made on the basis of 31 trans- 
actions. You see, there were 506, I think it is, in the neighborhood 
of 500 in the total study. Then we sorted out those in the total 
study Avhich fell into the category of advertising at 10 percent, and 
the number which fell into the category oF advertising at 10 percent 
was 31. 

The Chairman. Do you think that is a large enough Ham[)le on 
which to base a conclusion as to the general practice? 

Dr. Ayres. No; I certainly don't, but I think it is a very important 
sample in showing the problem. Here was a study taken at random 
in 21 Massachusetts communities divided between medium-size towns 
and Boston; the largest number of cases came from Boston. And 
then that study was made in a series of established stores. The 
Commission did a very careful job, as far as I have been able to 
(liscover, and what they did was to take only established stores of 
reputation, in other words they didn't go to any of the gyp places- 
all that was eliminated before they started, and then they took 
whatever the store sold on a time basis. 

The 'Chairman. These transactions, then, as I understand your 
testimony, are transactions that were carried on by reputable stores 
in Massachusetts. 
Dr. Ayres. The study says "well established." 
The Chairman. Well, I ,think we can use the two phrases as 
synonymous. 

Dr. Ayres. I think they are probably expected to be synonymous. 

The Chairman. At any rate, those wdio conducted the study avoided 

going to stores which had the reputation of exploiting the customer. 

Dr. Ayres. That is what I understand from reading the report, 

which was done under what was understood to be very competent 

auspices. 

The Chairman. So the study may then be interpreted as reflecting 
the conditions which exist in the credit trade in well-established 
stores ? 
Dr. Ayres. Yes. 

There is one more series of charts, which I will just show you 
briefly, that is on 5 percent, which tells roughly the same picture, 
except it jumps around very much, and it indicates that there is some 
further study needed relating to type of product, and the reason for 
the store giving 5 or 6 or 10 percent advertised basis of percent. The 
study doesn't mdicate what that is, but you will see that in this 
5-percent story we find that on the basis of straight percentage — 
that is, the relation of the unpaid balance to the carrying charge — 
we get 35 percent that falls below 6 percent, then it jumps around and 
Ave find between 12 and 18 percent carrying charge, 22 percent of the 
cases; then it jumps again, 12 percent are between 30 and 50. 
Mr. Montgomery. I should like to see these charts. 
Tlie Chairman. All of these charts may be received. 
(The charts referred to were marked "Exhibits Nos. 523 and 524" 
and appear on pp. 3361 and 3362.) 



('(►NCK.NTKA riON OF KCONOMIC POWER 



3361 



Dr. Ayres. Tho largest i)erce)U, on tiiis 5-perce)U basis, 52 percent 
of the cases willi 21 cases, came l:)etweeii 9 and 10. Then there is a 
.i^ap in (he chart, and we find that 17 peicent came between 30 and 50, 
and tliat 10 percent — only four cases in this case, because a<ijain it is 
a ratlier small sample — came between 50 and 100, and none over 100. 

The interestino- thiii<^r is, however, when you \)\\\ these charts side 
by side and ask yourself as a consumer \Aishino; to buy which ti-nns 



'a- ml 

Z UJ 

~ (X 
UJ $ 

o 

< UJ 
-I K 
<C < 



o 





I 



II 



"2 2 

o o 



• -O ft* c c 

^- I « 2 ? 

- £ <^ X X 

ui 5 » -D -D 



llii 






you should look to as being the most advantageous. It is iinpossible 
to say on the basis of the charts as they are, because there is such over- 
lapping between the rates charged if it is advertised at 5, advertised 
at (), and advertised at 10, and you can't tell at all whove youi- best 
( hance would lie in tei-nis of this habitual pTactice. 



3362 



CONCENTRATION OF ECONOMIC POWER 



Mr. Henderson. It might easily be, might it not, Dr. Ayres, that 
as far as the consumer is concerned in these particular cases he would 
be better off to pay a stated interest rate of 10 percent than in some 
of the other cases where it was nominally 5 percent ? 

Dr. Atees. There is a whole series of individual cases in which that 
is true. It can't be said as a generalization, but it can be said in a 
whole series of the individual cases. 









«-o 








■s - 










0) 


o 






■fl 




« g j; 


2 .• 

o 






U 


h 


g 




i'. 




■ - lii 

oi2 ^- c a 
»o - So. 


g""! 


i 




s 1^ g 


2uj 


5 




. 1 s-;g 




SE« 




S- b -2 5 ^ 


i^^ 


o 








z 




2 " " S c 

g 5 i 2 ^ 




ss 




°^ Soil 




<nO-^ — 


1 


1 i 5^ 


1- 
(f) 
iii 
a: 

LU 

1- 

2 


2 
Q 


1 III 


I -D S "i 


UJ 


1- s 




I s iJ 


fe| 




O 1 « m O 

O 1 r^ t O 


1 S £ "^ s 
< i ° b 


tnQ 


? 




< sig 


^ -r 
1^5 


£S 




§ s-g? 




^S 


V 1 K> r- V 


ir!l 


3 


<» 




- * i 

* 2 


0. 

2 


ggp o> » 


S' s s. 1 1 


O DC* 

9 = S 5 
O o J g 


o 
o 


juiui O o 


o o op o 


£ 1 54 




s 


£! * a s 8 


ill 

-s Si " 
1 ££ 



Dr. LuBiN. Dr. Ayres, I take it that you have been paying some 
attention to the great increase in advertising that has occurred in 
the last few months by various organizations that lend money on a 
5-, 6-, and 10-percent basis. I have been conscious of the fact that 
both newspapers and magazines have carried more and more adver- 



CONCENTRATION OF ECONOMIC POWER . 3363 

tising recently from such financing firms. Do you know of any well- 
established financing firms that finance either automobiles, refriger- 
ators, or any of these standard products that will lend you money for 
less than 10 percent a year? 

■Dr. Ayres. I can't answer that question^ on any careful basis. 
There were individual cases in this study which actually showed 
a lower rate, and there are automobile firms which advertise 6 per- 
cent. That leads me to the general credit situation. This is just 
a very small example of which I was able to get the material 
because of the Massachusetts study, but to bring to you in definite 
terms a very terrific situation as far as consumer credit is concerned. 
There ai-e two parts to that problem. There is not only this question 
of exorbitant rates being given to the consumer in perfectly fraudu- 
lent terms by well-established stores, but there is the fact that this is 
done under contract a^id that the other terms of these contracts are 
simply unbelievable. This kind of credit is granted on terms the like 
of which is not known to the business community at all on a similar 
basis. The Massachusetts study has individual cases which show 
where the wages were subject to garnishment and individual cases 
where the seller refused to accept the returned goods, garnisheed 
the wages of the person involved, and forced them into bankruptcy. 

Mr. Hendekson. As I remember the report, it mentioned reposses- 
sion after a considerable percentage of the contract price had been 
paid. 

Dr. Ayres. That is another evil. 

Mr. Henderson. Isn't that the largest evil in this question of 
credit? 

Dr. Aykes. It is one of the largest. I wouldn't be able to say whether 
it is actually the largest. 

Mr. Henderson. I asked you about one case of those two cages of 
100 percent. It might easily be that the difference between, say, 100 
percent and 6 percent in terms of dollars would not be extraordinarily 
impressive, that is, particularly as compared with complete loss 
of a purchased product after practically the entire contract had been 
paid. There is no doubt about that, is there? 

Dr. Ayres. No; there is no doubt that of the two evils that very 
well may be the lesser, no possible doubt. In other words, many 
of these contracts contain clauses whereby title does not pass until 
the final payment is made. And further than that, they contain all 
kinds of detail clauses giving the right of the seller to repossess, in 
case of an automobile to enter upon the premises with no court pro- 
cedure whatsoever, to repossess the automobile and oftentimes in 
cases of tires he would have the right to come by on the street and 
take the tires off of the car and leave the car standing or to take the 
car and force a repossession fee of $5 and full payment of the total, 
just because there was a delinquency of a few days. And then there 
are all kinds of other very heavy charges in terms of delinquencies. 

Then there are insurance abuses. The study indicates that all 
kinds of fake charges in connection with giving insurance on auto- 
mobiles have been practiced, and I am testifying only on the basis 
of this study as illustrative of a problem which is very, very far- 
reaching and someone, some congressional committee, needs to blow 
off the lid on the situation which I believe will prove to be one of 
the most shocking in the country. 



3364 CONCENTRATION OF ECONOMIC TOWEU 

Mr. Henderson. Dr. Ayers, isn't the regulation of interest rates 
to be charged for the loan of money and ci .*dit a 8tate matter and not 
a Federal matter? 

Dr. AvREs. It is not regiihited by State laws. There sue nil kinds 
of State laws in existence. 

Mr. Hendekson. It isn't constitutionally a Federal right — the right 
to regulate the rate of interest is reserved to the States. 

The Chairman. Now you are asking Dr. Ayres to qualify as a 
lawyer. She didn't appear as an expert on constitutional law. I 
think we may say the answer to your question is "Yes." We know- 
that to be the fact. This matter of local credit, borrowing money 
and this contract within the State is not a matter of interstate 
commerce, and therefore is not within the jurisdiction of the Federal 
Government. 

Dr. Ayres. I would certainly suppose that that is true. There arc 
cases in which it would probably be borderline. 

The Chairman. Oh, unquestionably, yes. 

Dr. Ayres. In cases of automobiles in interstate trade, and so forth, 
where the terms are ])ublished at the point of origin, and so 'forth. 

The Chairman. There would be variations. 

Mr. Montgomery. Dr. Ayres, weren't you referring to the con- 
tract terms as well as the rate of interest, and couldn't it be possible 
that those contracts be made in interstate commerce? 

Dr. Ayres. In terms of automobiles that very habitually is true. 
Now, wJiether there are subsidiary companies, whether that is around 
certain cases I don't know, but there are national credit corporations 
which handle financing automobiles. 

The Chairman. The corporation which is doing an interstate busi- 
ness in credit would be in interstate commerce. 

Di-. Ayres. And then you get a verj'^ difficult problem in terms of 
what can the State do about it. So this ties up with one of the added 
difficulties which the consumer faces in trying to buy goods. It is 
a part of the problem of all of the difficulty in meeting the mer- 
chandising situation. It ties up with the problem of oversales, terri- 
fic pressure on the consumer to buy often way beyond his means ; and 
then it ties back to the fact that so much of it is fraudulent, that 
it affects his total purchases, relating to the whole flow of interstate 
commerce. 

The Chairman. Of course, this question of credit iias long been a 
most difficult one and from the earliest times the borrower has been 
compelled to pay extortionate rates of interest in many, many in- 
stances. It is not so long since it was almost universal, for example, 
in all of the States that the borrower who signed a note would in 
that very note sign away his right to resist payment upon tlie note. 
He would in the note itself appoint tlie person from whom he bor- 
rowed the money as his attorney m fact to contest judgment on the 
note. That has been abolished in most of the States by statute. 

It may be of interest to make this connnent because I think that 
an examination of the whole history of credit will show that the 
small borrower is very much better protected today than at any time 
in tlie history of this country, but of course the transition from local 
commerce to interstate commerce has brought about a condition in 
which it has been possible to renew some of the evils that were 
eradicated by State laws. "" 



CONGENTKATION OF ECONOMIC POWER 3365 

Dr. Atees. Yes ; and the question of usury has not been applied in 
terms of loans on time payment in most cases, so that while the same 
kind of usury practices may be possible here because the d('finitif)n 
Inisn't been carried over in terms of the relation of buying goods 
ort time 

Mr. Chawnek (interposing). From the point of view of the con- 
sumer, do you think that a substantial part of the difficulty that 
you have presented would be eliminated in advertising consumer 
credit of this type if the lender were required to always state the 
actual interest rate on outstanding balances ? 

Dr. Atres. Yes, I do; and then the consumer can judge whether 
he can afford to pay what is. actually necessary to pay in order to 
bu}^ the commodity under those circumstances. 

Mr. Chawner. That w ould seem to be a very simple matter. 

Dr. Ayres. Comparatively very simple. 

Mr. Henderson. That is the approach Massachusetts has taken. 

Dr. Atres. That is the approach and that is the reason for this 
study in the hope of being able to go ahead along that line. 

The Chairman. Isn't there a move -in that direction? It seems 
to nie I have noticed recently in finance company advertisements 
declarations of fact that interest would be charged only on the un- 
paid balance and not on the full sura for the entire period. 

Dr. Ayres. That movement has been very much fostered by the 
credit unions and there has been a lot of Government work done on 
that. Mr. Montgomery, I don't know whether you have the facts 
on what has been done on credit unions, but the development of the 
movement of credit unions is having a very profound effect in the 
field. 

Mr. Henderson, You could say, as far as most of the actual interest 
rates charged here, the borrowing consumer would have been infinitely 
better off from the standpoint of his cost and certainly as to his 
treatment and his legal rights if he had borrowed the money from 
a credit union or any institution under State regulation and bought 
the thing for cash. 

Dr. Ayres. In almost evei'y instance he would have been Very much 
better off. 

Mr. Henderson. And he woiild not have had the same difficulties 
on repossession because under the legalized institutions no such right 
of replevin and garnishment runs. 

Dr. Ayres. Exactly. 

Mr. Montgomery. Dr. Ayres, you had some information you 
wanted to give the committee on the subject of resale price main- 
tenance, didn't you? 

Dr. Ayres. Yes; I ha.ve. 

The Chairman. Before Dr. Ayres takes up that phase of the study, 
I want to make note in the lecord with respect to the standard con- 
tainer acts^ iind I think it would be well to incorporate this brief 
statement m the testimony of Dr. Ayres Avith respect to the con- 
tainers. 

On August 31, 1916, Congress adopted an act ^ to fix standards for 
Climax baskets for grapes and other fruits and vegetables and to fix 

1 39 Stat. 673. 



3366 CONCENTRATION OF ECONOMIC POWER 

standards for baskets and other containers for small fruits, berries, 
vegetables, and for other purposes. 

Then in 1928, on May 21, there was passed an act to fix standards 
for hampers, round stave baskets, and splint baskets, for fruits and 
vegetables and for other purposes. 

Any person who may be interested can find these acts set forth in 
full in the United States Code, title 15, sections 251 to 257, inclusive. 
It occurs to me, Mr. Montgomery, that somebody in the Agriculture 
Marketing Service might Be able to prepare a statement that would 
be of interest to the committee upon the manner in which those acts 
have been enforced, the conditions which existed at the time that 
they were passed and the conditions that exi,st now.^ 

Mr. Montgomery, I shaU certainly see that is done, Mr. Chairman. 
In addition I should note that there is also a Standard Barrel Act 
that, I think, was the first of these. We will get a statement cover- 
ing that whole situation. 

The Chairman. I think it would be of interest to the committee. 

Mr. Montgomery. We will file tiiat. Dr. Ayres. 

PRICE FIXING 

Dr. Ayres. Another one of the very .important problems which 
faces the consumer is buying under the so-called fair-trade laws and 
the resale-price maintenance laws. Now, there are available no ade- 
quate data to tell us how these laws are working. We need a great 
deal of material in regard to the relationship to what has happened 
to series of prices, to retail profits, on wholesalers' and manufacturers' 
profits, on the competition between large and small retailers, on the 
competition between national and private brands, on the competi- 
tion between price-fixed and non-price-fixed brands before we can 
judge of the actual effect of the price-fixing laws. I refer of course 
to the Robinson-Patman Act and the Miller-Tydings bill and the 
State laws enacted pursuant to them. 

Since it is impossible to judge in terms of a scientific judgment the 
effect of those, we can't go into the fact on which prices have been 
affected and how they have been affected. That is what we have got 
to learn. But in th^ meantime consumers are very profoundly worried 
by the situation, by the brief reports which come out indicating that 
in many cases in specific areas there are higher prices on many com- 
modities which the consumer finds simply as a matter of investigation 
in a small way on his own. But only the Government or some well- 
financed, impartial research agency can make the kind of survey 
which we must have in order to judge what really is happening 
under these laws. 

Certainly consumer organizations with their limited resources can't 
think of making such investigations. I can't testify, therefore, on the 
effect of these laws, although I fear that the effect will be harmful to 
consumers. 

I do not wish to argue economics or price fixing. Such argument 
will remain more controversial than scientific until we get these 
facts which I have pointed out are needed. 

^ Mr. Montgomery subsequently submitted sucb statement which was entered In the 
record ^as "Exhibit No. 660'^ during bearings held June 7, 1939, and appears in appendix 
to Jthls volume on p. 3487. 



CONCENTRATION OF ECONOMIC POWER 3367 

LOBBYING FOR PRICE MAINTENANCE IJEGI8LATI0N 

Dr. Ayres. However, I have done this. I have collected a large 
number of excerpts from the press on the drug trade. These tell me 
as a consumer rather forcibly how that trade worked to get these 
laws passed and what it expects to get from these laws. I am filing 
these excerpts with you for your examination, and I would like to 
read just a few of the excerpts and put into evidence a slightly 
larger number, if that is permissible, or perhaps you would wait on 
them. Perhaps you could rule on that after I have read them. 

The Chairman. Of course, you have introduced this with a state- 
ment that the study hasn't oeen sufficiently broad as yet to enable 
you to form a judgment, so that it is only part of the story according 
to your testimony. 

Dr. Ayres. This is nothing of the story in terms of effect. This is 
merely excerpts from what those who worked to get the law passed 
hope to have it do. In other words, these are direct quotations from 
journals in the drug trade and others in trade journals commenting 
on it, so that there is no interpretative material or no statistical 
material involved. 

Let me read to you samples of what this material is. 

(The quotations referred to were marked "Exhibit No. 525" and 
are included in the appendix on p. 3460.) 

Dr. Ayres. I shall call attention to the following on the question 
of gettijig the Miller-Tydings bills through Congress. Let me quote 
the Washington representative of the National Association of Retail 
Druggists as quoted in their journal for October 3, 1935 [reading from 
"Exhibit No. 625"] : 

At the time of the opening of the present Washington office, a careful study 
was made of the methods used in the past in attempts to influence the legislative 
mind. After examining all these facts and the results obtained, we came to the 
inescapable conclusion that a new approach was not only in order but absolutely 
necessary if we were to expect results. 

With this opiuion crystallized, we conceived the idea of the Congressional 
Contact Committees in- every Congressional District and in every state. This 
was based on the theory that in every such political subdivision there resided 
several retail druggists who were close personal or political friends of their 
Congressman or their Senator, and that an appeal or a request from one or two 
such individuals would be of far greater value than a hundred letters or tele- 
grams from persons unknown to the legislator. 

Two weeks later, in the same journal — this follows another quota- 
tion 

The Chairman (interposing). May I say it is not the retail drug- 
gists who have developed that technique ? 

Dr. Ayres [reading further from "Exhibit No. 525"] : 

This is a task that must be accomplished by individual druggists in their own 
home territories. These legislators are now at home. Their ears are keenly 
attuned to things constituents desire. Do not overlook the fact that every Con- 
gressman and at least one-third of the Senators are keenly aware of the fact 
that there will be an election In 1986, and this will make them particularly 
attentive to your message. 

The Miller-Tydings bill was introduced January 6, 1936. 
Mr. Montgomery. Are you quoting now ? 
Dr. Ayres. No ; end quote. 



3368 CONCENTRATION OF ECONOMIC POWER 

Ten days later the National Association of Retail Druggists' Jour- 
nal calls for action on a large scale, as follows [reading further from 

"i:xhibit No. 525"] : 

Officers aud members of state and local associations and members of con- 
gressional contact committees fiom these states should be prepared to use every 
influence at their command to bring to the attention of the Senators the justice 
and economic necessity for this legislation as soon as it is called for by the 
Washington Office. • * * 

At least 1,000 communications should be placed in the hands of each of these 
Senators on the Judiciary Committee when the call comes from Washington. 

The bill failed to pass that year. The association reorganized its 
contact committees from a congressional-district basis to a county- 
unit basis. There was, as you remember, an election in the fall oi' 
that year. The November 5 issue of their journal states how ii 
organized the druggists for that campaign [reading further from 
"Exhibit No. 525"] : 

On September 1 the National Association of Retail Druggists asked the State 
and local associations and the members of the congressional contact committees 
to contact every candidate whose name appeared on the ballot for election to 
the Senate and House. * * * We now ask again that every State aod local 
association * * * select a qualified man in every county and every state 
to serve on the congi-essional contact committee. * * * We further ask that 
when these county selections are made complete, an organized effort be made 
to contact personally every Congressman and Senator upon the Miller-Tydings 
bill. 

On January 6, 1937, they appeared to be well organized. I quote 
from the January T issue of the journal : 

Forty-four states of the Union are now organized as never before in history 
for the purpose of furthering legislation. * * * \Ve have the proper con- 
tact men in this country. They now number over 2,000. 

The pressure was being applied on a weekly basis, according to 
the February 18 issue of the journal: 

Again we ask every local N. A. R.. D. member to sit down immediately upon 
the reading of these columns and write again to the Senators and Congressmen, 
and to repeat that performance every week until you are advised that this 
legislation * * * has passed the last barrier in the congressional steeple- 
chase. 

The Chairman. Of course, this all has to do with merely tlu' 
method of applying pressure to Congress, and as I indicated a 
moment ago, that is a familiar story, and it happens in every kind 
of organization. And, as a matter of fact, I fancy it Avon't be long 
before consumers will be doing exactly the same thing. 

Dr. Atres. If we are to have a real democracy, I am sure that 
must happen. 

The Chairman. I think the committee would really be more intei- 
csted in what you started out to tell us — what was expected to l)i" 
obtained as a result of the legislation. 

Dr. Atres. Perhaps I can skip some of this and include some of 
(lie other quotations. 

Tlie Chairman. I don't mean to shut you off. Dr. Ay res, at all. 
because this is free, wide, and handsome for any re[)rosentation at all. 

Dr. Atres. I want to give only that which is valuable, and the 
problem here is the fact that the consumer is very much worried to see 
a story of how a specific piece of legislation very definitely affect- 



CONCENTRATION OF ECONOMIC POWER 3369 

mg thenij supposedly sprang out of a general interest and was engi- 
neered with the greatest care and planning by a single group. That 
there were others interested in the passage of these laws we all know, 
but that the organization to carry this on is here set out, and it very 
much adds to the consumers', well, terror, I think isn't too strong "a 
word in terms of the effect of such legislation on him. When he real- 
izes how this thing came about in terms of pressure by a very small, 
comparatively small in terms of our total population, interest group 
who organized on such a basis as to present a picture of pressure 
arising from the people all over the country. 

And it is in terms of that fear of the consumer as to what is hap- 
pening to us, where are we in the economic picture, that this is of 
value. It isn't of value in terms of the effect of the bill but if this 
group organized on this basis for the purpose of gain from tliis bill, 
we are not in position to judge what has happened, and it emphasizes 
to us the fact that we must somehow find out what is happening to 
us under this and how far we are therefore being affected by it, 
because obviously no special interest group is going to put this kind 
of organization into pressure for legislation unless they expect to get 
a great deal out of it. 

Representative Williams. Ls it your idea, as representing the con- 
sumers, that that pressure that was brought there resujted in the 
passage of the Miller-Tydings bill, or do you think that the Congress 
passed it simply because they thought it was in the interest of the 
consumers of the country? 

Dr. Ayres. I think those*' things intermingle and tie up. In other 
words, I can't judge of the purposes behind the vote of all of the 
persons in Congress and in the Senate in voting for that bill, but the 
fact that they were deluged with letters and telegrams from their 
constituents at the proper time must have been of importance to them. 
That is, I take that as my opinion, I would think it would be. 

Mr. Henderson. You know. Dr. Ayres, that the Congress did not 
have a separate and distinct opportunity to pass on the Miller-Tyd- 
ings bill as such. It was attached as a rider, was it not, to an api)ro- 
priatio'ns bill, and had a veto been laid a<iainst i(, it wonld Kave 
vetoed also the District of Columbia a])nropriations'? 

Dr. Atees. Yes. Tliere is very interesting material here, sorao of th<' 
quotations shoAving n w every time thej-e was a delay a defiuitt- call for 
telegrams went out, and then as soon as the congressional situation was 
cleared, all of this turned to the I'resident in order to pre\eni a. veto, 
and he "was deluged in tlie same way that Congressmen and Senators 
had been. So that there is a full campaign by a specific intoiest 
group which was based on the hope of making it a natioudl affair, 
but it was in terms of the belief of these people. It was their a (fair. 

Mr. Blaisdell. Dr. Ayres, have you any evidence that would indj- 
cate that there was a considerable consumer support for this -partic- 
ular bill, or were there resolutions passenl from various consumer oi 
riominal consumer organizations in support of the legislation? 

Dr. Ayres. I have here quotations showing how the trade tried to 
organize consumei* support for the bill. While they were so well 
occupied with Congrch.s, they were not ]ieglecling their customers. cUid 
a campaign to get theii* customers behind the bill was as carefully 
undertaken as the campaign to bring to the attention of the legislators 



3370 CONCENTRATION OF ECONOMIC POWER 

their problem. Here we find, in the January 2, 1937, issue of the 
N. A. R. D. Journal [reading from "Exhibit No. 525"] : 

Because of the fact that the drug store is open evenings, when other businesses 
are closed and when people have more leisure, the druggist is placed in a par- 
ticularly advantageous position to talk to his patrons. He has an unparalleled 
opportunity to put in his best licks for the fair candidates for ofBce and to take 
care of those who are unfair. 

Then, again, over the signature of Mr. Dargavel, executive officer 
of the association, in the February 20 issue, we find : 

I want to stress again the necessity for each and every one of you to fight 
this battle in your own home communities. 

Here are some other quotations, from the April 15 issue : 

No druggist can afford to be callous in the statements he makes regarding fair 
trade or regarding such price adjustment as may result from it. Whenever he 
is questioned regarding it by a customer, he must be quick to seize the oppor- 
tunity to point out to the customer how fair trade would prove to the customer's 
advantage. Certainly if he hasn't sufficient ingenuity to do that, the least he 
can do is to say nothing. 

Then there are some more quotations along the same lines. 

That doesn't answer your question directly, but it shows the attempt 
that was being made to bring consumers into line to support the bill, 
I believe there is other testimony which is coming in terms of the 
general problem of consumer organizations, so that I will leave that 
for a later person to testify to. 

Representative Williams. Were the druggists the only groups that 
were interested in this legislation? 

Dr. Atres. I believe not, but I am offering this as material which 
I was able easily to collect to bring in to show the problem, and to 
show how the consumers must necessarily feel in a situation of this 
kind. Here is the overt evidence of an attempt by special interests 
to gain by legislation. 

Then we don't know how it has affected us. Maybe it hasn't affected 
us as badly as we think, but we can't know that until the facts are 
made available. 

The Chairman. But you seem to be very suspicious. 

Dr. Ayres. Well, after being a housewife for 10 years and trying 
to do a good job of buying, that is what happens to one if one is awake 
to the problems. 

The Chairman. Well, of course, it is a fact that a great many 
retail merchants have felt that they were at a great disadvantage 
because of the growth of the national organizations which were 
invading the field of local distribution, and these retail merchants 
felt that to protect themselves against the danger of being forced 
out of business by reason of what they would call overcompetition 
in selling at retail of national commodities, or what they sometimes 
call chiseling and price cutting, it was necessary for them to com- 
bine and get le^slation which would establish what they regarded 
to be a fair price. They call this a fair-trade campaign, and, of 
course, there are definitely two points of view with respect to this 
whole problem. We find it presented to us in various and different 
ways. 

There was a substantial amount of opinion to support the codes 
under the N. R. A., and of course those codes operated to fix prices 
to the consumer, and when the N. R. A failed, then these retail 



CONCENTRATION OF ECONOMIC POWER 337 1 

merchants resorted to this method to save who they regarded to 
be beneficial to them and to the pent-ral public because they felt 
that the forcing out of business of independent retail merchants 
would have a bad effect upon communities, and therefore upon the 
people who live in the communities, and therefore upon the con- 
sumer. It is by no means a simple problem. 

Dr. Aters. No; there is no possible question but that all of this 
legislation arises out of the fact that terrific problems exist, and it 
seems to me that the reason for the existence of this committee is 
to try and see, if i may presume to give an opinion on the subject, 
or try and delve into, the reasons for the existence of these problems, 
in order to put chem into focus. 

The Chairman. Exactly. That is what we are here for. 

Dr. Ayees, And it is to thraw some liglit on the consumer's plight 
in relation to these problems that I wish to testify, because the effect 
on the total consumer is so vitally tied, more so than we are in the 
habit of thinking — with the welfare of the total economy, because 
only as we are good buyers can the whole mechanism of industry and 
trade be expected to function well. 

Representative Williams. So far have you discovered any effects 
at all of the Tydings-Miller Act on prices to consumers? 

Dr. Ayres. There have been a series of small studies which indicate 
various things. In otiier words, we can't summarize those studies 
because they haveni; been wide enough. 

Representative Williams. Wliat has been your observation and 
experience along that line? 

Dr. Atres. As a consumer residing in New York, I know there 
are certain commodities I pay more for, and I know it is true of. 
many of my friends, and it is true of a small study group who went 
out and studied a few commodities in a consumer group I was con-? 
nected with. That isn't an economic answer; that is just a' drop 
in the bucket in terms of the total problem. 

Representative Williams. Have you any reason to believe that 
that IS due to that particular act, or from other causes? 

Dr. Ayres. In certain cases I am sure it is due to the act because 
the price has changed out of relationship with other prices. "Where 
you get three or four items which are affected by the Fekl-Crawford 
Act in New York, where the price change is entirely out of line with 
others, of course there are many, many factors that have to be con- 
sidered, but there is some presumptive evidence that there is a rela- 
tionship. 

As an economist, I wouldn't for a moment say that the effect was 
from "a" to "b," but it is ver}' important to get the fact that con- 
sumers believe they see instances where they are very much hurt, 
and so far as consumers can tell, as individuals, this is the problem. 
There has been some study which shows that in outlying commu- 
nities certain types of prices have fallen, whereas in competitive 
areas the same prices have risen. The consumer is interested pri- 
marily in terms of the competitive price. Obviously if you buy at 
a neighborhood store you are paying for service and you are paying 
more than if you go down town and buy at a competitive market. 
Instead of having a service you take your own time and carfare and 
foot energy and go and buy in a competitive market. Not to be able 
to gain by that is definitelj' a loss to the consumer, and the question 



3372 CONCENTRATION OF ECONOMIC POWER 

is, How far is that true ? To a certain extent we know it is true. It 
is one of the counter'^'ailing, counterbalancing influences in the 
picture. 

Mr. Montgomery. I would like to get it clear. Are you testifying 
either for or against resale price maintenance? 

Dr. Atres. I am not. 

Mr. Montgomery. Are you testifying as to their effect in general ? 

Dr. Ayres. No; I am not. 

Mr. Montgomery. Do you have any evidence in this that you have 
brought which shows your reason for fearing that the trade expects 
to do this or that with prices? As I gather, what you have here is 
material from the trade press on the subject of price maintenance. 
These quotations are from the trade press. 

Dr. Ayres. Urging the trade to support this legislation as being 
in their interest. 

Mr. Montgomery. Do you have quotations there from the trade 
press showing either what they are doing with respect to prices under 
these laws, or what they hope to do? 

Dr. Ayres. There was material in my long list here saying spe- 
cifically that. Here are quotations which bring that out. They show 
a policy of boycotting manufacturers and newspapers unfair to the 
fair-trade laws, white list of other manufacturers, and coercion on 
manufacturers who don't comply with the desires of the association. 

The Chairman. Those letters deal merely with the technic of 
applying pressure? 

Dr. Ayres. This is the technic of applying pressure to use the 
laws to bring about that which they desire. 

The Chairman. What I understood Mr. Montgomery to ask you 
was for any information which they had with respect to the purposes 
which were to be served by these laws. 

Dr. Ayres. I think these quotations will bring that out. This is 
a quotation from the Drug Trade News of April 26, 1937, page 1 
[reading irom "Exhibit No. 525"] : 

A boycott of the products of manufacturers who do not use and enforce 
fair-trade contracts, and expose of manufacturers who are "secretly allied" 
with R. H. Macy & Co., nnd a concerted effort to fight private brands, were 
threatened by druggists at the militant fair-trade victory meeting held in con- 
juc"; n with the convention of the New York Pharmaceutical Council at Hotel 
Pennsylvania, New York City, recently. 

Anothpr : 

Following a mid-January mass meeting, druggists of the New York metro- 
politan area seemed likely to clear their shelves of items manufactured by five 
leading manufa(?turers. * * * To inject action into the meeting in place 
of talk, the younger element among the druggists "tossed out" the "old guard" 
nnd replaced them with younger leaders. * ♦ * Simultaneously with the sug- 
gested removal of products of the five banned manufacturers from their shelves. 
the retailers launched an attack on two New York newspapers, the Times and 
he World-Telegram. 

In their news and editorial columns, they had carried material 
antagonistic to the fair-trade law. 

Mr. Montgomery. I don't think you said what you were quoting 
from in all that last quote. 

Dr. Ayres. That is from the N. A. R. D. Journal, February 6. 
1936, page 146. 



CONCENTRATIOisr OP ECONOMIC POWER 3373 

Going on to a further quote from the Druggist's Circular, January 
1935, page 42 [reading further from "Exhibit No. 525"] : 

Perhaps the question most often asked in discussions of price stabilization, 
fair-trade legislation, and the like is, will the retail druggist actually support 
l^ie manufactiu'er who "plaj'S ball" with him, or will ho use the manufacturer's 
sales policy as an umbrella to protect sales of unknown brands of merchandise. 
Just what can the druggist do and what will he do in support of a manu- 
facturer. ♦ * * 

Pages of theoretical consideration could be written on this subject and yet 
not be as convincing as the program which the druggists of the State of 
California are now putting into effect to demonstrate their support to the Dr. 
Miles Laboratories, Inc. 

A month or two ago the Southern California, Northern California, and 
California State Phannaceutical Associations invited the Dr. Miles California 
Company to participate with them in staging a Dr. Miles Week as a testimonial 
of appreciation of the company's stabilization efforts.. ♦ * * 

Further quote, Drug Topics, May 18, 1936 : 

Stand pat for the 33% percent niorgin of piofit wliich i,<; strongly advocated 
by the national association. 

I think this meets the question. 

Stand pat for the SSVs percent margin of profit which is strongly advocated 
by the national association. Even though fair-trade legislation is passed, the 
chains would still have a 16 percent advantage for buying direct and would 
still have their hidden discounts unless an antidiscrimination bill is passed such 
as that represented by the Patman bill. 

Then, from the Druggist's Circuhir, October 1935, page 40: The 
1935 N. A. R. D. convention- 
adopted as the principle for the guidance of members in their support of manu- 
facturers the stabilization of prices, discounts, and profits to assure the efficient 
individual retail druggists at Ifeast 33% percent margin from suggested minimum 
selling prices; commended the retail druggists of California for their construc- 
tive work along fair-trade lines and for their handling of the Pepsodcnt case 
involving withdrawal of contracts. 

A further quote : 

Stabilization of prices, discounts, and profits to assure the efficient small 
individual druggist at least 33% percent margin on minimum selling prices. 

Toward this end, your association has been active during the year. Countless 
conferences have resulted in the adoption of many new sales policies by manu- 
facturers, some, perhaps, still short of the stated objective, but at least headed 
in the right direction. When the retail druggists of the Nation join their 
Association and give it their full support, not only in their individual interest 
but in the interest of all, the power of the Association to bring about these 
changes will be greatly amplified. The solution of this lies to a great extent 
in your hands — increase your Association's numerical strength and carry out 
its suggestions. 

That was quoted from the N. A, R. D. Journal of September 22. 
193.6, page 1298. 

I skip some and further quote, this time from Printer's Ink, Vol. 
180, No. 9, August 26, 1937, page 6 : 

In the drug and cosmetic fields many manufacturers are being compelled to 
operate under these laws against their wishes and better judgment. Pressure 
is being brought to bear through "the retailers' associations and their fair-trade 
committees. Manufacturers who do not file minimum prices are having their 
troubles with independent outlets in some States. Those manufacturers, such 
as ourselves, who have filed prices have had to set higher rainimnms than 
they desired in some instances. The committet's are not permitted, supposedly, 
by law to dictate what the minimum prices shall be but they are doir. just 
124491— 39— pt. 8 7 



3374 CONCENTRATION OF ECONOMIC POWER 

that by refusing to approve contracts containing prices which do not give the 
retailer what they consider to be a fair profit margin. In most cases the 
committees are insisting on a mark-up of at least 20 percent and usually 33% 
percent. 

I think that gives the purpose of the association in relation to law. 

The Chairman. I think that the last quotation which you read is 
rather clearly illustrative of the thought I have had in mind and 
have attempted to expre-ss on several occasions during your testi- 
mony. It seems to me that these fair-trade laws, so called, whether 
the Miller-Tydings Act passed by Congress on the District of Colum- 
bia appropriations bill, or the various similar laws which have been 
adopted by the States, are merely manifestations of the effort upon 
the part of the local merchants to maintain some degree of local inde- 
pendence against the concentrated effects of the national movement. 
Organizations have appeared in the economic field of such great 
power and strength that they tend to dominate the economic picture 
for the whole country and to close out free, independent enterprise 
in local communities. These laws, like the various trade-barrier 
laws which are springing up in various States, the attempt by license 
or by preferences of one kind or ai^her to exclude competition from 
outside the boundaries of the Stat^-wi^-fe all expressions of the funda- 
mental desire of people, whether they are engaged in business or in 
any other enterprise, to maintain the largest possible degree of local 
gel f-government. 

Dr. Atres. I don't know whether a comment on that is in order. 
If it is, I would like to make it. 

The Chairman. Quite. 

Dr. Atres. I certainly agree that all of this is the result of terrific 
problems in the distribution field and also of terrific struggles in the 
manufacturing field. There is competent discu^ion in terms of the 
fact that it often isn't the little fellow who benefits by these laws, and 
it seems to me that one of the most important factors which we have 
to open up is the question as to who it is who benefits. ' There is a good 
deal of competent hearsay, if we may speak of competent hearsay, 
which would indicate that much of the pressure back of the passage 
of these fair-trade laws was not of retail origin ; that much of it was 
originated by certain very large interests who, in turn, were able to 
sell the idea of how the interest of certain small 

The Chairman (interposing). Large interests that wanted to sell 
the natiohally manufactured goods to local distributors as their out- 
let in the field of distribution as against national chains which desire 
to control the local outlets. 

Dr. Atres. In other words, we have a battle royal in which we 
have many big interests fighting many other big interests and many 
small interests fighting big interests and other small interests, and 
in the interplay of pressures which results we get all kinds of bene- 
fits to all kinds of groups, and in the meantime the consumer, who 
is not organized, hasn't the money to make himself competent to 
judge what is happening unc.iir this threat of tremendous economic 
struggle going on above his head, is the one who suffers, and I be- 
lieve oecause of his lack of competence upsets the whole applecart. 

The Chairman. There is a good deal in that. Of course, concen- 



CONCENTRATION OF ECONOMIC POWER 3375 

tration of economic power has been accompanied by the steadily in- 
creasing unemployment. 

Dr. Atres. Certainly our unemployment problem is a major one. 

The Chairman. As unemployment increases consuming power de- 
creases and our problem is one of adjusting the local business to 
national business on such a scale that all factors, consumer, and 
retailer, and producer, will have a proper share in the entire eco- 
nomic system. 

Dr. Atbes. Raise the general standard of living and other things 
will follow. 

The Chairman. Exactly. 

Are there any other questions to be asked of the witness? 

Mr. O'CoNNELL. Dr. Ayres, in a State such as New York where 
they have a resale price maintenance law as regards nationally ad- 
vertised brands, to the extent that the law is effective, what inde- 
pendence or what function has the retailer in the sale of that 
product? We were discussing efforts that the so-called independent 
small retailer was making to retain his independence as a part of the 
distribution system, but as I understand it, if the resale price main- 
tenance law is in effect and operative, he no longer has any inde- 
pendence as regards that particular product, has he ? Isn't he bound 
by contract ? 

Dr. Atres. He is bound by contract and that is why many of 
the retailers object to the law. 

Mr. O'CoNNELL. As a matter of fact, in most States isn't he bound 
even though he isn't a party to the contract as regards the nation- 
ally advertised brands? 

Dr. Atres. The courts have so determined in a number of im- 
portant cases. 

Mr. O'CoNNELL. The statutes intend that to be so; isn't that so? 

Dr. Atres. They are working that way. I would prefer not to 
say what -the statute intends, but the effect is that without question. 

Mr. Wilson. Do you know what attitude certain nation-wide 
or perhaps international organizations such as McKesson & Robbins 
took with respect to the Miller-Tydings Act and the Patman Act? 

Dr. Atres. I have seen material (I do not have it with me) that 
McKesson & Robbins were the initiators of the fair-trade movement 
in California, and I have seen photostats of that correspondence 
indicating that they were very active. I don't know whether this 
is hearsay; I never had that material in my possession, but I have 
heard it. 

The Chairman. We have no strict rule, but it is apparent that 
some of the questions which are being put to you are being put for 
the purposes of argument and not for the purposes of eliciting in- 
formation. 

Are there any other questions? 

We are very grateful to you, Dr. Ayres. I think you have been 
a particularly enlightening witness. 

Dr. Atres. Thank you. I am delighted to see the committee 
thinking so hard about the consumer. 

(Whereupon, at 12 : 25 p. m., the committee recessed until 2 : 15 
p. m. of the same day.) 



3376 CONCENTRATION OF ECONOMIC POWER 

AFTERNOON SESSION 

(The hearing was resumed at 2:40 p. m. upon the expiration of 
the recess.) 

The Chairman. The committee will please come to order. Mr. 
Montgomery, are you ready to proceed? 

CONSUMER SERVICES AND ORGANIZATIONS 

Mr. Montgomery. Mi-. Chairman and members of the committee, 
we have been showing in various ways the confusion which confronts 
the consumers in the market place in the goods they buy and the 
prices they pay for those goods, and also the question of credit. 
This afternoon our first witness, Miss Persia Campbell, is going to 
talk about the confusion coming to the consumer movement from a 
different direction, confusion that results from the services being 
offered to consumers, both educating them with respect to commodi- 
ties and helping them with setting up consumer organizations, serv- 
ices coming to them from interests that have goods for sale to 
consumers. 

This whole subject raises a question of very great importance 
indeed for the consumer movement, because it will raise the issue 
whether or not the consumer movement is to be organized from a con- 
sumer basis or from some other basis. I am quite sure it is also a 
question of very great importance to this committee, because it de- 
termines in a very real way what part these consumer organizations 
will be able to take in the competitive process of the general dis- 
cussion I made at the beginning of our period. However, it is a 
very difficult question to testify on in any general or loose way, and 
certainly shouldn't be done in that way, and for that reason Miss 
Campbell has prepared her statement and documented it very care- 
fully and meticulously, and wants permission to read the statement 
to the committee so that she shall state exactly the facts she has and 
what their purport is. 

Miss Campbell, will you take the stand? 

The Chairman. Do you solemnly swear that the testimony you are 
about to give in this proceeding shall be the truth, the whole truth, 
and nothing but the truth, so help you God? 

Miss Campbetj.. I do. 

TESTIMONY OF MISS PERSIA CAMPBELL, EXECUTIVE SECRETARY 
OF CONSUMERS' NATIONAL FEDERATION, NEW YORK CITY 

Ml'. Montgomery. State your name please. 

Miss CAaiPRELL. Persia Campbell. 

Mr. Montgoiery. Where do you live, Miss Campbell? 

Miss Campbell. In New York City. 

Mr. Montgomery. Will you state your affiliation with the Con- 
sumers' National Federation? 

Miss Campbeli I am executive secretary of the Consumers' Na- 
tional Federation. 

Mr. Montgomery. Will you describe very briefly the nature of that 
organization ? 



CONCENTRATION OF ECONOMIC POWER 3377 

Miss Campbell. I think the Consumers' National Federation can 
be most aptly described as a coordinating committee or agency which 
was set up in 1937 by a group of consumer agencies and organizations 
in order to provide tliem with a centralized information and researcli 
service. Since that time it has expanded its activities considerably 
and has a very happy working relation with nearly all consumer 
organizations in the field, even those not originally responsible for 
setting it up. 

The Chairman. Nearly all you say? Are there any exceptions? 

Miss Campbell. Not that I know of. 

Mr. MoNTGo:\iERY. I think you might mention some of the members 
of this committee. 

Miss Campbell. The chairman of the federation, is Miss Helen 
Hall, who is president of the International Federation of Settlements ; 
the vice chairman is Robert Lynd, professor of sociology, University 
of Columbia; I am the executive secretary and acting treasurer. 

Then we have a committee which is mostly in New York City, 
with a few outside members like Prof. Paul Douglas, University of 
Chicago. Some of the New York members include Dr. Kuth Ayres 
who was here this morning, and Mr. Dexter Masters who spoke here 
yesterday, and Miss Susan Jenkins, who is at the Henry Street Set- 
tlement in New York City; Miss Mildred Gutwiilig is also in the 
settlement movement in New York; also a representative from the 
Consumers' League in New York City; and a number of others who 
are regarded as consumer leaders. 

Mr. Montgomery. Since you are going to be discussing the ques- 
tions in part of the financing of consumer services or consumer or- 
ganizations, I was interested in your statement that you are acting 
treasurer of the Consumers' National Federation. I take it your 
duties as acting treasurer are not very burdensome. Miss Campbell. 

Miss Campbell. I think it would be very hard for you to believe on 
how small a budget we operate in the Consumers' National Federa- 
tion. Last year our total budget from membership organiza- 
tions and small donations for all the work that we did, including the 
publication of a bulletin, five issues of it, was about $2,000. 

Mr. Montgomery. Will you proceed with your statement. Miss 
Campbell? 

Miss Campbell. If you will permit me, sir, I should like to read this 
statement. I am presenting it on behalf of the Consumers' National 
Federation. 

Traditional theory of the competitive system assumes that con- 
sumers are an effective bargaining factor in our economy. 

Whether this was true or not in the past, it has been made abund- 
antly clear in previous testimony that at present consumers, as indi- 
viduals, are in an extremely weak bargaining position. 

We consider this fact of serious concern, not alone to individual 
families, but also to our economy as a whole. 

To lift themselves out of this position of helplessness, millions of 
consum^^rs are asserting their right to two things: (1^ their right to 
more facts about the goods offered for sale; (2) their right to organize 
for the protection and promotion of their interests as buj'ers. 



3378 CONCENTRATION OF ECONOMIC POWER 

Witnesses yesterday presented testimony showing how difficult it is 
for consumers to get facts about goods from advertising, from labels, 
from salespersons. They told also of the effort of consumers to or- 
ganize around their own interests. 

We plan to bring to your attention various practices of industry 
and trade which greatly complicate the efforts of consumers to obtain 
disinterested facts and to achieve their right of independent organi- 
zation. I have grouped these practices under three main headings: 
(1) practices which capitalize on consumer desire for independent and 
objective judgment on the products of industry; (2) practices which 
raise doubts as to the objectivity of some of the so-called educational 
materials being distributed through the schools; (3) practices which 
appear to capitalize on the widespread consumer impulse to organize 
independently. 

COMMODITY RATING SERVICES PROVIDED BY COMMERCIAL AGENCIES 

Miss Campbell. Among the first group of practices — those cap- 
italizing on consumer desire for facts about goods — I would like to 
bring to your attention various enterprises which by their names or 
by seals of approval or other types of certification presume to provide 
consumers with unbiased information as to the reliability or goods, 
but which apparently are serving special and limited interests. 

The uncertain meaning of various certification and approval systems 
has been a matter of grave concerii to one of the country's leading 
technical professional associations. The Association of Consulting 
Chemists and Chemical Engineers addressed a letter to the American 
Standards Association on March 4, 1936, asking them to set up an 
American recommended practice for public approvals, certification, 
listing, or endorsement systems. The association in tlieir letter said : 

The increasing use of such terms as "approved" or "certified," where the basis 
of approval is not evident^ threatens to throw suspicion upon all certifications or 
approvals, even upon those founded upon the most satisfactory standards and 
test procedures. 

They further pointed out that in some cases standards for approval — ■ 

are developed under the auspices of vendors and take little account of the 
consumer point of view. In still other cases there is no evidence of the exist- 
ence of standards, and if they do exist they are not available to the public. 
Thus, it is not evident to the consumer whether such approvals are significant 
and valid or otherwise. 

Mr. Montgomery. Will you indicate v^hen you are quoting and when 
you come to the end ? 

Miss Campbell. The proposal of the chemist group was endorsed by 
the American Home Economics Association, the American Society 
for Testing Materials, the National Association of Purchasing Agen- 
cies, the National Bureau of Standards, and the Consumers' Project 
of the Department of Labor. 

The April 25, 1938, issue of the executive edition of Retailing con- 
tained a news story telling of the progi'ess of this project. This story 
states that — 

The Association of Consulting Chemists and Chemical Engineers had ealistod 
the aid of more than 10 scientifie and consumer bodies and requested the Ameri- 
can Standards Association to investigate the possibilities of propagating stand- 
ards for testing laboratories and other agencies certifying consumer goods. 



CONCENTRATION OF ECONOMIC POWER 3379 

The news story continues: 

* ♦ * it is predicted by the clioinists that a iuiinl)er of professional endors- 
ers will fade out of the picture and other agencies will probubly have to revise 
some of their procedures if they intend their seals to carry the same prestige as 
formerly. 

Let me give you one instance of a so-called certification and approval 
service clearly vshown to be deceptive by the issuance of a cease-and- 
desist order by the Federal Trade Commission. This is the case of the 
Automotive Test Laboratories of America (F. T. C. Docket No, 3329, 
April 29, 1038). The Federal Trade Commission found that one 
Morris E. Newman, sole owner and operator of these so-called labora- 
tories, had issued certificates of Uierit for certain products of the 
Chemical Products Manufacturers' of Chicago, 111. 

Upon investigation, the F. T. C. came to the conclusion that these 
certificates — 

are false and mislending in all essential respects, in that they were not the result 
of scientific, independent, and impartial tests by competent persons, but were 
prepared from material provided by the manufacturer of the products. 

The Commission further found that the statements made about 
the products — 

have had, and still have, the tenaency and capacity to mislead and deceive a 
substantial portion of the purchasing public into the erroneous belief that all 
said statements and representations are true — 

and that as a direct consequence — 

a substantial number of the purchasing public have purchased such products. 

An individual, trading as Consumers Bureau of Standards — 

engaged in the business of selling and distributing in commerce * * ♦ a 
publication purporting to list and grade certain consumers' goods — 

has also been complained against by the Federal Trade Commission 
(Docket No., 3718, February 18, 1939). The Commission charges that 
the— 

said Consumers Bureau of Standards is not a national nonprofit consumers' 
research and educational organization for securing and publishing outstanding 
values in a wide variety of consumers' products, based on comparative tests 
or examinations as to quality and price. Respondent does not investigate, test, 
examine, or report on articles, products or services for the benefit of consumers. 

A different type of misleading set-up is illustrated in the case of 
the Ross Roy Service, Inc., of Detroit, which was proceeded against 
by the Federal Trade Commission (F.'T. C. Docket No. 3125, Janu- 
ary 19, 1939). The Ross Roy Service, Inc., represented that it — 

was "an independent organization in no way affiliated with any manufacturer" ; 
and that it was an "accurate and unbiased source of information." 

On the contrary the Commission found that — 

the truth and facts clearly indicate said information and data so published by 
respondent ♦ ♦ * was biased, inaccurate, and unauthoritative. 

Also that — 

* • * Kelvinator Corporation, agreed to and did pay said respondent, the 
Ross Roy Service, Inc., the sum of $10,569. 

The consumer is also confused about the basis for accepting the 
trustworthiness of advertising claims, particularly when they appear 



3380 CONCENTRATION OF ECONOMIC POWER 

in a publication which guarantees trustworthiness and reliability of 
statements made in their pages. For example, the Good Housekeep- 
ing Magazine states in a pamphlet of their education department, 
Bulletin No. 13, 1937, page 3: "It is the magazine's written promise 
that all products advertised in it are satisfactory, and that the essen- 
tial claims made for them are true." And further, "It is the definite 
policy of Good Housekeej)ing to make its advertising pages ti*ust- 
worthy and reliable. Eveiy product advertised in Good Housekeep- 
ing is guaranteed by us as advertised." 

Many consumers are concerned about the inconsistencies between 
some of the advertising claims in Good Housekeeping Magazine and 
various stipulations of the Federal Trade Commission. For instance 
I have before me statements which have appeared in advertisements 
of Ipana tooth paste, a product of the Bristoi-Myers Co. Alongside 
of these statements I have listed excerpts from stipulation No. 01714, 
dated June 21, 1937, issued by the Federal Trade Commission in 
which Bristol-Myers Co. agrees to cease and desist from making some 
of these statements. Let me read these to you. Remember that these 
objectionable statements all appeared in Good Housekeeping Maga- 
zine which purports to "guarantee*' every product "as advertised." 

Mr. Montgomery. Do you want to introduce those as exhibits? 

Miss Campbell. I haven't the originals here. 

Let me read these to you. Remember, these objectionable state- 
ments appear in Good Housekeeping Magazine, which purports to 
"guarantee" every product "as advertised." 

In the December 1936 issue of Good Housekeeping, an advertise- 
ment of Ipana stated : 

But the civilized way to build firm gums is Ipana and massage. 

Bristol-Myers agreed in June 1937, to "cease and desist" from 
saying "that Ipana and massage is the civilized way to build firm 
gums." 

In the January 1937 issue of this magazine an advertisement of 
Ipana stated : 

Don't risk being a "dental cripple." Change to Ipana and massage. 

Bristol-Myers agreed in June 1937 to "cease and desist" from say- 
ing "that Ipana and massage will preA^ent one from becoming a 
'dental cripple.' " 

In the April 1937 issue of Good Housekeeping, an advertisement 
stated : 

* * * rub a little extra Ipana into your gums. You can fofl — almost from 
the first — a change toward new healthy fixmress, as Ipana wakens the lazy 
gum tissues, and as new circulation courses tJirough them. 

Three months later, Bristol-Myers Co. agreed to "cease and delist" 
from saying — 

that the rubbing of a little Ipana tootli paste into the gums will produce a new 
circulation, awakening the tissues and resulting in new, healthy firmness in the 
gum walls themselves. 

Another instance of inconsisteiicy between advertising claims pre- 
sumably passed upon b}" this magazine and stipulations of the Fed- 
eral Trade Commission have come to our attention. In this case the 



CONCENTIIATION OF ECONOMKJ POWER 3381 

product is Welch's ^ape juice, and the claims made for it appeared 
in Good Housekeeping Magazine. 

Start drinking Welch's today and koep fatigue and fat away — 
said an ad in the July 1935 issue, page 176. 

.On May 28^ 1937, Welch's Grape Juice Co. agreed with the Federal 
Trade Conniiission (in stipulation No. 01G20) that it would stop 
saying "that use of the product will 'keep fatigue and fat away.''' 

Said an ad appearing in the October 1936 issue : 

Thus you lose safely and comfortably — often 7 pounds a month, or more. 

The company agreed with the Federal Trade Commission (in 
stipulation No. 01620) on May 28, 1937, not to say : 

That use of the product will enable one to reduce to normal weight or that 
use of the product or any doiinite amount thereof will enable one to reduce any 
definite number of pounds witliin any definite period of time. 

Can a consumer place confidence in "guaranteed'' advertising in 
view of such inconsistencies as these? 

Is it not reasonable for consumers to ask, in the face of guaranteed 
advertising to the claims in which the Federal Trade Commission 
takes exception, and of doubtful approval practices such as that of 
the automotive test laboratories mentioned above, and of products 
promoted by questionable "scientific" agencies — I repeat, is it not 
reasonable for consumers to ask Avhen they are going to get reliable, 
guides to buying ? 

It is our belief that this distrust can be set at rest only when a 
broad inquiry is made into the methods used by certifiers to certify 
products. Beyond that there is the larger task of establishing a])- 
proved testing methods, and "certifying the certifiers." Some Gov- 
ernment agency must take the initiative in attaining these services 
for consumers. 

CONSUMER "educational" MATERIAL SUPPLIED TO SCHOOLS BY 
COMMERCIAL AGENCIES 

Miss Campbell. Another problem is the use of the public schools 
for the distribution of so-called consumer education materials which 
are in reality propaganda for commercial products. We do not know 
how widespread this practice is, but there are enough known instances 
to justify concern on the part of consumers. 

We wish to point out some of the issues involved in this problem 
by describing an instance in which the makers of a proprietnry 
cold remedy, the Vick Chemical Co., appear to have used reputedly 
disinterested organizations as channels for getting publicity for the 
"Vick Cold Control plan" into the schools. The two organizations 
involved, wittingly or unwittingly, were Home Makers' Educational 
Service, of Freeport, N. Y„ and the Women's National Institute, 
with headquarters in New \ork City. 

The Home Makers' Educational Service is a commercial organ- 
ization which sends a monthly bulletin containing lesson ])I;ins to a 
lar<re number of home economics teachers. On the back of the Home 
Makers' Bulletin are listed 15 firms who manufacture and distribute 
products which support the Home Makers' Service. Conskler the 



3382 CONCENTRATION OF ECONOMIC POWER 

approach which the Vick Chemical Co., one of the firms listed as 
supporting the Home Makers' Educational Service, makes to the 
public-school teacher. Here is a letter received bv a public-school 
teacher on January 10, 1939 [reading "Exhibit No."'526"] : 

Dear Teacher: As you know, one of the most serious problems faced by 
teachers and educators is classroom absences due to colds. 

You would doubtless welcome any plan which would help you reduce the 
seriousness of this problem * * *. Vicks Plan has been clinically tested 
in schools and resulted in reduciflg absences due to colds more than half. In 
fact, in the most carefully supervised of these tests, such absences were reduced 
more than three fourths. 

Through Home Makers Educational Service you are now provided with lesson 
material on Vicks Plan for classroom use. (See January 1939 Bulletin.) 

In addition, we are glad to supply you with supplementary material con- 
sisting of: 

(a) A Vicks Plan folder which describes the Plan in detail. 

(6) A booklet carrying the complete techuical report on the operation and 
results of clinical tests made of Vicks Plan over four winter periods and includ- 
ing 17,353 subjects. 

(c) A report issued by the "Women's National Institute on their recent Insti- 
tute Forum on the Common Cold has been called to our attention. At our 
request, they have consented to send you a copy direct. 

Two basic forms of medication form the foundation of Vicks Plan — Vicks 
VapoRub and Vicks Va-tro-nol, You are no doubt familiar with Vicks Vapo- 
Rub — a standby in nearly every home for relieving miseries of develoi)ed colds. 
You may or may not be familiar with Vicks Va-tro-nol, a specialized medica- 
tion for the nose and throat, expressly designed to help prevent the development 
of many colds. 

We will be glad to send you a generous trial size bottle of Va-tro-nol free 
for your personal test and use. * * • Also available on your request are 
Vicks Plan folders to distribute to members of your class. Simply send your 
order to Home Makers Educational S.^rvice. 

We sincerely hope Vicks Plan will be found most helpful to you * * • 
that it will prove practical in aiding you to bring about a new high in attend- 
ance records, as well as better general health for those in your classes. 
Cordially yours, 

Vick Chemical Company, 

By L. RiCHABDSON, 

We submit a copy of that letter. 

Mr. Montgomery. Do you vrant to introauce mat as an exhibit? 
Let's identify this. This is a letter headed "Vick Chemical Co.," 
dated January 10, 1939. This is the "Dear Teacher" letter that you 
just read. 

Acting Chairman Williams. Is that an exact copy of the letter 
you just read? I don't see the necessity of duplicating it in the 
record. It is a copy of what you have just read. 

Miss Campbell. We just wanted you to have the signature, that's all. 

Mr. Henderson. Couldn't we receive it and mark it as one of the 
•exhibits, and treat it as we have done in the past — put it in the files, 
and not print it? 

Acting Chairman Williams. We can do that. I don't see the nec- 
essity of having it go into the record again. 

Mr. Henderson, It becomes a part of the committee's record for 
reference and not for printing, then. 

Acting Chairman Williams. It may be accepted for that purpose. 

(The communication referred to Avas marked "Exhibit No. 526" 
and appears in full in the text on this page.) 

Mr. Montgomery. Now, Home-Maker's Bulletin, volume 24, Janu- 
ary 1939, No. 5. 



CONCENTRATION OF ECONOMIC POWER 3383 

Miss Campbell. We submit a copy of the bulletin of the Home 
Makers' Educational Service containing tlTe lesson plan which pre- 
sents suggestions for studying the problem of the common cold, 
including the Vick cold-control plan. "This is Bulletin, volume 24, 
No. 5, January 1939. 

Acting Chairman Williams. This may be accepted for the files. 

(The bulletin referred to was marked "Exhibit No. 527" and is on 
file with the committee.) 

Miss Campbell. The study outline in section 4 of this bulletin makes 
reference to the Vick clinical studies and then suggests that the 
teachers — 

discuss Va-tro-nol as an aid in jjreventing the development of many colds, and 
VapoRub to relieve developed colds. Give Va-tro-nol application to students 
with incipient symptoms of colds. 

The Home Makers' Bulletin also recommends the use of a report 
issued by the Women's National Institute on their forum held in 
1938 on the common cold. 

The Women's National Institute is a women's organization spon- 
sored by the Women's National Exposition of Arts and Industry in 
New York City, which organizes annual expositions of commercial 
products. We submit two copies of the institute report on the com- 
mon cold in the form in which it was distributed "to the educators 
of American youth." It summarizes 

Mr. Montgomery (interposing).' Is there anything to identify this 
particular document? 

Miss Campbell. Look at page 7 ; you will find the reference to 
VapoRub and Va-tro-nol is changed a little in the two copies. 

Mr. Montgomery. Are these both the same thing ? 

Miss Campbell. No ; there is a change on page 7. 

Mr. Montgomery. These are both, Mr. Chairman, circulars of the 
Women's National Institute, on the subject of the problems of the com- 
mon cold." The witness states that they are not identical, that there 
are some differences on page 7. 

Miss Campbell. Concerning the proprietary products. 

Acting Chairman Williams. What do these purport to be? 

Miss Campbell, They are a report on the forum held by the Wom- 
en's National Institute on the common cold in the form in which it 
was sent to the educators of American youth. We submit two copies 
because, if you will notice on page 7, there is a difference in the way 
the proprietary products are printed. 

Acting Chairman Williams. You are offering these simply for the 
files and not in the record. 

Mr. Montgomery. Yes. 

Acting Chairman Williams. They may be accepted. 

(The reports referred to were marked "Exhibits Nos. 528 and 529" 
and are on file with the committee.) 

Miss Campbell. This report summarizes statements made at the 
forum by three outstanding doctors on different aspects of the com- 
mon cold and then presents an outline of the report "of the North 
Carolina clinics on the common cold, including the details of the Vick 
plan." Due to the fact that three prominent doctors were quoted in 
this report, the Bureau of Investigation of the American Medical 
Association conducted an inquiry and issued a report in the Journal 



3384 CONCENTRATION OF ECONOMIC POWER 

of the American Medical Association for February, 1939, a copy of 
M'hich is herewith offered also. 

Mr. Montgomery. I offer for the files a photostat from the Bureau 
of Investigation of the American Medical Association, dated Fe'lyHi- 
ary 4, 1939. That is from the Journal of the American Medical 
Association. 

Acting Chairman Williams. It may be accepted for the files. 

(The report referred to was marked "Exhibit No. 530" and is on 
file with the committee.) 

Miss Campbell. Replies received from the physicians indicated 
that they were not aware that their statements were to be attached 
to a report on the Vick plan. The Bureau of Investigation con- 
cluded : 

Much of the material contained in the summary and the recommendations is 
satisfactory, but the obvious purpose of the whole performance was the ultimate 
recommendation for the use of these proprietary medicines. Having secured 
by this circuitous technique what appears to be scientific sponsorship for the 
products concerned, the next step was circulation of this leaflet. The ingenuity 
of American promotional and advertising agencies is • proverbial. The effort 
here described may be admirable as a new departure in advertising technique ; 
as a means of enlisting reputable organizations in the "promotion of proprietary 
preparations by giving semblance of scientific and ethical sponsorship, it can 
only be condemned. 

Mr. Montgomeky. That statement you have just read is quoted 
from the American Medical Association Journal ? 

Miss Campbell. From the report I have just submitted. 

We want to emphasize the fact that we are not here making any 
judgment as to the merits of the clinical studies made in North 
Carolina, nor the Vick products referred to above. We are not in 
a position to judge them. Nor do we completely know what were 
the relations between the Vick Chemical Co. and the agencies referred 
to above. We do submit, however, that this story centered around 
the Vick plan dramatizes ap issue, that is the distribution of such 
material through the school. This issue is of major importance to 
consumers in their eager search for reliable information on the na- 
ture and use of consumer goods. 

Acting Chairman Williams. In that connection, have you any 
further evidence that that was the general practice of the Vick Co. ? 

Miss Campbell. No. 

Acting Chairman Williams. Or is this just an isolated case? 

Miss Cami'bell. We have no further evidence outside the general 
advertising of the Vick Co. These agencies, however, like the 
Homemakers' Educational Bulletin,'^have sent out material for other 
companies in the same way. 

Acting Chairman Williams. All right ; proceed. 

CONSUMER ORGANIZATIONS SPONSORED BY COMMERCIAL AGENCIES 

Miss Campbell. There is another serious difficulty which confronts 
consumers. There appears to be a growing practice on the part of 
industry to capitalize on the efforts of consumers to organize groups 
to protect and promote their own interests. We would like to have 
your committee or some Government agenty inquire into the follow- 
ing series of events. 



nONOKNTKATION OF ECONOMK^ J'OWKK 3385 

On November ;^0, 1936, n meeting was held by Hie Jii^titiite of 
Distribution, That, I understand, is u trade association of whieli 
some of the hirge chain-store groups are members. 

At this meeting a resohition was passed instructing the managing 
director to prepare a program of pul)]ic relations for tlie direct dis- 
tributors of America. 

As a i-esult of tliis resohition, Wlieeler Saiiiiiions, at tliiit time 
managing director of tlie Institute of Distribution, prepared a confi- 
dential report and distributed it as a basis for discussion for a meet- 
ing called for March 15, 1937. 

I should like to offer excerpts from this confidential report. 

Mr. Montgomery. Will you state again what this is? 

Miss Campufxt.. Excerpts from a confidential report prepared by 
Wheeler Sammons, managing director of the Institute of Distribu- 
tion, preparatory to a meeting called for March 15, 1937. 

Mr. Mt>NTGOMERY. Do you want this introduced in the vecoid 'i 

Miss Campbell. Wliatever you think best. 

Mr. Montgomery. Can this be introduced as an exhibit? 

Miss Campbell. I propose to quote from it. 

Acting Chairman Williams. Not without examination of it by the 
committee perhaps. I wouldn't want to take the responsibility of 
admitting this to the record further than for identification and dis- 
cussion of it. 

Mr. Montgomery. May we offer it as an exhibit for the record and 
if the committee decides against that procedure then offer it for the 
files? ^ ■ 

Acting Chairman Williams. We A^'ill do that subject to the 
approval of the committee.^ 

(The excerpts referred to were marked "Exhibit No. 531" and is 
included in the appendix on p. 3468.) 

Miss Campbell. This report was entitled "An Outline of Dii-ecl 
Distribution Public Relations — ^With the Consumer Speaking." 

This outline proposed a three-point program of organization : 

(1) A national consumer organization; (2) Consumer Foundation, Inc.; (3) 
A National consumer mouthpiece or voice, "Consumer's News," or any similar 
publication * * ♦ 

To promote the plan for the development of "a national consumer 
organization," Wheeler Sammons reported on experiments wliich had 
already been undertaken to organize housewives with $2,500 or less 
a year. This experimental organization was undertaken to deter- 
mine whether enough of such low-income housewives could be 
brought together to — 

make effective the appearance of selected housewives * » • before le^isl.-i- 
tive committees and meetings of state legislators. 

This experiment v^as said to be — 

successful to the extent that it demonstrated (a) the background availability 
of housewives in the particular group selected and at a cost within reason, 
(b) the availability of selected housewives for appearances made logical and 
effective by the group background. 
A national consumer organization — 



1 The committee subsequently approved publication of this exhibit. 



3386 CONCENTRATION OF ECONOMIC POWER 

according to this confidential memorandum — 

would have as its stated purpose, consumer education. It was felt wisest, dur- 
ing the formation of the grouping, to lead up to specific discriminatory taxation 
and restrictive distributive regulations through broader tax and cost-of-living 
matters, general hidden taxes, and cost-of-living indirect taxation, as well as 
state and local governmental costs. 

The second. point of the proposed public-relations program was a 
consumers' foundation. In the plan for a directing board for this 
foundation, it was stated that — 

the direct distributors would be represented on this board, but would not 
dominate it, although contributions would effectively, in fact, control the exist- 
ence of the foundation, admittedly. 

It appears that a certificate of incorporation for a consumers' 
foundation was approved in the Supreme Court of New York, Jan- 
uary 18, 1937. 

Now, on April 30, 1937, Dr. William Trufant Foster, director of 
the Pollak Foundation for Economic Research, Massachusetts, called 
a luncheon meeting of businessmen, consumer leaders, and others, for 
the purpose of discussing the need for a consumers' foundation. At 
that time the proposals contained in Wheeler Sammons' report were 
not, of course, generally known, though rumors were current that 
the Institute of Distribution was also interested in consumer 
organization. 

Mr. Henderson. May I ask a question? Do I get it straight that 
you are quoting from material you have and have submitted which 
was prepared by Mr. Wheeler Sammons? 

Miss Campbell. Yes. 

Mr. Henderson. And that the consumers' foundation was to have 
members on it who were not consumers but were distributors? Is 
that it? 

Miss Campbell. The consumers' foundation of which I am now 
speaking? 

Mr. Henderson. Yes. 

Miss Campbell. We are not prepared to say. We do not know, Mr. 
Henderson, whether the Foster foundation was the direct offspring 
of that report. 

Mr. Henderson. I am getting at the report. In this report which 
Mr. Sammons prepared, one of the purposes was to set up some kind 
of a consumers' foundation? 

Miss Campbell. It was to be called a Consumer Foundation. 

Mr. Henderson. But some who were not consumers but distributors 
were to be represented on the foundation? 

Miss Campbell. On the board. 

Mr. Henderson. What was that phrase? 

Miss Campbell (reading) : 

But would not dominate it although contributions would effectively, In fact, 
control the existence of the foundation, admittedly. 

That is a quote from that report. 

Mr. Henderson. That the distributors would admittedly control 
through their contributions. 
Miss Campbell. Yes. 
Mr. Montgomery. They were to be a minority on the board. 



CONCENTRATION OF ECONOMIC POWER 3387 

Miss Campbell. On the board itself. That I am quoting from the 
report, Mr, Henderson. 

Mr. Hendekson. I hadn't gotten that quite straight. 

Miss Campbell. Now, on April 30, 1937, Dr. William Trufant 
Foster called this luncheon meeting in the city of New York, of 
businessmen, consumer leaders, and others, for the purpose of dis- 
cussing the need for a consumers' foundation. At that time the 
proposals contained in Wlieeler Sammons' report were not, of course, 
generally known, though rumors were current that the Institute of 
Distribution was also mterested in consumer organization. At the 
luncheon, the question was raised whether there was any connection 
between the two efforts. In response to an inquiry, Dr. Foster stated 
that the luncheon expenses wer6 being met by the Institute of 
Distribution. 

During the summer of 1937, the Pollak Foundation 

Mr. Montgomery. Excuse me, was that the only answer to that 
question, just ihat the luncheon expenses were being met? 

Miss Campbell. So I am told. During the summer of 1937 the Pol- 
lak Foundation received a grant of $25,000 from the Institute of 
Distribution to conduct a survey of existing consumer organizations 
"to try to determine precisely what kind of organization was most 
needed." That is from Bulletin No. 1, January 8, 1938, Consumers' 
Foundation, Inc. 

I should like to submit a copy of that. 

Mr. Montgomery. I offer this also for the files. 

Acting Chairman Williams. It may be accepted for the files. 

(The bulletin referred to was marked "Exhibit No. 532" and is on 
file with the committee.) 

Miss Campbell. On January 8, 1938, Dr. Foster was elected presi- 
dent of the Consumers' Foundation, Inc. Almost immediately ono 
influential trade paper (Retailing, January 24, 1938) ran an editorial 
under the caption, "Facades Are Dangerous," 

Mr. Henderson. What are dangerous? 

Miss Campbell. Facades. 

Mr. Henderson. Oh, facades. 

Miss Campbell. Excuse me. Quoting the editorial: 

It is right and proper that business and the consumer should work togethei-. 
It is dangerous if a consumer facade is being constructed to be used for selfish 
purposes. The Consumer's Foundation, Inc., will be its own best witness as to 
Its purposes and intentions. 

It appears from such information as we have that the plans for 
the foundation were not developed further. 

From New York .we go to California. 

Mr. Henderson. I didn't get your terminal sentence there. 

Miss Campbell. It appears from such information as we have that 
the plans for the foundation were not developed further. 

Mr. Henderson. Did the agencies represented at that luncheon go 
ahead and give any expression of interest in the foundation? 

Miss Campbell. We don't know the subsequent development of it, 
Mr. Henderson. 

Mr. Montgomery. So far as you know, the Consumers' Foundation 
has not been functioning. 



3388 CONClONTltATlON OF ECONOMH', 1>C)VVL:U 

Miss Campbell. No; not as far as we know. We are asking for 
inquiry into some of these matters which we consider of great impor- 
Inncc [o the consumer position. 

Mr. Blatsofxl. You were present at (he luncheon? 

Miss ('ami'hell. 1 was not present at the luncheon. I may say I 
was not admitted to (he luncheon. 

From New York we go to California. In that State during 1936 
there had been a very active and successful campaign organized by 
I^ord & Thomas,' advertising agency, against the State Chain Store 
Tax Act, No. 22, of 1935. 

. Early in 1937 plans were under way to establish a Consumers' 
Foundation, or Consumer Education Foundation, or a Foundation 
lor Consumer P]ducation (it seems to have been variously known). 
According to (he Home-Ownod News, otticial publication of an asso- 
ciation of independent merchants in San Francisco (August 1937), 
the new founda(ion was "created and financed by (he chain-store 
group." We have a copy of these issues. 

Mr. Montgomery. Are you going to read from them ? 

Miss CAMriiKLL. Yes; if there is time. 

Mr. Montgomery. Mr. Chairman, these arc issues of Home-Owned 
News, dated August 10:57, Se|)teml)er 1937, DercniluM- 19:'.7. and 
October 1937. May we submit those for the files? 

Acting Chairman Williams. They may be accepted for the files. 

(The publications referred to were marked "Exhilnt No. 533" and 
are on file with the committee.) 

Miss CAMrBELL. In the issues of September to December of this 
same bulletin a series of letters were published. These letters wen- 
alleged to have passed between the San Francisco and Los Angeles 
oilices of the foundation. These letters, if correct!}' quoted by the 
paper, reveal in clear and even vulgar terms that well known women 
were being used by a commercial organization for purposes which 
were not consistent with reputations which those women had won 
by their past performances. 

Mr. Montgomery. What do you mean by that? Can yon read 
some of the letters? 

Miss Camtbell. I would be very glad, if there is time, to read 
some excerpts. 

Mr. Montgomery. If you will just read excerpts to illustrate the 
statement you made. 

Miss Campbell. I think you would at least be entertained by the 
attitude of these gentlemen, if these letters are, as alleged, correct. 

Mr. Montgomery. Explain who this is writing to whom and about 
what. 

Miss Campbell. It is alleged to be a letter from the manager of the 
San Francisco office of the Foundation for Consumer Education to 
the manager of the Los Angeles office, relating to the difficulties they 
were having in getting the cooperation of women whom they felt it 
was very useful and important to have. 

Mr. Montgomery. Wlio was financing this Foundation for Con- 
sumer Education, do you know? 

Miss Campbell. We haven't the evidence as to that. It is implied 
in the Home-Owned News that it was being financed through the 
chain-store association and Braun & Co., public relations counsel, but 



(:ON(J10NTitA'L'l()N OF ECONOMIC I'OWEIl 3389 

we have no way of guaranteeing that or knowing whether this is 
correct or not. 

Acting Chairman Williams. Do I understand that is a letter taken 
from this paper introduced? 

Miss Campbell. Yes. 

Acting Chairman Williams. Of course you can't voucli for its 
validity ? 

Miss Campbell. We don't know whether it is correct or not. I will 
be glad to read it. I think it is very interesting. 

Acting Chairman Williams. There is no objection. 

Miss Campbell (reading) : 

Mrs. B did an oxct'lleiit job in airanfiing tlio luncheon and Kcttinfr the riglif 
people there. Mrs. C was in town Friday and I entertained lier in tlu- Palace 
Cocktail Lounge for a couple of hours. Listen to this: I told her that Mrs. D's 
nose was out of joint becau.so she had heen pushed into the hackfiround and 
I was worried about some vice president to introduce the resolution, aft(>r 
Mrs. O had read her letter of invitation. 

I omit all names, sir, because we cannot guarantee the correctness 
of this. 

She rose to the bait and volunteered to make the resolution her.self. If we 
can keep up the pretense that Mrs. D is sore, I think we are cinched. Mrs. E 
says that she thinks she can get the northern California vice presidents to 

vote for it if Mrs. D herself will say she believes it is a good thing. Mrs. 

suggested that I should not bother Mrs. C this trip because she is all broken 
out with suspicions about everything and she might think that we were over- 
anxious. I followed her suggestion. 

I would like, with your permission, to quote from another letter 
about a lady. 

Mr. Montgomery, What is this about? 

Miss Campbell. This is a lady whose cooperation they weiv, very 
anxious to have. However, the letter quotes : 

She was a tough nut to ci-ack because she has a grudge against the chain 
stores. One of the first things she tossed at me was this remark : "I think 
that any consumer educational program should go thoroughly into the matter 
of false advertising." Then she asked me a direct question as to whether 
or not the chains had anything to do with this program. I asked her what 
her yen against the chains was, and she said that she had been falsely accused 
of being on the pay roll of the chain stores during the last campaign. I asked 
her how the deuce she could blame the chains for false propaganda circulated 
by the independents, and she said that the chain organizations, in her opinion, 
had capitalized upon the rumor by intimating very strongly that she was out 
actively working for the defeat of the chain-store tax. Just another little 
blunder which is having its repercussions now. However, she is a nut on 
public health, being an ex-nurse, and I kept harping away on the tremendous 
support we could give her health program in view of the fact that public 
health is a primary problem of the consumer. She has been having a tough 
battle fighting assembly bills 50 and 77, and I pointed out that it was tragic 
that our organization was not in operation in view of the fact that we could 
have carried on a systematic campaign against such obnoxious bills because 
they affect the public health. 

The same letter continues : 

I sent the release on the Housewives' League, which I read to you, to 200 
Northern California papers. Mrs. A still is of the opinion that I am acting 
in my private capacity and that my only interest is providing more milk and 
vital necessities for undernourished school children. 

Shall I read this first organization letter? 

Mr. Montgomery. You may read it if you want to. 

124491— 39— pt. 8 8 



3390 CONCENTRATION OF ECONOMIC POWER 

Miss Campbell. I can quote the diflBculties they were having in 
guaranteeing the support of the P. T. A., the Parent Teachers' Associa- 
tion [reading] : 

It seems foolish to me to paint a too-rosy picture of what we can do with 
the P. T. A. until we actually know for certain what we can do. To do so might 
cause another month's delay in getting our program started. In othef words, 
I think it very foolish to promise the cooperation of the P. T. A. and probably 
their endorsement at their July meeting and then have the same force that 
opposed us give us another kick in the pants. Possibly I have been over- 
anxious to get this thing started. Possibly you can appreciate this when I tell 
you that the independents' organization is already in full swing in Northern 
California and I am powerless to do anything except in an undercover manner 
until we are actually organized. I am enclosing a clipping to prove this point. 
I sincerely feel that unless we get started soon our backers are going to say 
to us: "We are sick of what you birds say you are going to do. You had 
better do something damn quickly or else * "* *." This is not pessimism ; it's 
plain horse sense. I haven't the slightest doubt in the world that if we get this 
organization rolling you and I can achieve everything, and more, that is 
expected of us. In the months of our association, I have come to know your 
talents and capabilities and feel that once we get started we can go to town. 

Well, sir, these are simply quotations from some of the letters there 
and I think perhaps it illustrates the point of view toward the con- 
sumer. 

Mr. Henderson. It illustrates, if I get the inference on your part, 
that back of the facade there are commercial organizations that nave 
set up these consumer organizations presumably to represent a con- 
sumer point of view and to. enlist women's organizations and others 
for their own purposes. 

Miss Campbell. It arouses suspicion, Mr. Henderson. We have no 
direct information. 

Mr. Henderson, That is a pretty mild term, Miss Campbell, par- 
ticularly for a legislative committee such as ours. It isn't just the 
arousing of a mild suspicion on your part. Isn't it true that your 
organization has much more than a mild suspicion about some of these 
things ? 

Miss Campbell. We haven't any information the correctness of 
which we could guarantee. 

Mr. Henderson. I didn't ask that, but you have more than a mild 
suspicion ? 

Miss Campbell. Personally I have. I wouldn't like to speak for 
the organization. 

Mr. Henderson. Aren't you personally, then, pretty well convinced 
from what you know of these organizations that a lot of them are 
faked organizations? 

Miss Campbell. I think I should repeat the fact, Mr. Henderson, 
that it is very difficult to make that statement without some further 
information. A great many women have joined up with some of these 
organizations who may quite honestly have joined up. 

Mr. Henderson. Isn't that the purpose, to construct an organization 
that women will ally themselves with honestly and then use the energies 
of these women for commercial purposes ? 

Miss Campbeijl.. That is the inference, but I think that in order 
to assist the consumer movement as a whole we really need an in- 
quiry into the facts behind these organizations so as to make them 
publicly available. 



CONCENTRATION OF ECONOMIC POWER 3391 

Acting Chairman Williams. What is a real honest-to-goodness con- 
sumers' organization? 

Miss Campbell. I present to you the Consumers' National Fed- 
eration and its members. 

Acting Chairman Williams. You are satisfied that it is all right? 

Miss Campbell. Perfectly satisfied. 

Acting Chairman Williams. As distinguished from some of the 
others you have described. 

Miss Campbell. All we ask is that we get the facts behind these 
organizations. 

Acting Chairman Williams. How many are in your organiza- 
tion ? 

Miss Campbell. The actual members I think at the present time 
number about 30 member organizations. 

Acting Chairman Williams. Member organizations? 

Miss Campbell. It is a federation. It is a very loose agency. 
It is more of .the type of a coordinating committee. 

Acting Chairman Williams. Where did it originate? Have you 
given this? 

Miss Campbell. Yes, I have. 

Acting Chairman Williams. I didn't happen to be here. 

Mr. Montgomery. Miss Campbell, I take it the federation would 
welcome, wouldn't it, the establishment of any sort of board of 
appeal or something to which any consumer organization could 
subject- its facts so that tjie Congressman's question could be an- 
swered specifically, organiz'ation by organization? 

Miss Campbell. We urge that a little later in this statement. 

Mr. Montgomery. You would welcome a similar inquiry with re- 
spect to the Consumers' National Federation? 

Miss Campbell. Very much, sir. 

Mr. Chawner. Miss Campbell, these letters are quite an indict- 
ment. Do these publications indicate at all the source of these 
letters, how they happened to be secured? 

Miss Campbell. Yes; they indicate that one of the former mem- 
bers of the foundation left the foundation and presumably made 
the letters available. However, we have only such information as 
was given there. 

We, the Consumers National Federation, are not in a position to 
state what were the real aims of this Foundation for Consumer Edu- 
cation in California, nor the controlling powers in it. Reliable in- 
formation about such developments is of great importance to con- 
sumers in deciding which organization th"v wish to join. 

Now, may I ask you to go with me to Chi ago to meet the National 
Consumers Tax Commission, Inc. This organization of "just aver- 
age American housewives," according to a leaflet of the National 
Consumers Tux Commission — 

represents r definite and concerted effort on the part of the women of America 
to effect a nationwide organization which will, first, present the facts about 
taxation to the public, and, second, reduce taxes to the level wh-'re they will 
not unnecessarily rob millions of families not only of the luxuries of life, but 
in many cases of even some of the bare necessities. 

The leaflet goes on to say : 

The women who originated the idea approached the business interests of their 
communities and of the country for assistance. These business interests agreed 



3392 (X)NCENTRATION OF ECONOMIC POWER 

that what the women were attempting was economically sound ,ind their en- 
thusiasm deserved financial backing. So they decided to put np their money 
and the women went to work. 

There has been a considerable amount of material published in the 
trade press and elsewhere which raises doubt as to the nature and 
purpose of this or<^anization. This material suggests that the Na- 
tional Consumers Tax Commission has some immediate connection 
with activities of Carl Byoir & Associates of New York City, a pub- 
lic-relations firm, and/or their clients, particularly of tlie (ireat 
Atlantic & Pacific Tea Co. Whether these suspicions are well 
founded or not Ave cannot say. We do claim the facts behind the 
organization should be disclosed. 

In August 1938 there appeared an announcement in the press (New 
York Times, August 12, 1938) to the effect that the A. & P. had 
made a contribution of $2,000 to the organizational work of the 
Emergency Consumers Tax (^(^uncils in New Jersey, said to be a 
body of women representing local consumer groups in 60 com- 
munities. 

On September 15, 1938, George and John Hartford, of the A. t^ P. 
in a full-page advertisement in the New York Times, announced 
that they had decided to state their case on the chain store tax issue 
to the American people, that they had arranjjed with Carl Byoir & 
Associates to conduct the campaign. Among other things, the\ pro- 
posed to cooperate in the work and formation of study groups among 
consumers, farmers, and workers. 

Mr. Montgomery. Miss Campbell, do I understand from what you 
have just testified that you have presented evidence that A. & P. Tea 
Co. is behind this National Consumers' Tax Commission, Inc.? 

Miss Campbell. We have evidence that ihey have contributed 
money to the New Jersey Tax Emergency Council and also the Na- 
tional Consumers' Tax Commission. 

Mr. Montgomery. Haven't you heard — I think it is published in 
one of their bulletins — of a letter from John Hartford to the organi- 
zation, promising, I think,' unlimited financial support? Have you 
seen that bulletin? 

Miss Campbell. I have seen the copy of it: I haven't got it here, 
but it just offers contributions; it doesn't say that he is controlling the 
organization. 

Mr. Montgomery. He was just offering 

Miss Campbell. Money to it. According to Tide magazine, Sep- 
tember 1, 1938, pages IG to 18, a group of men were busy in New 
Jersey throughout the summer helping in setting up in 1938 — the 
Emergency Consumer Tax Councils in New Jersey. These tax coun- 
cils have now become formally affiliated with the National Con- 
sumers' Tax Commission. This so-called Consumers' Tax Conunission 
now claims to have as of March 1939 about 4,000 units operating 
throughout the whole country. Material issued by it includes a 
monthly bulletin, a series of pamphlets, a study program written for 
the most part about the subject of hidden taxes. We offer some of 
this N. C. T. C. material. 

Mr. Montgomery. This exhibit is made up of apparently a leaflet 
sent out by National Consumers' Tax Commission, Inc., telling its 
plan ; it doesn't seem to be dated ; certain letters from the National 
Consumers' Tax Commission (the addresses and names have been 



CONCENTRATION Oh" ECONOMICS POWER 3393 

.stricken), certain excerpts from Tide magazine itnd from flie News 
Letter of the Institue for Consumer Education, and a bulletin of tin- 
Institute for Propaganda Analysis of December 1, 1938. 

Here is also a photostat of the fi-ont page or part of tlie fi'ont page 
of the Farmer-Labor Press of December 8, 1938, carrying a story 
about the hidden taxes on information furnished by the National 
Consumers' Tax Commission. 

That is offered for the files. 

The Chairman. It may be recei\'ed. 

(The material referred to was marked "Exhibit No. 534" and is on 
lile with the committee.) 

Miss Campbell. Perhaps I can illustrate the type of material that 
is put out from a few excerpts in this little pamphlet entitled "Why 
Pay Taxes in the Dark?" There is a poster — I will offer this after- 
ward — from which I will read: 

There are 112 hidden taxes in a pair of shoes. These shoes cost you $5.60. 
The shoes are .worth $4. You pay $1.60 taxes", which amounts to price of new 
soles and heels. 

Let us go shopping together in your own town or city, stopping in at the 
meat market. You buy 40 cents worth of meat; actually you get 29 cents 
worth of meat. The other 11 cents pays taxes. 

Taxes take from children's mouths the nourishing foods they need for build- 
ing liealthy bodies. A remorseless guest at the family table, the hidden tax 
collector gulps, in effect, two eggs out of evei'y dozen, nearly three slices out of 
every loaf of bread, and a substantial share of butter, bacon, milk, and other 
food. 

A surrey of the hidden tax^s paid by one family in its food purchases re- 
vealed the unwanted guest consumed in a year the equivalent of 578 loaves of 
bread or 165 pounds of butter or 144 dozen T^gs or 156 pounds of bacon. 

Mr. Montgomery. All of that w .s quoted from the pamphlet "Why 
Pay Taxes in the Dark?" That is published by the National Con- 
sumers' Tax Commission. May I offer this pamphlet also for the files ? 

The Chairman. It may be received. 

(The pamphlet referred to was marked "Exhibit No. 535" and is on 
file with the committee.) 

Miss Campbell. 'There ]S no question that indirect taxes are a 
serious consumer pioblem. It is not clear from the propaganda of 
this organization that indirect taxes are synonymous with the so- 
called hidden taxes they write about. We have not made an analysis 
of these statements, but we believe such an analysis should be made 
by a responsible and authoritative agency. 

In this connection I should like to submit a statement issued by the 
Tax Policy I^eague of New York (September 1936), entitled "Tax 
Nonsense." This reads in part : 

The flat statements that so many cents of the cost of a pair of shoes or a 
definite percentage of th^ rent bill, are the result of taxes are highly inaccurate. 
As a matter of fact it is doubtful that the people writing such stuff actuary 
believe it themselves. 

Our basic concern, however, is rather with the true motivation of 
the organization, rather than the validity of the m.aterial it dis- 
tributes. The Consumers National Federation recognizes- the right 
of any group to state its case before the public. We want to make it 
clear that in presenting this statement we are not -as a federation 
opposing or supporting the chain-store tax proposals. We claim 
that consumers are worried and confused by the setting up of or 



3394 CONCENTRATION OF ECONOMIC POWER 

ganizations purporting to be independent but which give rise to 
suspicions that they are "captive." 

Mr. Montgomery. I offer this for the files, also, Mr. Chairman. 
That is the "Tax Nonsense" from which she read, issued by Tax Policy 
League of New York, September 1936. 

(The statement referred to was marked "Exhibit No. 536" and is 
on file with the committee.) 

That consumers are confused is evidenced by a letter we have 
received recently (May 1, 1939) from the president of the General 
Federation of Women's Clubs. This reads as follows 

The Chairman (interposing). Is the Tax Policy League a favorite 
organization? 

Miss Campbell. Not a member or supporting organization of the 
Consumers National Federation. 

The Chairman. This is not under suspicion? 

Miss Campbell. Not at the moment. 

Mr. Montgomery. It is hard to tell from one week to the next ? 

Miss Campbell. That is one of our problems, Mr. Chairman. The 
General Federation of Women's Clubs claims to have about 2,000,000 
members in the country. This is addressed to me personally, as 
executive secretary of the Consumers National Federation, and reads 
as follows: 

Very frequently, almost daily, I am receiving requests for information regard- 
ing the National Consumers Tax Commission, 310 South Michigan Avenue, Chi- 
cago, Illinois. Women who have long been connected with the Federation as 
State, district, or local club officers are frequently invited to serve as organizers 
for the units of this organization. They write to us for definite information 
regarding the purposes of the National Consumers Tax Commission, how it is 
financed, who controls the organization, who owns it, or in whose name it is 
incorporated. 

I understand that the organization is incorporated in the names of four 
men, but only the names of women appear on the letterhead. The impression 
is certainly given that it is a woman's organization. 

Do you have any information, or can you secure information which I can 
use? The women who write to me are truly interested in the questions of 
taxation and reliable consumer information, but apparently there is great doubt 
in the minds of many of them regarding the origin, methods of finance, and 
the reliability of the programs which are submitted to them for study. There 
is a very definite criticism of the expense accounts granted the workers, the 
traveling representatives, the publicity men, and the apparently large appropria- 
tions for telephone expense accounts. 

Any information you can give will be greatly appreciated, and I hope it will 
be of a type which I can use in replying to letters of inquiry. 

Mr. Montgomery. Were you able to answer Mrs. Dunbar's letter 
with information? 

Miss Campbell. I think what we need is to have some inquiry so 
we can get sufficient information to be able to reply adequately to 
that letter. 

Mr. Williams. You did not answer that letter? 

Miss Campbell. I haven't the information to make it possible for 
me to answer it. 

In an article to the New York Times (May 16, 1937), Prof. Robert 
Lynd, of Columbia University, stated that there are two specific 
dangers to the bona fide consumer movement in the setting up of 
"kept" consumer groups. First, there is a danger that not even 
the membership, let alone the general public, will know of the cap- 
tive status of the organization. Obviously, he said, those who pay 



CONCENTRATION OF ECONOMIC POWER 3395 

the bills will— in this world in which it is taken for granted that 
you get what you pay for— see to it that only those issues are pushed 
which it is to the advantage of the business instigators of those 
groups to have pushed. Second, the very existence of such loudly 
pMblicized groups in the field will tend to lull bona fide consumer 
groups into thinking that consumers' interests are being cared for. 
"This," he declared, " can operate only to muddle up the field and 
in the end to throw discredit on the efficacy of all consumer organi- 
zations." 

It is in this belief, in good faith, that we bring these matters to 
your attention and urge that you institute an inquiry into them. 
Thsre should be some way — possibly similar to the required dis- 
closure of the financial interests of newspapers in order to enjoy 
second-class mailing privileges — to compel such organizations to set 
forth tl^e real parties of interest behind them. Women whose names 
appear in connection with any of these organizations are sometimes 
entirely innocent of their inner workings and objectives. 

No doubt if w^e have raised questions about any organizations 
which feel they have already adequately disclosed their purposes 
and resources, they will welcome any public investigation of con- 
sumer organizations. In this connection may I quote from a state- 
ment which is said to have been made by Mr. Charles Wesley Dunn, 
attorney for the Associated Grocery Manufacturers, Inc.? 

Those persons who say they represent the consumer professionally should be 
subjected to the same type of discipline as are doctors and lawyers. 

He also said that consumer activities should be put under one 
Government department. 

This suggestion for a central consumer agency was urged before 
the President by the delegation of consumers referred to by Mr. 
Montgomery in his opening statement yesterday, which came to 
Washington in February 1938. We submit for the record a copy 
of the memorandum presented by this delegation on the subject 
of a Federal consumer agency. 

Mr. Montgomery. You want that offered as an exhibit to your 
testimony? May that be offered as an exhibit, Mr. Chairman? 

The Chairman. To be printed? 

Mr. Montgomery. I suppose you want it printed? 

Miss Campbell. I should like to have it printed. It is a memo- 
randum on the subject of the Federal consumer agency presented 
by a delegation of consumers to the President. 

The Chairman. It may be received for printing. 

(The memorandum referred to was marked "Exhibit No. 537" 
and is included in the appendix on p. 3473.) 

Mr. Montgomery. Where was this statement of Charles Wesley 
Dunn quoted ? 

]\Iiss Campbell. New York Times, May 9, 1939. It was made at 
White Sulphur Sprinjrs, W. Va., May 8. 

Mr. Montgomery. You have heard of a company union, haven't 
you. Miss Campbell? 

Miss Campbeil. I have heard of them. 

Mr. Montgomery. How do you define a company union ? 

Miss Campbell. I should define a company union as a union that 
was under the control of the employer. 



3396 CONCENTKATION Ol'' ECONOMKJ POWER 

Mr. Montgomery. Do you think it would be an apt analogy to say 
that tliese organizations which you have been talking about, the 
type of organization you have been discussing, "kept" organizations, 
are somew^hat similar to a company union in the labor field, only 
these are in the consumer field ? 

Miss. Campbell. I should say a "kept" organization was certainly 
analogous. 

Mr. Montgomery. Any other questions ? 

The Chairman. Members of the committee desire to question the 
witness? The next witness, Mr. Montgomery? ^ 

Mr. Montgomery. Mr. Ephraim. Mr. Chairman, all the way 
through so far we have been hearing from consumers. I think this 
next witness is going to give us very interesting testimony indeed- 
He is a manufacturer and he has a story to tell from his side of the 
market, about his effort to reach through to the consuming public with 
liis products. It will tie very closely, I think, to the story that the 
consumers have been telling before. Will you be sworn, Mr. Ephraim ? 

The Chairman. Do you solemnly swear that the testimony you 
are about to give in this proceeding shall be the truth, the whole 
truth and nothing but tlie truth, so help you God? 

Mr. EPHRAiivr. I do. 

TESTIMONY OF JEROME W. EPHRAIM, JEROME W. EPHRAIM, INC., 
MANUFACTURERS OF COSMETICS, NEW YORK CITY 

problem of marketing new consumer products 

Mr. Montgomery. Your name, please ? 

Mr. Ephraim. Jerome W. Ephraim. 

Mr. Montgomery. And your address? 

Mr. Ephraim. 91 Warren Street, New York. 

Mr. Montgomery. What occupation are you engaged in, Mr. 
Ephraim ? 

Mr. Ephraim. I am a manufacturer of tooth paste, shaving cream, 
cold cream, and products of a similar chemical nature. 

Mr. Montgomery. Will you describe that business and how it oper- 
ates? Tell us something about what it is. 

Mr. Ephraim. As at present constituted it is a business of manu- 
facturing, bottling, and supplying some 47 related personal needs 
such as I have indicated before, direct to consumers. The business is 
at present operating on a mail-order basis, on a basis of selling to 
representatives, on a basis of supplying such things to people as may 
come to our store, which is essentially in New York. I have at- 
tempted to get wider distribution than this, which is my story here 
today. 

Mr. Montgomery. Tell us what your plan was in setting up this 
business. Tell us what the scheme was you had in mind when you 
began this enterprise. 

Mr. Ephraim. I had an idea I didn't want to become essentially 
another manufacturei- of tooth paste. I will take tooth paste here 
for the purposes of illustration. 

Mr. Montgomery. You do manufacture tooth paste, don't you? 

Mr. Ephraim. I manufacture tooth paste; A^es, sir. I had an idea 
that to become a manufacturer of tooth paste one has to have some- 



CONCENTRATION OE ECONOMIC POWER 3397 

tiling more than that and I had an idea that you had here some- 
thing of a consumer mai'ket which I would like to be able to supply 
products to; a straight business proposition, as far as I was concerned. 
So instead of becomina- simply another mamifacturer I tried to ap- 
[ji'oach it fiom what might be called a consumer angle. Instead of 
making another tooth paste I looked into tooth i)aste (juite a bit. 1 
consulted experts, and so on, and so forth. The thought came that 
instead of making just another product, the product would represent 
f 10m tlie consumers' point of view as good a product as could be made. 

Mr. Montgomery. How did you go about that? 

Mr. Epkkaim. Well, the idea is simply this. I took the idea of 
finding out what products, from a consumer point of view — you have 
heard all along here the consumer telling you — should be su])plied, 
and I simply came along with a broad plan and tried to supjjly them. 
Instead of manufacturing tooth paste, mouth wash, tooth powder, we 
will say, I went into tiie field of oral hygiene, to find out what might 
be the types of products that should \)v made, and going ahead and 
making them. Products were made, formulas were furnished, refer- 
ences were given. In fact, I did enough Axork in the field of oral 
hygiene to write a number of magazine articles, one on dentifrices, for 
instance, which originally appeared in the American Mercury, which 
was reprinted by the Reader's Digest and reprinted by the American 
Dental Association itself . 

I merely state that not simply to tell you about it but because there 
is something more impoi-tant than simply having a good produes, 
and for the moment I will just tell you a word about the product, to 
sort of establish it for you. 

The product has been on the market for well over 5 years-. If you 
would use the product, you would find it is similar in nature, so far 
as its taste is concerned, to any product you find on the market. It 
has a consumer acceptance limited only by my ability to get distri- 
bution for it. The product was also accepted by the Council on 
Therapeutics af the American Dental Association, which meant it 
met with their advertising standards and also certain technical re- 
quirements they had. That is the official organization of dentists 
themselves. 

The product, for instance, is listed in the American Dental Asso- 
ciation's book. Accepted Dental Remedies. It is a booklet issued 
by the American Dental Association which lists products Avhich it — 
I wouldn't say recommends — but products that a dentist would be 
likely to recommend. In other words, it is a selected list of products 
that meet their requirements, and there are today something like 10 
or 12 of those products, and if you were to ask your dentist what 
dentifrice to use he would be likely to tell you any of those* 12, 
which would include mine. 

Mr. MontgomekV. How many of the well-known brands of tooth- 
paste are listed theye? 

Mr. EpHRAiM/^here is only one nationally advertised product. 
There had been several others nationalW advertised, but they were 
dropped from the list. 

Mr. HiNRiCHS. Because of the character of the product oi' the 
character of the advertising ? 

Mr. Ephraim. It is a matter of both. The advertising has to be 
in acoOTd with their ideas on advertising. Claims cannot be made 



3398 CONCENTRATION OF ECONOMIC POWER 

that cannot be substantiated, so far as the technical standards are 
concerned. They run abrasion tests. In other words, the greatest 
crime a tooth paste can commit is to be a coarse product that might 
scratch the enamel of your tooth. You have to submit evidence, 
run on abrasion-test machines, which they have the details of, that 
will show that the product is not abrasive, or is not coarse. In addi- 
tion to that, there are certain gross (shall I say gross?) violations. 
For instance, sodium perborate is an objectionable ingredient in a 
tooth powder, although it is not an uncommon ingredient in sorae 
of the products on the market today. 

Mr. Montgomery. Why is it objectionable'? 

Mr. EpHEAiM. It "burns the mucous membranes of the mouth. 
There are what are known as perborate burns. There are a number 
of them reported in the literature. 

Mr. Montgomery. Why is it put into tooth paste ? 

Mr. EpHRAiM. There is no particular technical reason why it is 
put in tooth paste. It has the effect of releasing oxygen, which 
makes you feel, when you are using it, that you might have some- 
thing in your mouth. It has its therapeutic use in the treatment of 
trench mouth, which is a specific disease. It is not for general use; 
nevertheless, a leading brand of tooth powder contains sodium per- 
borate, to my knowledge. 

Mr. Montgomery. Well, now, that is about tooth paste. You have 
studied the requirements for tooth paste and you published these 
articles about them and you have set up a business to manufacture 
a product, and it has been accepted by the dental association. Now, 
the next task facing you, I take it, was to market that tooth paste. 
Tell us your experience. 

Mr, Ephraim. In a business such as this it isn't important alone 
to have a good product. As a matter of fact, it is almost of sec- 
ondary importance. You have to have a good story to sell that 
product and, what is even more important, the wherewithal to get 
that story across. 

I have indicated very briefly the appeal I tried to establish for 
these products. In other words, I developed what was to me a 
merchandising, idea. Other people sell tooth paste on the basis 
of correcting acid mouth, perhaps, or curing pyorrhea, or pre- 
venting bleeding gums, and so on. Unfortunately I couldn't make 
such a tooth paste, aiid no one else can for that matter. But I had 
this idea of attacking it from the point of view of the consumer. 

To take an ambitious comparison to illustrate it quickly, I tried 
to be a sort of M. I. T., a sort of laboratory to find out what these 
products were, what they should be, and make them accordingly. 

I took that idea and the products to many of , the leading distrib- 
utors in the country. They could be named if necessary, but it 
included the largest mail-order concerns in the country, the largest 
retail department stores in the country, and two of the largest clrug 
chains in the country, and incidentallyj in a small way, I ofiered it 
to individual outlets, individual druggists, and a few other depart- 
ment stores. 

Invariably the story was the same: "You have a very good prod- 
uct, the price is right, your story is good, but bring customers to us. 
You bring customers into our stores to ask for your product and we 



nONCENTRATION OF ECONOMIC POWER 3399 

will be very glad to carry it." In other words, create a demand; in 
other words, advertise it. 

Advertising involves an expenditure of money that I wasn't able 
to make. 

Mr. Montgomery. What did you find out it would cost you to put 
your product on the market the way these outlets were suggesting 
to you? 

Mr. Ephraim. I took the matter up with several advertising agen- 
cies and it involved, according to one well-known advertising agency, 
at least $100,000 to find out how the thing might go ; in other woras", 
$100,000 to try to get national distribution for a product which has. 
according to the Department of Commerce, a wholesale value oi 
something like $35,000,000 (tooth pastes and tooth powders). Ac- 
cording to a magazine survey made by the Fawcett Publications, 
90 percent of that business is in the hands of 10 brands. In other 
words, the crumbs, as it were, are divided among such other manu- 
facturers as there may be. There doesn't appear to be a meeting 
ground with consumers on the thing, and to become a national dis- 
tributor or to establish a product on a national basis would involve, 
you can imagine, a considerable sum of money. One hundred thou- 
sand dollars would probably be needed to establish the fact whether 
or not you could even put the product over. 

Mr. Montgomery. Let me get that clear. The $100,000 outlay that 
the advertising industry suggested was solely for the purpose of 
determining how or if this product could be put across to the public? 
Mr. Ephraim. Correct. 
Mr. HiNRiCHS. On a national basis? 

Mr. Ephraim. On a national basis. In other words, you take even 
the well-known brands of tooth paste on the market today. When 
one of them wishes, as they all do, to plan their advertising for the 
following year, there may be three or four appeals that they may 
want to use. They don't toss their million dollars or whatever it 
might be just on a table. They run tests themselves. This year, for 
instance, one tooth-paste manufacturer ties up his tooth paste with the 
World^s Fair. In other words, if you buy this tooth paste you might 
get a free trip to New York. Another appeal might be almost 
anything. 

From my point of view, to try this out, you would go to certain 
selected communities. In other words, if we can sell the tooth paste, 
we will say, in Richmond, Va., we can sell the tooth paste in Akron, 
Ohio, we will say, and so on, and build it up. In other words, you 
liave to do a certain amount of exploratory work, testing, trying this 
idea and trying that idea, all of which runs into a considerable sum 
of money, as you can imagine. 

Mr. Montgomery. Is tliat what the $100,000 outlay was for, to ap 
that exploratory work? 

Mr. Ephraim. Yes ; that is what it would be for. In other words, 
to impress the consciousness of the name on you it is necessary for 
any advertiser to get at you, as it were, in several ways. You can't 
just insert an ad in a newspaper and then run away. The value of 
advertising is in its cumulative effect. You might, just for the sake 
3f illustration, go to Wheeling, W. Va., and run a number of news- 
paper advertisements in Wheeling. You might broadcast from the 



3400 CONCENTRATION OF ECONOMIC POWER 

local radio station; you might have a detail man who would go from 
dentist to dentist to tell your story and then leave samples of your 
product. That, as you can see, can run into a sizable sum of money. 

(The chairman returned to the chair.) 

The Chairman. What is the objection to it ? 

Mr. Ephraim. There is no objection, excepting the sum of money 
involved. I am not drawing a moral. 

The Chairman. Then what is the purpose of the story? What 
are you driving at?- 

Mr. Ephraim. What I am driving at is this, that you have heard 
the testimony of people before me, more or less representing the 
consumer, who want a certain type of thing, certain information, 
and so on, and so forth. I am at the other side of fence here. I 
am trying to get to them. The purpose of all this is to attempt to 
show, at least, that we have a stone wall existing. I cannot get to 
them because I cannot get my tooth paste in the usual outlets because 
no store is going to carry that tooth paste unless I create the demand 
that I have indicated to you. 

Mr. Montgomery. That stone wall is these 10 brands which. have 
been able to make outlays to establish themselves in the market; is 
that it? 

Mr. Ephraim. You have a stone wall, a monopolistic situation, or 
anything you might want to call it, in which 10 brands control 90 
percent of the business, according to the Fa wcetti Publications. 

The Chairman. Yes; but you are talking about advertising. I 
confess that I see nothing wrong about advertising. 

Advertising is one means of asserting competitive enterprise, and 
the fact that one person is successful in advertising and another per- 
son is not successful doesn't arouse any feeling of distress on my part. 
All human activity seems to me to be based upon the competition 
between individuals to impress themselves upon those with whom 
they deal. That has been the history of business from time imme- 
morial, hasn't it been? 

Mr. Ephraim. Yes, sir ; I am not saying the advertising as such is 
bad. Of course, it isn't. What I am saying is this, that we have 
people over here who want products in a certain way. I am trying 
to reach those products. We try to maintain a free and open and 
competive market. If I were, for instance, to make neckties, the basis 
of my competition with other necktie manufacturers would be how 
good a product I could make and how low a price I might be able 
to sell it at. That is fair competition, and I bow to it. But that 
situation doesn't exist here. 

The situation is that a product, no matter how meritorious, can't 
reach these people with the present method of distribution. 

The Chairaian. Well, now, to make an illustration that might 
appeal t^ some of the members of this committee or at least to the 
congressional members, those who are elected, we go out to secure 
votes when we are running for election. We try to create a demand 
for our services. That is a perfectly natural activity, is it not, upon 
tho part of the person who desires to serve the public in a responsible 
position ? 
Mr. Ephraim. Yes, sir. 

The Chairman. And everybody engages in it. It might easily 
'•"suh, of course, and probably does, in the defeat of the more able 



CONCENTRATION OF ECONOMIC POWER 3401 

candidate. The candidal^ who succeeds is the one who has sufficient 
personality to create a d'emand for his services, and that is done by 
way of advertising. 

Mr. HiNRiCHS. Mr. Chairman, to keep the analogy that I think the 
witness is trying to draw, it is that even the Congressman finds it 
helps to build the priceless ingredient if you have travel expenses 
from some source, and in the marketing of certain types of product 
the initial expend.iture, the initial capacity to enter the market, has 
to do with the possession of rather substantial financial control. 

The Chairman. I don't follow that at all. Is the inference to be 
drawn from this suggestion that there ought to be a prohibition oh 
advertising? 

Mr. HiNRiCHS. I still haven't discovered the witness' ultimate goal. 

The Chairman. Is that your ultimate goal? Would you suggest 
that? 

Mr. HiNRicHS. No. I have some questions that I would like to ask 
later, too. 

The Chairman. Does the witness desire to suggest there should be 
a prohibition on advertising? 

Mr. Ephraim. No. 

The Chairman. What is the purpose of the testimoivy, then ? 

Mr. Ephraim. Let me put it to you another way, if I may. When 
you are going Out campaigning, so long as you brought on the analogy 
yourself— — 

The Chairman (interposing). I am perfectly willing to have thai 
analogy pursued. 

Mr. Ephraim. You have entered more or less a free and open 
market. We don't live in one of these so-called totalitarian states, 
as it were, where everything is rubber stamped, but let the best man 
win. 

The Chairman. I have heard that phrase used in the political 
arena. 

Mr. Ephraim. It is no reflection upon the elected members of that 
body tjiat that always hasn't been true; but what I wish to say here 
is that advertising has, in this particular instance, created what might 
be termed almost a monopolistic situation. For instance, when the 
Government itself buys tooth paste for the Veterans' Administration 
or the C. C. C, or the Army, they don't buj' it on the basis of curing 
pyorrhea of the C. C. C. boy. They have a very elaborate system 
of opening bids and having specifications for this product, and en- 
tering that market is a free and open market for tooth paste. I have 
on several occasions, for instance, received Government contract for 
tooth paste on that basis — purely a straight quality basis, with price. 
That I regard as an open market. I made, for instance, at one time, 
6 tons of tooth paste for the Veterans' Administration. Tiie next 
time some fellow came along and beat me out by half a cent a tube. 
I might have had some private thoughts under my breath about thai 
gentlemanj but nevertheless I had no justifiable or legitimate cause 
of complaint. The man was more efficient than I was in that par- 
ticular case. 

But if I go into the open market today, I can't do* that at all, be- 
cause the basis of competition there isn't the basis of quality and 
price, it is the artificial basis of brand competition. 



3402 CONCENTRATION OF ECONOMIC POWER 

Mr. Montgomery. Now explain further what you mean by that 
artificial basis. I think that illustrates your story. 

Mr. Ephbaim. Through the constant hammering awa}' over a period 
of years, and the expenditure of large sums of money, certain names 
become household words. If you were called upon to name these 10 
tooth pastes, you probably could do it very quickly. Each of these 
tooth pastes, for example, is sold on sales appeals of various kinds. 
Take one, for example, is sold on the basis of correcting acid mouth, 
a very successful sales appeal. From the point of view of a manu- 
facturer it doesn't matter whether or not that product is good, bad, 
or indifferent. From a technical point of view, as a matter of fact, 
there is a good deal that might be said against it. But my coming 
along and competing with that person, I am in no position whatever 
to compete, because it is entirely on the basis, through these outlets 
I have indicated to you before, of the advertised brands having, as I 
said, something like 90 percent of the business. 

Mr. Montgomery. Let me get it clear. Then, in order to compete, 
you must, as I understand your testimony, be able to do two things. 
You must be able to expend a great deal of money for advertising, 
considerably more capital outlay than is required to set up your 
factory and produce the product, and in addition you must sell it on 
some basis that you call sales appeal, which is not related to the 
actual quality or use of the tooth paste. Is that a fair statement of 
the problem you face? 

Mr. Ephraim. That is it. 

The Chairman. It doesn't follow, it seems to me, that the abolition 
of this national market which is obtained through advertising would 
be followed by reduction in price. As a matter of fact, it might be 
followed by just exactly the reverse, and the consumer might have to 
pay more for the product than under the present system, because I 
assume that you can have a lower price for a product if you have a 
large demand, if large volume of output and sales makes it possible 
to reduce the price of the single commodity. 

I remember when I was a youngster the most popular cigarette 
brand that I knew anything about was the Sweet Caporal cigarette. 
Everybody seemed to be smoking Sweet Caporal cigarettes. For 
some reason or other the manufacturer of that cigarette didn't keep 
up with the modern trend in advertising, and Sweet Caporal gave 
way to other brands. But the price at which Sweet Caporal was 
being sold was higher than the price at which these highly advertised 
brands are now sold. 

I don't think that people as a whole, with respect to cigarettes, 
have any idea that the extravagant claims which are made for them 
in the ads have any real basis. I don't believe, for example, tliat 
any cigarette is good for the throat, as we might be led to expect 
from the advertising, and I don't believe any consumer of cigarettes 
believes that they are good for the throat. The advertising merely 
creates a knowledge of the identity and brings about a demand. 

All discussion of advertising, it seems to me, is totally irrelevant 
unless you can show that by the abolition of advertising and there- 
fore the admission into the field of a large number of producers you 
would bring about an improvement of quality and a reduction of 
price. 



CONCENTRATION OF ECONOMIC POWER 3403 

Mr. Montgomery. Mr. Chairman, may I, by way of answer to that, 
read to you from a letter I received, and then I think Mr. Ephraini 
can confirm from his experience whether or not this is usual. This is 
from the South Shore Consumers' Society in Chicaj);o, sellincr tooth 
plastes at retail, and they advise me, in a letter of February 15, 1939, 
that they handle Mr. Ephraim's brand oi tooth paste, and pay him 
for it $1.20 a dozen, and retail it at 20 cents. They also handle 
Colgate's and Squibb's, for which they pay, respectively, at whole- 
sale, $3.20 a dozen and $3.40 a dozen, and then retail it at 35 cents 
and 40 cents. The Squibb's package and Mr. Ephraim's package are 
exactly the same size. It retails at twice the amount charged for 
his, and the wholesale cost to them is almost three times the cost of 
his product to them. 

Now, obviously, Squibb's is a very much larger operator than 
Mr. Ephraim, Do those price figures I read from the letter 

The Chairman. Well, then, Mr. Montgomery, do you suggest to 
the committee that advertising ought to be abolished ? 

Mr. Montgomery. No ; I think what Mr. Ephraim is saying that is 
of importance to this committee is this : Consumers have been testify- 
ing all along that they would like to be able to buy commodities based 
upon the facts as to what those commodities actually are, and Mr. 
Ephraim states rather convincingly, I think, that his product is at 
least as good as any other tooth paste, certainly so far as the official 
action taken by the American Dental Association 

The Chairman (interposing). That is an advertising claim which 
he might make, even in the newspapers, and perhaps get advantage 
from it. 

Mr. Montgomery. Yes; but that is based upon what arc probably 
objective standards of the American Dental Association. 

Then he says — his testimony is — "it isn't eriough for me to have a 
good product and to manufacture a thing that actually meets the 
consumer's need. I, in addition, must have sufficient capital that I 
can go out and buy access to the consumer." In other words, making 
a good product is only part of the producers' job. In addition you 
must have a franchise, you must purchase a franchise to get access 
to consumers' choice. He can't even submit his product to the selec- 
tion of the consumer. 

The Chairman. It has never been otherwise, Mr. Montgomery, and 
it doesn't make a bit of difference whether he does his business on a 
national scale or on a local scale, he cannot sell to any consumer unless 
he does some sort of advertising. 

Mr. Hinrichs. May I ask a question, Mr. Chairman? 

The Chairman. Certainly. 

Mr. Hinrichs. Mr. Ephraim, is your point with reference to tooth 
paste as a particular product, that you have a product in which the 
consumer can never be expected to exercise a technically discriminat- 
ing choice unless the product is so villainously bad that it causes the 
teeth to fall out or scratches the enamel so that it falls off almost 
immediately, that the technical standards of a good tooth paste are, 
or would be, essentially established through technical testing. That 
would be a condition, I gather, of the. tooth-paste business as you 
have described it. Would that be correct? 

Mr. Ephraim. Yes. 



3404 CONCENTRATION OF ECONOMIC POWER 

Mr. HiNRicHS. The second thing that I would gather from your 
testimony is that the manufacturer of a tooth paste meeting those 
technical standards is sen art which any competent manufacturer of 
tooth paste could follow. There is no secret about the manufacture 
of a good tooth paste. 

Mr. Ephraim. No. 

Mr. HiNRiCHs. The .third poiJlt^ then, that I gather from your 
testimony, is that at the present time the consumer is spending a 
fairly considerable amount of rnvney to be educated through adver- 
tising; and the fourth point, ih^t'.jf you were to make an adver- 
tising appeal to ihe consUQier, H \^ould be necessary to say some- 
thing other than that you Were making a really good tooth paste, 
that that is a common claim vrhich could be made by a number 
of manufacturers, and that you nmd to add sex appeal or sweet 
breath or something else that is irrelevant in order to make a dis- 
tinctive appeal. 

Then, would it follow from those four points which you have 
been making that your conclusion is that the consumer could ar- 
rive at an intelligent choice much more cheaply if there were avail- 
able a grading by a Government agency, for example, of the va- 
rious tooth pastes that meet certain differentiated standards of 
technical adequacy? Is that the conclusion that comes out of your 
testimony, that in this kind of a product advertising is an ex- 
tremely expensive way of establishing consumer guidance, and that 
it could be much more cheaply done and more accurately dpne 
through some form of impartial grading and standardizing of the 
product? 

Mr. Ephraim. 1 am not here to say that because somebod;^ else 
is lucky enough to have a million dollars to spend on advertising, 
and I may not have that, that advertising should be stopped. That 
isn't what I meant to say at all. I simply say that that situation 
is one in which a manufacturer of tootn paste simply can not 
make any headway. 

The Chairman. Well now, let us assume that we have a situa- 
tion; we have created another Government agency, as Mr. Hin- 
richs suggests, to test and grade these various tooth pastes so that 
each manufacturer, you included, may be able to say, "This new 
agency has given me Grade A." 

Now, starting from there we have 11 tooth pastes, 4;he 10 of which 
you have been speaking and yours, all of which have been desig- 
nated by the Government agency as grade' A. Where do we go 
from there? How are you'>going to get into the market, and how 
are the 11 of you going to compete to sell your products? 

Mr. Ephraim. If there were a Government agency that would 
grade tooth paste, such as you have designatipdj which is more or less 
the general idea back of all this, my competitive position would be 
helped in that: the same reasons would not continue to exist for a 
corisumer to buy those 10 tooth pastes as existed before. 

The Chairman. Suppose five of your competitors advertise this 
sex appeal of which Mr. Hinrichs talks. "Vv'ouldn't they have an 
advantage over you? 

Mr. Ephraim. We all could advertise sex appeal, but we all couldn't 
advertise, for instance, that our tooth paste corrects acid mouth. 



CONCENTRATION OF ECONOMIC POWER 3405 

The Chairman. Of course everybody will agree that false adver- 
tising should be condemned, and I think there is a strong move to 
support what we call truth in advertising. 

Mr. Ephraim. Yes. 

The Chairman. But assuming, now, truthful advertising, is there 
any objection to it, and if there is no objection to it, what diflference 
would the grading of these articles have upon the use of advertising 
and the success of the big advertiser in getting the field? In other 
words, after you have what you are talking about, unless you abolish 
advertising you haven't changed the situation at all, as it seems to 
me. You are, therefore, driven to make the choice between con- 
demning advertising altogether or saying, "We will be just exactly 
in the situation then that we are now." 

Mr. Ephraim. Well, for example, let's talk about the canned- 
goods business, about which I know nothing more than what one 
might know generally. 

The Chairman. You really ought to testify about the business of 
which you know something. 

Ml*. Ballinger. Mr. Ephraim, you say that 10 brands of tooth paste 
control 90 percent of the market. How many manufacturers make 
those 10 brands? 

Mr. Ephraim. I believe that they are 10 different manufacturers. 

Mr. Ballinger. Twenty or twenty-five years ago were there more 
manufacturers of tooth paste in this country? 

Mr. Ephraim. There probably were less. 

Mr. Ballinger. There are more now than there ever were? 

Mr. Ephraim. I should think so. 

Mr. Ballinger, I thought these large companies were probably the 
product of merger and combination and that that is how they ac- 
quired national distribution. 

Mr. Ephraim. Well, there is perhaps another reason why that 
didn't work that way. The use of dentifrice is becoming more wide- 
spread. 

Mr. Ballinger. If that were the case, I was going to say they 
simply raised the ante on you. 

Mr, Ephraim. Of course, I am only answering what I believe. I 
haven't checked up. 

Mr. Ballinger, There is another point here. How many of these 
10 brands are approved by the dental association ? 

Mr. Ephraim. One. 

Mr. Ballinger. Then it looks like 90 percent of that advertising 
is sheer waste from the standpoint of good public health and the 
things a tooth paste should do. We won't condemn advertising, but 
certainly the advertising that was exhibited here has a good deal of 
waste in it. 

Mr. Ephraim. You might state it that way. I believe you could 
quite properly criticize the nine others certainly. 

Mr. Ballinger. If we went after the other nine that are in exist- 
ence and made them put out a good product, by checking their adver- 
tising, perhaps then we wouldn't need your services. 

The Chairman. Well, may I say, Mr. Ballinger, that the history of 
common law makes the distinction which is being made, or which 
ought to be made here today. There nevef^has been any objection in 

124491— 30— pt. 8 9 



3406 CONCENTRATION OF ECONOMIC POWER 

the law to what has been called "puffing." Every distributor was 
entitled to puff his own product, to boast about it in other words, 
and say it was the best "in all the world. But when the distributor 
went beyond puffing to misrepresent the article, then he was violating 
the law, and that is a very sound distinction. But to try to make a 
new distinction the result of which would be to say that there shall be 
no advertising at all would, it seems to me, be entering into a very 
dangerous field to free enterprise, to individual initiative. 

Mr. Ephraim. You have in New York City, lor instance, graded 
milk which somebody spoke of before. Many of the large milk- 
distributing companies continue to advertise very heavily. There 
are also independent milk companies. . I don't know what the pro- 
portion of business is as I am saying it to you. All I am saying is 
if I went into the manufacture of neckties, for instance, about which 
I know nothing, the competition would be on a straight efficiency 
basis. I go into this business, and that situation doesn't exist. I say 
it to you 'for whatever it may be worth. 

Mr. Montgomery. I don't understand that your testimony is an 
attack upon advertising at all. Haven't you said that what you 
want is to have these goods sold to the consumer so the consumer can 
know when he is getting a good tooth paste, a tooth paste that meets 
normal consumer needs? Is that correct? 

Mr. Ephraim. Yes. 

Mr. Montgomery. And if their advertising or their label or their 
package carries some proof or evidence of that fact, that is the thing 
you are speaking for, I take it. 

Mr. Ephraim. The competitive market would be opened up. 

Mr. Montgomery. Now, if that fact is required to be shown on the 
package, you wouldn't care, would you, what adyertising they do in 
addition to that? 

Mr. Ephraim. No; obviously people with more millions at their 
disposal are certainly entitled to have the use of it. 

Mr. Montgomery. I take it your argument is, then, that you as a 
manufacturer producing a first-rate product want to be able, to give 
the consumer an opportunity to buy that product and want to be 
given an opportunity to compete in the market. 

Mr. Ephriam. Well, I only wanted to say this, that as a com- 
petitive situation exists on a straight advertising brand basis, the 
market is more or less closed. It is not on a straight quality basis 
as it is now constituted. If there were grades or something equiv- 
alent to that, you would restore it somewhat to that type oi com- 
petition, and I at least might be able to enter the market again. I 
simply say that on a straight quality basis, competition on a straight 
quality basis would be more likely. I am not talking of myself as an 
individual. The situation would be the same for all the hundreds of 
other manufacturers there might be, it would be more in the public 
interest and consumers could get what they wanted. This way there 
is no way of reaching them because of the stone wall that exists 
between us. 

Mr. Montgomery. In addition you are testifying that the tooth- 
paste market is preempted by 10 large manufacturers, and it would 
require a very large expenditure of money or a very large company 
to be able to get access to that national market. 

Mr. Ephraim. Yes. 



CONCENTRATION OF ECONOMIC POWER 3407 

The Chaikmax. But he also testified that there are more manu- 
facturers than there used to be. 

Mr.^ EphraiM. I say that there are probably more. I only sav this, 
I don't actually know, but the market for dentnfices is increasmir the 
same as the market for soap, cosmetics. These are products that are 
coming into mere general use. A generation ago people didn't brush 
their teeth at all probably and even today, perhaps one-third of the 
population do, due to education that has been carried on for a number 
of years. On that basis there are likely to be more manufacturers 
than there were in the past. I doii't know the figures. It is simply 
that the market is very likely to be an increasing one. 

The Chairman. Any other questions to be asked of this witness. 

Mr. Blaisdell. If i understand the testimony of the witness, ne 
has stated that by and large on the sale of these products there is a 
tremendous amount of advertising sold along with the product which 
the consumer buys and the advertising comes at added cost. In other 
words, m addition co buying the dentifrice, I a en also buying a let of 
pictures m newspapers and a lot of other things. 

Mr. Ephkaim. VV'ell, in addition to buying what might be called 
the proper functions of the dentifrice, you are Duymg certain liiu- 
sions, if that is what you mean. 

Mr. Blaisdell. In fact, you are buying advertising and in this 
case, in accordance with Mr. Montgomery's record, the cost of that has 
been passed on to the consumer. 

Mr. Ephraim. I can't say that so much as to say that we have 
here a product that we would be in a position to retail at 20 cents 
which is approximately half the price of these other products, if 
there is a means of getting that into the market We hav^ here — 
and I will ask you to assume at least for the moment — a product of 
certainly equal merit. We have a product that has the necessary 
background that would go with it. We have a product that could 
retail at 20 cents, which is roughly half the price of these other prod- 
ucts, but there is no effective means of getting that to these people 
on the other side of the fence. 

Mr. Blaisdell. You don't think it would be possible for a large 
number of small manufacturers who have the technical information 
to do it by selling in a lot of local markets a standardized product to 
create the broad market for this product that has been created in 
the past through advertising? 

Mr. Ephraim. Well, you see — let us assume in the city of Wash- 
ington, five men, Jones, Brown, what have you, started to manu- 
facture tooth paste. Those names would immediately languish on 
somebody's shelves. If there was some basis for identify irg the 
quality of those products so when you bought Jones' tooi 'i paste 
you would feel you were getting a satisfactory product, if tne Ameri- 
can Dental Association had accepted it or if there would be some 
other means of identifying it, yoii would then be willing to buy it. 
At the present time you are suspicious of it and would continue to 
pay 25 cents. 

Mr. BiiAisDEUii. If tooth paste is tooth paste and not this name or 
that name, then do you think it would be possible for a gro^p of 
small manufacturers scattered over the country, each one perhaps 
dealing in a limited market, to sell perhaps :is much of the product 
as is sold now on the basis of national advertising? 



3408 CONCENTRATION OF ECONOMIC POWER 

Mr. Ephraim. I should think so, if tooth paste were tooth paste. 

Mr. Blmsdell. If that were the situation and you had competition 
between those small manufacturers, do you think you come down 
some place nearer to the 20-cent price ? 

Mr. Ephraim. Yes ; very much so. For instance, if a situation as 
that existed, the competition between myself and these five other 
men would be. a free and open one and the business would go to that 
man who could make a good product at the lowest price, the same 
as the Government buys tooth paste. 

The Chairman. Suppose, Mr. Ephraim, after you got started in 
this field under this system and you were fortunate enough to induce 
Shirley Temple to use your tooth paste and, knowing that, would you 
refrain from advertising in the newspapers? 

Mr. Ephraim. Well, there is nothing immoral ai)out Shirley Tem- 
ple usiijg my tooth paste or advertising it. 

The Chairman. Of course not, and you wouldn't hesitate to adver- 
tise the fact and spend money -for advertising and get the business 
that would come from that use, would you '? 

Mr. Ephraim. I would infinitely prefer doing it on that basis that 
I said to you. The present basis of competition is such that I would 
have to get Shirley Temple or something of that nature. 

The Chairman. Yes ; but even though you have this grading which 
you speak of, you would still have the same condition exactly unless 
you prohibited advertising, and you insist that that is what you don't 
want to do. 

Mr. Ephraim. Well, I still don't think so. 

The Chairman. Of course, you don't think so. 

Now, if I say that here are four tooth pastes offered to you and 
they are all Government grade A for the moment, if you as an in- 
dividual want to buy the one tooth paste that Shirley Temple likes 
and pay 10 cents more a tube for it, that is your privilege. 

Well, people are just like that and thej^ want to do just that thing 
and there is nothing illegitimate about it. It just seems to me to 
be a complete waste of time, trying to talk about trying to prohibit 
advertising when you are not going to prohibit it. 

Mr. Montgomery. Since I brought the witness here and may be 
responsible for wasting your time, I want to answer that, sir. The 
witness has said over and over again he doesn't want to prevent any- 
body from talking about Shirley Temple. 

The Chairman. That seems to do away with the whole testimony 
of the witness because you brought him here to make an attack on 
advertising but when he is brought facis to face with that he denies 
the attack on advertising. 

Mr. Montgomery. I certainly object, sir, to the statement that we 
brought him here to make an attack on advertising, because that 
implies a motive that doesn't exist. 

The Chairman. I don't want to imply his motive, but that is what 
he is 

Mr. MoNTGOMEiJY. I think I will summarize in three sentences his 
testimony and then ask him if I have correctly stated it. He has 
said that (1) if the market were not preempted by 10 large manufac- 
turers he would be able to get his products before the consumer ; (2) he 
has said that if in those markets where tooth paste is sold to the 
consumer quality could be identified by a definite standard or grade, 



CONCENTRATION OF ECONOMIC POWER 3409 

then he would have an equal chance or perhaps a better chance than 
some to get the consumer to accept his product; (3) if he could do 
that and get his product before tlie consumer, he would be able to 
sell it at about half of what they are now paying for a similar 
product. 

Is that a correct summary? 

Mr, Ephkaim. Yes. 

Mr. Montgomery. Does any member of the committee dispute that 
summary ? 

The Chairman. But all of which boiled down comes to the definite 
result that the condition which you describe cannot be brought about 
unless you abolish advertising. 

Mr. MoiSTGOMEKY. I dou't agree, sir. I think it only requires 

The Chairman (interposing). Will you then answer the question 
that I have propounded to the witness and which he did not answer ? 
Assuming the condition exists of grading five different tooth pastes, 
some new Government agency establishes the ^ade and all five are 
grade A, now then, unless you prohibit advertising what is to prevent 
one or two of those from securing a dominant position in the market ? 

Mr. Montgomery. I think from his testimony — I can only base my 
answer on that since I donZt know the tooth paste business at all — 
who will get the domination of the market depends upon who has 
the most money presumably. You ask me how this result 

The Chairman (interposing). Do you want to take the money 
awav from them? 

Mr. Montgomery. If I understand his testimony correctly, he says 
the consumer can buy tooth paste for just half as much if two things 
are done: .(1) If the existing monopoly in the tooth paste market is 
removed — — 

The Chairman (interposing). Now, wait. You are making the 
assumption that there is a monopoly. I think the witness testified 
that these* 10 manufacturers are indejDendent from one another when 
Mr. Ballinger propounded that question to him and the answer was 
that they were not controlled. 

Mr. Montgomery. Well, then I would say the concentration of 
control or the domination of the market. Ninety percent of the busi- 
ness is in the hands of only 10 manufacturers. If that situation 
could be removed and if standards were made available, then he says 
the consumer would be able to buy tooth paste at about half the 
present price and, as I understand him, that has been what his tes- 
timony IS. 

Mr. Ballinger. Don't you mean that if the quality of the tooth 
paste were once established from the standpoint of health require- 
ments that advertisement would be less costly to a newcomer like 
Mr. Ephraim, that price would then be the dominate factor and that 
Mr. Ephraim would have a chance? 

Mr. Montgomery. Now you are asking me to testify. 

Mr. Ballinger. If you once establish the quality of the tooth paste, 
I don't believe people are foolish enough to buy tooth paste because 
Shirley Temple used it. I think the great mass of people, if they 
could get a cheaper tooth paste would buy it if they knew it was up 
to specifications of dentists, and so forthj and properly testified to. 

The Chairman. You know, it just strikes me, Mr. Montgomery, 



3410 CONCENTRATION OF ECONOMIC POWER 

that there are enough illegitimate practices in the economic world 
for us to try to solve and not bother ourselves with legitimate things 
which in the very nature of the human being you can't control, 

Mr, Montgomery, Well, sir, if you think that the sale of goods to 
consumers on a basis which doesn't tell them what they are getting 
at all, so they don't know what the}' are getting and have no assur- 
ance at all of. what they need — ~ 

The Chairman (interposing). Of course I don't say that. You are 
not entitled to make that inference. 

Mr. Montgomery, I am stating what I think is a major illegiti- 
mate practice in our current system of commerce. That has been the 
contention of our consumers ail the way through. 

The Chairman. But advertising is not illegitimate. 

Mr. Montgomery. I am not saymg a thing about advertising. We 
have been talking about lack of information to the consumer. 

The Chairman. With that there is no disagreement. 

Mr. Montgomery. I think the consumers' position would be con- 
sistently this, that if the consumers can buy goods on the basis of 
fact it would not remove advertising. Advertising would still have 
its own part. 

The Chairman. That is exactly what I am contending. The bur- 
den of this gentleman's testimony has been that because of adver- 
tising 10 firms dominate the market in his product and he cant 
break in, and I have said that even though you standardize the 
tooth paste, you don't remove the advertising; therefore, there is no 
change in the situation and unless you urge the abolition of adver- 
tising there is no sense in talking about advertising as an element in 
creating the situation. 

Mr. Ballinger. Senator, I understand the gentleman's testimony 
to mean if perhaps a simple service could be performed by the Gov- 
ernment of saying a tooth paste met a certain minimum requirement 
of health, that the difficulty of getting into the market from the 
standpoint of the cost of advertising, would be much less than it is 
because there is no establishment of any quality standards ; that an 
enormous and wasteful amount of money is poured into the market 
every year to create fictitious health attributes in tooth paste ; that if 
the Government will step in and say here is a tooth paste which 
meets minimum or high-grade standards for health, the amount of 
money which tooth-paste makers could then spend on advertising 
wouldn't be nearly as much and that then the appeal of low price will 
enter very materially into the picture and give a new small competi- 
tor who can produce cheaply a chance. 

The Chairman. You make a very much better story than has been 
toldiiere yet. 

However, we don't want to conduct a prolonged argument among 
the members of the committee. Do any members of the committee 
desire to ask any questions of the witness to elicit information ? 

Mr. Hinrichs. I still have curiosity. You have been speaking 
about getting into the national market, which presupposes, I should 
think, a rather substantial expansion of your total volume of business. 
Is the manufacture of tooth paste a business which is suspectible to 
rapidly decreasing raanufacturing costs? Suppose you are now 
engaged in manufacturing tooth paste ; is that correct ? 

Mr. Ephraim. Yes. 



CONCENTUATTON OF ECONOMIC POWER 34]] 

Mr. HiNRicris. Suppose you Avere to double the volume you now 
have. Would your manufacturing costs up to the shipping room be 
substantially lower than they are at the present time? 

Mr. Epiiraim. The larger the production, the lower the costs would 
be up to a certain point, I suppose. 

Mr. HiNRiciis. Up to what point? 

Mr. Epiiraim. It would be difficult to say, but, to answer your direct 
question, if my production were doubled my costs would be lower. 

Mr. HiKRiCHS. I have no idea what your production is, but it is not 
now large enough to supply even a large part of the New York market, 
I take it? 

Mr. Epiiraim. It is relatively small ; yes. 

Mr. HiNRicHS. But do you need'a national market? Do you reach 
a point rather early in that business where you run into substantially 
stable costs of manufacturing? 

Mr. Ephraim, Yes : I think you would. 

Mr. HiNRiCHS. And the decrease in costs from that point on is a 
decrease, is a spreading of the overhead of the selling cost; is that 
correct: that is, to get into the national market is going to cost you 
a certain number of million dollars? 

Mr. Ephraim. Yes. 

Mr. Hinrichs. And it will cost you a million dollars, whether you 
are in the national market on a large scale or on a small scale, really, 
and an increase in your volume from the point oi \'\e\v — from being 
a moderate-size business to a large-size business is merely a way of 
decreasing the overhead cost on selling; is that a correct picture of 
your business? 

Mr. Ephraim. I am sorry — if you will just state that again. 

Mr. Hinrichs. I am trying to see where the advantage to the con- 
sumer lies in having a service to a national market. Obviously you 
want to expend the size of your business to a point where you are 
achieving low manufacturing costs — low cost to the consumer ? 

Mr. Ephraim. Well, if you are asking me, we will say it costs 
so much per unit to produce a thousand gross of toothpaste within 
a certain period of time. You are asking me if I were to double 
that production, we will say, whether my costs would be lower? 

Mr. Hinrichs. Yes. 

Mr. Ephraim. There would be a point beyond which the dropping 
off wouldn't be very great, up to a certain point it would be con- 
siderable, but beyond that — in other words, I might buy 10,000 tubes 
or 10,000 gross of the empty tubes; that is a s<>parate business in 
itself, but saving between 10,000 and 20,000 would be very little, 
whereas the saving between 1,000 and 10,000 might be substantial. 

Mr. Hinrichs. So that from that point on if you are manufac- 
turing 10,000 gross in that period of time, any growth to 100,000 gross 
tubes would be reflected in selling economies and not in manufactur- 
ing economies? 

Mr. Ephraim. Very likely; yes. 

Mr. Hinrichs. Would there even be very large economies in sell- 
ing if you are selling against accepted standard grades ; putting the 
question the other way round, if you were bidding on a contract for 
government or mail-order house that was going to either use it itself 
or sell under its own brand, would you be able to quote a substantially 
lower price on the equivalent of 100,000 gross as against 10,000 gross? 



3412 CONCENTRATION OF ECONOMIC POWER 

Mr. Ephraim. If you reach those figures there might be a saving. 
I can't tell you oflrtiand just where the point would come in; the 
point where the savings would be likely to stop, but beyond a oer- 
tain point — as you say up to a certain point — my savings would be' in 
the manufacturing by having a larger production ; beyond that point 
it might be in the selling. 

Mr. HiNKiCHS. I .sympathize with your desire as an individual to 
have a national market, but~as one interested in consumers it isn't 
necessarily imperative that you as an individual should serve a na- 
tional market. Have you been able to establish a business which will 
service a local market ? I was going to ask you if you were going 
out in the near future, but can you establish yourself, have you 
been able to establish yourself, in that local market so that you are 
manufacturing and distributing to consumers economically within 
that limited area? 

Mr. Ephraim. Well, my business as it is today is not a local busi- 
ness; it is done with individuals in various parts of the country. As 
a matter of fact, it is essentially a mail-order business; it is not a 
local business, and it has been severely limited because there has been 
no way of reaching people. In other words, if I came into the city 
of Washington I couldn't do a local business without really adver- 
tising. 

The Chairman. Any other questions? Thank you very much, 
Mr. Ephraim. 

(The witness, Mr. Ephraim, was excused.) 

You have two more witnesses? You will call them tomorrow 
morning? The committee will stand in recess until 10:30 tomorrow 
morning and let the Chair express the hope that the members will 
assemble on time. 

(Whereupon at 4: 50 p. m. an adjournment was taken until Friday, 
May 12, 1939, at 10 : 30 a. m.) 



INVESTIGATION OF CONCENTRATION OF ECONOMIC POWER 



FRIDAY, MAY 12, 1939 

Untted States Senate, 
Temporary National Economic Committee, 

Washington^ D. C. 

The committee met at 10 : 48 a. m., pursuant to adjournment on 
Thursday, May 11, 1939, in the Caucus Room, Senate Office Build- 
ing, Senator Joseph C. O'Mahoney presiding. 

Present: Senator O'Mahoney, chairman; Representatives Reece 
and Williams; Messrs. O'Connell, Lubin, Henderson; and Lowell J. 
Chawner, Chief of Division of Economic Research, Bureau of For- 
eign and Domestic Commerce, alternate for Mr. Patterson. 

Present also: Messrs. D. E. Montgomery, Consumers' Counsel, 
Agricultural Adjustment Administration; and Willis J. Ballinger, 
Federal Trade Commission. 

The Chairman. The committee will please come to order. 

A few days ago, during the presentation of the hearings on beryl- 
lium by the Department of Justice, when the witness. Dr. F. H. 
Hirschland, was on the stand, I asked him for some information in 
respect to the capital structure of certain subsidiary corporations of 
the Metal & Thermit Corporation, of which he is an officer. That 
report has now been received and it is here presented for the record. 

(The report referred to was marked "Exhibit No. 538" and appears 
in appendix, Hearings, Part V, p. 2298.) 

The Chairman. Will you call your first witness? 

Mr. Montgomery. Mr. Walker. 

The Chairman. Do you solemnly swear the testimony you are 
about to give in these proceedings shall be the truth, the whole truth, 
and nothing but the truth, so help you God? 

Mr. Walker. I do. 

TESTIMONY OF L. R. WALKEE, SUPERVISOR OF BUILDING MATE- 
RIALS DEPARTMENT, SEARS, ROEBUCK & CO., CHICAGO, ILL. 

Mr. Montgomery. Will you give your name, please. . 

Mr. Walker. L. R. Walker. 

Mr. Montgomery. Address? 

Mr. Walker. Sears, Roebuck & Co., Chicago, 111. 

Mr. Montgomery. What is your position with the company, Mr. 
Walker. 

Mr. Walker. I am a supervisor. 

Mr. Montgomery. Of what division? 

Mr. Walker. Having charge of the building material end of our 
business. 

3413 



3414 CONCENTRATION OF ECONOMIC POWER 

Mr. Montgomery. Now, Mr. Walker, before you go into your testi- 
mony there is a point I want to make. I understand your testimony 
is going to involve at one point, at least, a criticism of certain kinds 
of advertising on the part of your competitors that you have encoun- 
tered. Is that correct? 

Mr. Walker. Yes, sir. 

Mr. Mo>rrGOMERT. You are going to offer that testimony? 

Mr. Walker. Yes, sir. 

Mr. MoNTGOMERT. I Want you to state for the record whether or 
not, when you offer that specific criticism, you are launching an 
attack on advertising. 

Mr. Walker. I can hardly do that. Advertising has really built 
our business. We are the largest newspaper advertisers in the coun- 
try, in addition to spending $8,000,000 a year on catalogs, and we 
feel advertising has made us. 

Mr. Montgomery. And you think it would be a fair statement that 
I have not brought you here to make an attack upon advertising ? 

Mr. Walker. I hope not, because I would not make a very good 
witness. 

need for standard ratings in marketing household equipment 

Mr. Montgomery. Now, Mr. Walker, tell us first about the plumb- 
ing and heating part of your work. I don't want you to go into a 
general discussion of the work. I think you can state first of all 
what the plumbing and heating equipment means in the cost of home 
building. 

Mr. Walker. In a new home the plumbing and heating part of 
the home is about 16 percent of the cost of a home. In modernizing 
it runs from $250 to $1,500 per job, and it is one of the, few mechan- 
ical parts of a home. It is something that has to perform and 
function, consequently it is quite necessary that it should have a long 
life and be functioning right. 

Mr. Montgomery. Well now, what has been the development of 
the art in this plumbing and heating industry over recent years? 

Mr. Walker. Well, since 1927 the industry has been very, very 
badly depressed. It got down to about 15 percent of normal during 
the thirties, consequently there has been very little money in the 
industry to develop improved methods and improved products. But 
in other industries there has been quite a lot of technological develop- 
ment that could be used in the plumbing industry if manufacturers 
liad the money to spend. A few manufacturers have spent enough 
money to improve their product but the majority have not because 
they couldn't afford it. 

Mr. Montgomery. Can you give some particular illustration of how 
improvements have been made in the development of some of this 
equipment ? 

Mr. Walker. Yes. In the case of furnaces, because of the art in 
the casting and the molding of furnaces the method was quite 
limited for many years and everybody made the same type of prod- 
uct. Because of the similarity in the product, a measurement of the 
v/idth of the fire pot of a furnace was used in rating the capacity of 
the furnace. That went on for many years. 



CONCENTRATION OF ECONOMIC POWER 34 15 

Mix Montgomery. Let me get this clear. You mean then that the 
width of the firepot became through usage in the trade a sort of 
standard by which a furnace was rated? 

Mr. Walker. Yes, sir. 

Mr. Montgomery. And by which it was sold to consumers? 

Mr. Walker. Yes, sir; and the measurement used was the widest 
point in the fire pot. Now, because the automobile industry showed so 
much improvement in casting and molding, it is possible today to 
make a furnace or a cast-iron product with a much thinner wall, 
and a much straighter side than in the former days. I'ormerly 
it was necessary to have quite a slant on it in order to drag it out of 
the sand. We call this the drag in molding. When the auto- 
mobile industry came in they learned how to get straighter sides, 
how to get thinner walls, and how to do a number of things we never 
knew before. Consequently today we can make a furnace that has 
much more capacity with the same size fire pot that we had before. 

Mr. Montgomery. Under present methods the fire pot may have a 
larger Oi smaller capacity but still have the same measure? 

Mr. Walker. Yes. 

Mr. Montgomery. You can illustrate that? 

Mr. Walker. Yes; the chart. 

(The chart referred to was marked "Exhibit No. 539" and appears 
on p. 3416.) 

Mr. Walker, As an example, if you will visualize this furnace, 
here, the fire pot 

Mr. Montgomery (interposing). Mr. Walker, in talking about the 
chart, if you will indicate the parts of the chart you are pointing at 
it will help the final record, because that will be reproduced in the 
record. 

Mr. Walker. Yes. If you visualize the furnace, this is the fire pot 
here. 

Mr, Montgomery. Where is it on the chart ? 

Mr. Walker. Right here; and here is the same thing here. 

The Chairman. The point, Mr. Witness, is that saying "here" 
or "there" in the record means nothing, so if you will just define the 
part of the chart to which you are referring, then the reader will 
know what you are indicating to us by your gestures. 

Mr. Montgomery. Each part of your chart has a little label on it, 
so will you just refer to that? 

Mr. Walker. You mean this? Do I define that by saying it is 
the fire pot? 

Mr. Montgomery. The upper picture, or something like that. 

Mr. Walker. In the upper picture here is the fire pot. Now, for- 
merly it was necessary to have a slant similar to this in order to 
drag out of the sand. 

Mr. Montgomery. Similar to the furnace A design. 

Mr. Walker. Yes; shown on the right of the chart. In the last 
few years we have been able to straighten that out as you see it on 
the left side of this chart. 

Mr. Montgomery^ Shown as furnace B. 

Mr. Walker. Shown as furnace B. Now, consequently, the meas- 
urement as the consumer knows it today, an 18- or 20- or 22-inch 
furnace, is a measurement shown from here to here in A. But by 



3416 



CONCENTRATION OF ECONOMIC POWER 



Exhibit No. 539 



WARM AIR GRAVITY FURNACE OUTPUT AGAINST 
ACCEPTED SIZE DESIGNATION 



FIREPOTS 




FURNACE "A' 



■22IN 




AREA FOR GRATE 
354- SQ. IN. 



SIZE DESIGNATION 

IS BY MAXIMUM 
FIREPOT DIAMETER 




"B" SUPERIMPOSED ON'K" 



FURN/)^CE B 
i* 22 IN. >>, 




AREA FOR GRATE 
322 SQ. IN. 



COMPARISON OF GRATE AREAS 



50 100 



SQUARE INCHES 
ISO 200 £50 300 35C 400 



GRATE AREA OF 'X' 
GRATE AREA OF "B" 




CONCENTRATION OF ECONOMIC POWER 3417 

straiojhtening this out as we have it in this B furnace here you have 
a very much larger grate area here than you had formcnly. Conse- 
quently, this measurement no longer is the proper measurement for 
a furnace. 

You can take the same firebox as shown in A and B and by 
straightening this out you can get 25 percent more heat out of the 
furnace; in other words, the cubic area of the box will go from 254 
to about 322 by straightening out those sides. 

Mr. Montgomery. That is without any change in the dimensions 
of the fire pot? 

Mr. Walker. But still that furnace is sold as an 18-, 20-, or 22- 
inch furnace based on the measurement of the top of the firebox. 

Mr. Montgomery. Now, Mr. Walker, in your opinion, what kind 
of standard could be arrive at for a furnace? 

Mr. Walker. There is a standard that has been recommended, but 
it was not accepted by the industry because, in our own case, in order 
to improve this product we had to spend $205,000, and because of 
the depressed condition of the industry many companies don't feel 
they want to spend that amount of money. Consequently, they op- 
pose any rating, except the ratings that have been standard for 
years. But there is a rating that was worked out by the University 
of Illinois which, if used and made mandatory, would protect the 
consumer. It is based on the amount of fuel you put into a furnace 
minus the stack temperature, as the heat goes out, leaving the bal- 
ance of the heat that goes into your home. That is the wav to rate 
a furnace. 

Mr. Montgomery, You say that such a standard as that would pro- 
tect the consumer, meaning that the consumer is not protected under 
the standards now? 

Mr. Walker. He has no way in the world to know what he is get- 
ting. If the furnace is a certain width through the firepot, as 
shown here, it would be as much as 25 percent different in heat de- 
livery of the product for the same size measurement. 

Mr. Montgomery. What is the effect of the absence of a valid 
standard in this industry upon you as a maker and seller of furnaces? 

Mr. Walker. In order to meet the situation we have two furnaces, 
one of which we made in the twenties. We are showinj^ two fur- 
naces, one of the 22 delivering 254, the other 322. But it is neces- 
sary for us to keep both products and offer both products to anyone 
who wants the difference. 

Mr. Montgomery. And the old product that you carry you are able 
to sell at a lower price ? 

Mr. Walker. Yes. 

Mr. Montgomery. You carry that to meet competition of those who 
sell the old type? 

Mr. Walker. Yes. 

Mr. Montgomery. Your conclusions, then, are that there ought to 
be a standard by which a furnace capacity or furnace performance 
could be rated, for both your interest and the interest of the con- 
sumer ? 

Mr. Walker. Yes. 

Mr. Montgomery. By whom should such a standard be worked 
out? Have you any opinions on that? 



3418 CONCENTRATION OF ECONOMIC POWER 

Mr. Walker. I have always felt there ought to be a standard that 
had some teeth in it. We have asked the Bureau of Standards to 
do this thing, or some agency that has authority so that the Federal 
Trade Commission, in case it was not respected, could take some 
action on it. 

The Chairman. We have read a good deal in the public press and 
elsewhere about Government interference with business. I think 
from your statement, so far as you are concerned you are not par- 
ticularly alarmed about that. 

Mr. Walker. No, sir ; not at all. 

The CiiAiRMAJsr. In other words, government can do a great deal 
to help business by protecting the public ? 

Mr. Walker. It has been our feeling that they not only can but 
they have. The chairman of the board and our executive vice presi- 
dent, General Wood and Mr. Nelson, spend much of their time in 
Washington, as you probably know, and we believe they can do some 
good. They have done a great deal of good for the public. 

Mr. Montgomery. You had a similar illustration in the case of 
boilers. I wish you would describe that to us. I think probably 
the easiest way would be to introduce your chart on that; perhaps 
just describe the situation right from the chart. 

(The chart referred to was marked "Exhibit No. 540" and appears 
on p. 3419.) 

Mr. Walkeb. There again you have an industry, the foundry 
industry, that has been very much depressed through the steel 
companies trying to take its market away from it. There was no 
rating whatever on boilers up to the early twenties, consequently an 
association of contractors wrote to 17 boiler manufacturers and se- 
cured the size of their boilers and their claimed ratings, and they 
cubed the boiler and divided it by IT and took the claimed ratings 
and divided them by 17 and said that was the average and rated 
boilers on that basis. 
Mr. Montgomery. I am not sure that is quite clear. 
Mr. Walker. I am going to show that. In other words, they 
took the width of a boiler, 23 inches across here if it happened to 
be that size, then took the height, which happened to be 41 inches 
in this illustration, and the length of 20 inches. They cubed these 
figures and in this boiler it figures out to be 18,860. Then they 
added the cubed results for each of the 17 manufacturers and divided 
this total by 17. They then said that on that size boiler they would 
take their claimed ratings and divide that by 17 and that was the 
rating of the boiler. That was the standard, which means nothing 
whatever. You come in the market today with a new boiler and *i 
if you raise this combustion chamber some, which w^ould give you 
greater heat, or if you have a through travel and it would come 
through twice instead of once, you get no credit. 

Mr. Montgomery. In the rating — it would still rate the same. 
Mr. Walker. Yes; it is still rated on the original average cube 
of 17 manufacturers in about 1921 or 1922. With the technological 
development in the United States of cast iron we are today able to 
produce a boiler that has 25 to 35 percent greater capacity than the 
boilers of the twenties, but so far as the public is concerned we 
have one rating and it is set up by a contractors' association. There 



CONCENTRATION OF ECONOMIC POWER 



3419 



Exhibit No. 540 

EXAMPLE: 5 SECTION BOILELR 



NEW BUR.. CUBAGE 



//gW BLR.. R-ATINg- 
AVE^R-A<9^ BLR- R.AT/NG- 



/AVERiAQE BL-R-.CUBAG-E 

Indusiry 5' se.ch'on ave^raae, ouoacje, - iSfiS-^ cu. in. 

roHn^ claim ' 2-36.5 s<j. if. 

A'£->V BO/L ER, CUQA Gl= . .. i3,aeo ccl. />, , 
n " R.ATIN& _ _ ._ X 

I'd, 03-^ ~2.3^.5" 
X'235.8 6 s<).-ft s-feant 



siiZQni 




3420 CONCENTRATION OF ECONOMIC POWER 

is no manufacturers' association rating at all. As a result of this 
condition, several of the better manufacturers built up a rating 
as it should be, but it has been opposed by numerous other manu- 
facturers who don't want to spend money, and we have never been 
able to get it through. It certainly gives no knowledge whatever 
of the form of the boiler based on any industry rating. . 

The Chaikman. What was the obstacle about your .getting that 
t hrough ? 

Mr. Walker. Well, it was submitted to the Association of Manu- 
facturers, something more than a year ago, and the majority of 
them refused to approve it. 

The Chaikman. What association of manufacturers? 

Mr. Walker. Association of Boiler Manufacturers. 

The Chairman. Are you a member of that? 

Mr. Walker. Our company is; we have two companies which are 
members. 

The Chairman. You have two companies which are members? 

Mr. Walker. Yes. 

The Chairman. What are those two companies? 

Mr. Walkek. The Kundle Manufacturing Co. and Hart & Grouse. 

The Chairman. Are they subsidiaries of Sears Roebuck? 

Mr. ^A'alkek. Well, yes; one is a wholly owned compaiiy and the 
other is a partially owned. 

The Chairman. And they are engaged 

Mr. Walker (interposing). In the manufacture of boilers. 

The Chairman. Was the problem debated at length? 

Mr. W'lLKER. No. It was submitted as a recommendation to all 
manufacturers in writing and was discussed. I wouldn't say it was 
debated at length ; it was discussed. 

The Chairman. What objections were given or made to the sug- 
gestion ? 

Mr. Walker. I couldn't tell you. I didn't attend the meetings. 
I have, however, with me, the recommendations and so forth which 
were sent out. 

Tlie Chairman. I was interested to know what, if any, argument 
was advanced against it. 

Mr. Walker. I don't know ; I can't imagine any argument against 
it. 

The Chairman. Well, it would be difficult, but I wondered what 
was said. 

Representative Whxiams. Would there be any financial consid- 
eration ? 

Mr. Walker. Oh, yes. What would happen, it Avould force every 
manufacturer to modernize his product, because if you had a standard 
rating that v/as based on the heat output of a boiler and j'ou were 
maimfacturing a boiler that didn't deliver tliat heat you couldn't sell 
it, you would have to modernize your product, and when you must 
make molds it runs into money very quickly. 

Mr. MoNTGOMEKv. On this same question, with respect to trying to 
get standards for fire pots, were you engaged in any effort there to 
try to get the industry to work out a standard? 

Mr. Walker. No. There is a standard now, and, as I say, it is 
very good, but there is no way to force all manufacturers to respect 
it. As an example, when three manufacturers came out with this 



CONCENTRATION *)K ECONOMIC I'OWEK 3421 

boiler with the straighter fire pot, immediately the ratings were 
raised. The other distributors and manufacturers just ajbitrariiy 
raised their ratings, although they didn't change their product, on 
the theory that if you put more coal in it, more often, you can get 
more heat out of it. The University of Illinois test is based on 
putting fuel in the boiler every 8 hours. If you put fuel in every 4 
hours you will get more heat out of the boiler, but you waste a great 
deal of your fuel. 

Mr. Montgomery. In other words the other manufacturers used 
what purported to be a standard, but it wasn't a correct standard. 

Mr. Walker. It wasn't a standard that should have been used. 

Mr. Montgomery. You mentioned the consumer. When 1 build a 
house the architect probably orders the boiler to go into my house, 
doesn't he? 

Mr, Walker. Yes. 

Mr. Montgomery. How does he select the capacity of the boiler? 

Mr. Walker. On the rating of the association. Most architects 
use this rating set up by. this contractors' association. 

Mr. Montgomery. Do you know, if he orders a boiler with a certain 
rating, which I suppose he has figured the house needs to get proper 
heat, by how much the boiler he actually buys may vary from that 
rating? How much difference is there above and below the actual 
capacity of the boilers that meet a certain rating? 

Mr. Walker. You can take the same amount of cast iron and the 
same amount of cost and product, and vary the performance by 
35 percent at least. 

Mr. Montgomery. And still come within the same rating as the 
rating used now? 

Mr. Walker. Yes. 

Mr. Montgomery. So that the consumer may get a substantially 
inferior product, or get a product whose performance is substantially 
inferior to that which he expects and needs in his house? 

Mr. Walker. And in that connection the F. H. A. today is having 
a considerable amount of trouble on their loans. A good number of 
the heating plants do not perform, are not performing, and they are 
having considerable trouble with the banks over the fact that they 
are not getting what they thought they were getting in heating plants. 

Mr. Montgomery. Will you explain further what some of the 
difficulties are when you get a furnace installed in 3'our house, or a 
boiler installed in your house, that is materially under capacity? 

Mr. Walker. Well, first, when it is cold you have to fire quite 
often, and that is a matter of labor. Next, by firing it often you 
soon burn it out. You force the boiler or furnace too hard so you 
eventually burn it out, while if you have one that is properly sized, 
if it isn't forced, it should last a lifetime. 

Mr. Montgomery. A boiler or furnace of proper capacity would 
last a lifetime? 

Mr. Walker. Yes. 

Mr. Montgomery. How rapidly, in your experience, can a furnace 
be burned out if it is being driven over capacity? 

Mr. Walker. Well, that is hard to say. I would say if you kept 
a furnace at a red heat you could burn it out in a year or so, if you 
just forced it that hard. That isn't normal, and jpeople don't nor- 

124491— 39— pt. 8 10 



3422 CONCENTRATION OF ECONOMIC POWER 

mally do that. In a number of instances I know of boilers that have 
burned out in. 4 or 5 years. 

Mr. Montgomery. Four or five years instead of a lifetime ? 

Mr. Walker. Yes. 

Mr, Montgomery. That is a rough measure of the approximate 
possible cost that may be incurred by a consumer due to the fact that 
there is no standard by which the consumer can make this purchase? 

Mr. Walker. Yes. 

Dr. LuBiN. May I ask a question? Is it fair to conclude, from 
what you said, that in buying a furnace today the standards that 
exist in the industry are absolutely of very little value to the con- 
sumer in determining what he is getting, in terms of efficiency? 

Mr. Walker. Yes. I would say this, that the standard that the 
consumer has been taught to use is no measure whatever of the rating 
of the product he gets. In other words, because the industry for 
many years all made a similar product they used one measure. Now, 
as we have learned to improve that product, they are still using that 
same measure and it doesn't at all typify the output of that product. 
More than half of the industry is still making the old product and 
opposes anything that changes that standard. 

The Chairman. To what extent do retailers know of the improve- 
ments which have been effected? 

Mr. Walker. I would say they know it 100 percent. The retailers 
know it. 

The Chairman. Well, the "retailer, then, could advise the consumer. 

Mr. Walker. Yes. 

The Chairman. Is there any advantage to the retailer in taking 
the substandard, the submodern standard, product rather than the 
modern product? 

Mr. Walker. He can buy it for less money. 

The Chairman. A greater profit may be made on the substandard 
unit than on the modern one? 

Mr. Walker. Either a greater profit or he can sell it for less money. 

The Chairman. Have you found that difficulty? 

Mr. Walker. We have both products in all our stores. We sell 
one of them for about 20 percent less than the other. Its other is 
a substandard product and it is 20 percent less than our better prod- 
uct. We have two brands, the Indestructo and the Hercules, the 
Indestructo being the better product and the Hercules the standard 
product sold in industry, and there is about 20 percent difference in 
selling price. 

The Chairman. How about the ordinary retailer. Does he carry 
two brands? 

Mr. Walker. In some cases. In some cases he does not. 

The Chairman. So that actually the protection of the consumer 
might to some extent depend, also, upon the degree to which the 
retailer actually advises him of the value of the product? 

Mr. Walker. I would say 100 percent would depend upon that. 

Mr. Montgomery. In selling your better product, you are in com- 
petition, of course, with a great many retailers, aren't you ? 

Mr. Walker. Yes. 

Mr. Montgomery. Do you find it to be a fact that retailers are 
selling the inferior product to the consumers? 

Mr. Walker. Yes. 



CONCENTRATION OF ECONOMIC POWER 3423 

Mr. Montgomery, You are trying to meet that competition ? 

Mr. Walker. Yes, sir. 

Mr. MoNTGOMERT. And it is a fact then, isn't it, that retailers are 
selling to consumers boilers and furnaces that are under capacity? 

Mr. Walker. Yes, sir. 

Mr. Montgomery. You can state that of your own knowledge, that 
that actually happens? 

Mr. Walker. Yes. 

For instance, we know of a number of cases where, in rating a 
boiler for its output, or a furnace, where it. has been rated for 10 
years at a certain rating, as these new products have come out they 
arbitrarily raised the rating without changing the boiler at all. The 
Federal Trade Commission has no action against them because they 
defend it by saying : 

All you have to do is put more coal in it and you will get more heat out of it. 

Dr. LuBiN. Also, many retailers have no alternative. If a retailer 
is only permitted to carry a given brand and if the manufacturer 
only makes one type of furnace, namely, the substandard, the retailer 
has no alternative but to sell that standard. 

Mr. Walker. Fortunately a retailer can buy the better product. 

Dr. LuBiN. Do all manufacturers make the better products? 

Mr. Walker. No; but the manufacturers that do it will sell to 
anybody. There are no exclusive agencies. He can get it. 

Mr. Montgomery. If there are some retailers who are, either be- 
cause of profit or because of being able to quote a lower price, selling 
to consumers a product that is below the standard they actually 
need, how can the consumer look for protection, then, to the retailer? 

Mr. Walker. Well, the only thing he can do is deal with a reliable 
house, I would say. I don't know of any other way. He has no 
other measure. 

Mr. Montgomery. Of course, an average consumer buys a furnace 
or boiler only, about once in a lifetime, if that often, so he is not in 
a position to shop around from day to day. If he finds he picked 
a retailer who sold him a poor product, he can't remedy the situation 
tomorrow. 

Mr. Walker. And it is such an important part of a home that 
certainly there ought to be some standard that we all could respect. 

Mr. Montgomery. You had something to tell us on the question of 
the alloys used in furnaces. Will you develop that story ? 

Mr. Walker. In the steel industry they have developed alloys to 
be used in steel, that are used in steel to increase the heat resistance 
of the steel, and several years ago our research and development 
department questioned why that couldn't be done in cast iron, so 
at considerable expense and much research we developed the use of 
alloys with cast iron that gave us a heat resistance to cast iron, arid 
we secured a patent on it, under the name of Indestructo metal. It 
changes the consistency of the cast iron by making it of very much 
finer grain and very much denser, and also increases the h,eat resist- 
ance of the iron. 

As soon as this was put on the market as Indestructo metal it was 
accepted very rapidly, and because it was patented it was an exclusive 
product of Sears, Roebuck & Co. 



3424 CONCENTRATION OF ECONOMIC POWER 

In order to meet the situation a number of distributors and manu- 
facturers coined names in describinj^ their iron. They didn't claim 
it was alloy or anythin^T of that sort, but inferred it, and today you 
will find a number of names like Gymco Iron, or Duco Iron, or some- 
thing of that sort, that is nothing in the world but cast iron and the 
consumer is led to believe that he is getting something dilTerent from 
cast iron, and I feel that that is, by inference, a misrepresentation. 

Mr. Montgomery. How much more wear can you get out of a fur- 
nace made of your iron than out of one made of cast iron under the 
same operating conditions? 

Mr. Walker. Well, we guarantee any product made with In- 
destructo metal for 20 years, and it is the only guaranty given that 
I know of that is more than a year 

Mr. Montgomery. How did you establish the fact that that is a 
superior product? 

Mr. Walker. After we developed it we turned it over to the 
Pittsburgh Testing Laboratories to put it through quite severe tests 
over a period of months, and through their reports it developed that 
we had something that would last at least 20 years. 

Mr. Montgomery. You said that then some of your competitors, 
by using certain names, indicated that they had an alloy too, but 
they had only cast iron. How did you establish the fact that thej 
had only cast ii^on? 

Mr. Walker. First, several of them were buying the same product 
we were buying, from the same warehouse. In addition to that we 
bought a number of their products and put them through our labora- 
tories and analyzed them, and found out it was plain cast iron. 

Mr. Montgomery. I wish you would describe in some detail some 
of the claims made by other competitors for these newly christened 
cast-iron furnaces. 

Mr. Walker. Well, the claim is entirely by inference. They vdll 
say, "This furnace is made from Duco iron" — I don't like to use 
trade names — or John Doe iron, or some descriptive coined word. 

Mr. Montgomery. I was wondering if they went into scientific 
discussions. That is quite a frequent way to convince the consumer 
that the product is very excellent. 

Mr. Walker. No; they only said it was an iron made from an 
alloy. 

The Chairman. But actually it was not made from an alloy? 

Mr. Walker. No. 

Representative Reece. Has that practice been called to the atten- 
tion of the Federal Trade Commission, or do you think the Federal 
Trade Commission would have authority to deal with that as an 
unfair trade practice? 

Mr. Walker. I think in that case they would, where a claim of 
alloy was used. I don't think they would, for instance, if I put 
out a furnace and said it was made of Walker iron. I don't think 
there is any basis for complaint there. 

Representative Rfece. I am not so- sure that it might not have, 
especially under section V as amended by the Wheeler-Lea Act. 
It gives a great deal of authority to prevent unfair trade practices. 
It may not have. 



CONCENTRATION OF ECONOMIC POWER 3425 

Mr. Walker. We submitted it to the Consumers' Counsel Division, 
to Mr. Montgomery, but we didn't feel that, except by inference, there 
was anything to attack. 

The Chairman. You didn't submit it to the Federal Trade Com- 
mission ? 

Mr. Walker. No; we did submit it to the Bureau of Standards, 
and asked whether they could set a standard, and they said they 
could not. 

Mr. Montgomery. Did they say why they couldn't? 

Mr. Walker. No ; they said they had no basis on which they could 
do it. 

Mr. Montgomery. You don't know whether they couldn't do it 
under the law? 

Mr. Walker. I think Mr. Mumma can answer that. 

Mr. Montgomery. This is Mr. George E. Mumma, manager, heat- 
ing department, of Sears, Roebuck & Co. 

The Chairman. Do you solemnly swear that the testimony you are 
about to give in this proceeding shall be the truth, the whole truth, 
and nothing but the truth, so help you God ? 

Mr. Mumma. I do. 

TESTIMONY OF GEORGE E. MUMMA, MANAGER, HEATING DEPART- 
MENT, SEARS, ROEBUCK & CO., CHICAGO, ILL. 

Mr. Mumma. I wrote in October of 1938 to the Bureau of Standards 
describing a situation in tfie rating of heating plants, and asked if 
they AvouTd either establish as a standard the recognized method of 
rating as developed by the University of Illinois, or would they set 
up their own standard, or if neither could be the case, could we help 
in the setting up of a standard. I received a reply from Mr. Briggs, 
Director of the Bureau, stating that no work had been done and that 
they apparently could not do any work — Yours truly.^ 

There was no reason given why a standard could not be set up. We 
did not take up this particular case of the alloy directly with the 
Bureau of Standards, although we did describe the situation com- 
petitively to the Agricultural Division. 

Dr. LuBiN. May I ask, Mr. Walker, whether your "firm makes such 
requests to the Bureau of Standards at different times ? I mean, have 
you on other occasions asked the Bureau of Standards to set up a 
standard or adopt one? 

Mr. Walker. That is the only case I have had any contact with. 

The Chairman. Of course, the answer to all of these questions is 
to be found in the law. It would be a simple matter to check up the 
law. Have you done that, Mr. Montgomery ? 

Mr. Montgomery. No. 

The Chairman. These witnesses obviously don't know the powers 
and duties of the Bureau of Standards. 

Mr. Walker. On this trip we are trying to ascertain whether we 
could appropriate enough money for them to make the test. We 

1 Under date of May 25, 1939, the Director of tue National Bureau of Standards sub- 
mitted a nipmo re Mr. Mimiinn"s statement which was entered in the record as ''Exhibit 
No. 63!)" during bearings held May 20, 1939, and Is included in the appendix to this Part 
on p. 3476. 



3426 CONCENTRATION OF ECONOMIC POWER 

would be willing to finance the things because it really means a lot 
to the consumer and naturally we are interested. 

Dr. LuBiN. Do you know of any cases where the Bureau of 
Standards has set up standards that are used by industry ? Over the 
radio one hears, for instance, that a certain gasoline meets the Bureau 
of Standards' test, or standard. Is that common in other types of 
products ? 

Mr. Walker. I can't name the products, but I am quite sure that 
they do that because I have seen it referred to. 

Mr. Montgomery. I think if the committee wants to get this ques- 
tion cleared up, there is a gentleman here from the Bureau of 
Standards. You see, these gentlemen don't know from the reply 
they got from the Bureau of Standards whether it is a question of 
law or a question of current appropriations or a question of equip- 
ment, or what not. 

Dr. LuBiN. After Mr. Walker is finis]-:-d, I should like awfully 
much if we can get a picture of what the Bureau of Standards does 
do and what are the potentialities in that field. 

The Chairman. It would be a simple matter, just as I suggested 
yesterday to Mr. Montgomery, to have the statement made on behalf 
of the Marketing Division of the Department of Agriculture on the 
manner in which the Standard Container Act has been enforced and 
what the results have been under that.^ 

Mr. Montgomery. Yes; for fruits and vegetables. 

The Chairman. Obviously witnesses such as these before us today 
are not competent to testify on this question. 

Mr. Montgomery. There is a gentleman right here from the Bu- 
reau of Standards who, when they are through, can answer your 
questions on that point if he is willing to testify. 

There is one other point you wanted to bring up with respect to 
the pottery industry, toilet bowls, and how they are marketed. 

Mr. Walker. The pottery industry makes lavatories and toilets 
and in the process the principal defect that develops through the kiln 
is known as crazing. Crazing describes a condition where the out- 
side finish, the glaze, cracks in small hairlike cracks that are hardly 
visible to the naked eye. Unless you inspect these under a microscope 
you don't see them. The better manufacturers in the United States 
don't sell any seconds. A crazed piece of pottery is called a second. 
They do not sell any seconds in the United States, in America, but a 
number of less ethical concerns do, and the consumer today is buying 
these seconds, thinking he is buying firsts. The result is that in a 
very short time, in the course of a year or two, the water seeps through 
these cracks and causes yellow stains and becomes most unsightly 
and unsanitary. The only mark that is put on the back, a distin- 
guishing mark between a first and a second, are two little red dots on 
the back of a bowl at a point that wouldn't normally be seen, and that 
was established during the N. R. A.'s days, and consequently there 
is no way in the world for a consumer to tell when buying a piece of 
pottery whether he is getting a first or second, and he is buying 
today a lot of seconds. 

Mr. Montgomery. That is, the consumer wouldn't know? 

Mr. Walker. The consumer couldn't tell anything about it. 

» Subsequently submitted and pntered In the record during hearings held June 7, 1939, 
and Included in appendix to this Part on p. 3487. 



CONCENTRATION OF ECONOMIC POWER 3427 

Mr. Montgomery. Do you suppose the retailer would know? 

Mr. Walker. Yes; certainly. 

Mr. Montgomery. Yet you find from your experience that consum- 
ers are buying those seconds and not knowing it. 

Mr. Walker. Yes, yes; there again I feel that there should be some 
protection on these major projects, some protection for the consumer 
on these major products that he buys once or twice in a lifetime. 

Mr. Montgomery. Some standard language by which a manufac- 
turer or distributor like yourself can talk with consumers about the 
products that one is selling and the other is buying. 

Mr. Walker. Yes. 

Mr. Montgomery. I wanted to ask this one further question, Mr. 
Walker. In examining merchandising to the consumer, it has been 

gointed out often that consumers buy generally in two different ways, 
ome consumers buy by brand ; that is, they get a certain brand that 
they want to buy and they stay with it and buy that. Other con- 
sumers, however, perhaps those who want to save money, will, as I 
say, buy by price. They go around shopping and try to get the 
cheapest article they can get. Now, with respect to the sale of goods 
in that price market, that highly competitive market, has it been your 
experience that the sale of goods is merely in terms of the price, in the 
absence of a standard defining the quality of the commodity that is 
commonly offered for sale? 

Mr. Walker. Yes; it tends to do this I would say: It tends to 
encourage some manufacturers to produce a substandard product. 
On the other hand, other manufacturers maintain their normal stand- 
ards, and in the consumer goods you have an impulse buying ; adver- 
tising influences much more than pj-ice, but in the heavier goods you 
will find that price is much more a factor than advertising. Conse- 
quently there is a tendency to, on the part of some manufacturers, 
produce the lowest-priced article they can. In other words, when 
you are spending a thousand dollars for something, you will do more 
shopping than if you buy a handkerchief or tie or tooth paste or 
something of that sort. 

Mr. Montgomery. Does that have the effect, for example, in your 
line to induce manufacturers to make a fire pot or a boiler that is 
below the rating in performance but still meets the alleged rating? 

Mr. Walker. What has happened in the industry, they are not 
producing one that is lower; they are just not improving the one 
they have, because it means quite a cost to do it. 

Mr. Montgomery. Are there any other questions ? 

The Chairman. Do any members of the committee desire to ask 
Mr. Walker any questions? 

Mr. O'CoNNELL. I sh-ould like to ask you just one question about 
what I understand to be one of the things that holds back the devel- 
opment, I take it, to modernize the product of a company that is 
producing what you refer to as a substandard product. It would 
involve a substantial cost to the manufacturer in modernizing his 
equipment, is that what you mean? 

Mr. Walker. Yes. 

Mr. O'Connell. You spoke of spending $250,000 in connection 
with the development of the better fire pot, I think. 

Mr. Walker. Yes. 



3428 CONCENTRATION OF ECONOMIC POWER 

Mr. O'CoNNELL. That meant experimentation? 

Mr. Walker. Well, of that $250,000 I think there was $28,000 in 
engineering expense, and the rest of it in equipment and molds and 
flasks and that sort of thing. 

Mr. O'CoNNELL. So from the point of view of the manufacturers 
who are producing the substandard product, it really would present 
something of a financial problem to them, would it not? 

Mr. Walb^er. That is what it is ; yes. 

Mr. O'CoNNELii. Because they would like to throw out a certain 
amount of equipment that they have and buy new equipment and 
spend money which in some cases they may not have. 

Mr. Walker. Yes; that is 'what is holding them back. 

Mr. Montgomery. I would like to ask one more question, and that 
calls for a rather broad opinion, but I think your experience will 
justify your expressing one if you care to. Do you think, Mr. Walker, 
that if the manufacturing industry, the distributors and the consumer 
were brought together, trading on a factual basis by means of stand- 
ards which describe the goods, that would undermine the whole 
system of free enterprise as we know it in America today ? 

Mr. Walker. Why, no; I don't think so. I feel the reverse. I 
think it would tend to make, industry more successful and the con- 
sumer better satisfied. 

Mr. Montgomery. You think it is both feasible and practicable to 
move our distribution of products in that direction ? 

Mr. Walker. Certainly. 

Mr. Montgomery. Thank you, Mr. Walker. 

Mr. Chav/ner. May I ask a question of the witness? Mr. Walker, 
there is, I believe, an association known as the American Society for 
Testing Materials. 

Mr. Walker. Yes. 

Mr. Chawner. That is a private association of engineers and 
manufacturers and others? 

Mr. Walker. Yes. 

Mr. Chawner. Doesn't that association make standards for a num- 
ber of products? 

Mr. Walker. Yes. 

Mr. Chawner. Possibly not highly fabricated products such as the 
heating and ventilating equipment that you have mentioned. That 
association does make standards which are scientifically useful? 

Mr. Walker. Yes. 

Mr. Chawner. The implication of your testimony is that in this 
particular case the Federal Government should do something about 
it ; that the Federal Government should set these standards. Do you 
feel, to take for an example, in heating and ventilating that the ap- 
propriate association there is incompetent to do that? 

Mr. Walker. No, no. There are a number of associations with 
testing laboratories and the association you refer to is very compe- 
tent. The University of Illinois in the furnace end is probably the 
most competent and they have set the standards, but the point I am 
making is there is no teeth in it so nobody has to respect them. I 
mean we could have any one of a dozen testing laboratories set a 
standard, but there is no way which you can say to the manufacturer, 
"If you sell this thing, you have to sell it based on this standard." 
He can make any standard he wants for his product. 



CONCENTRATION OF ECONOMIC POWER 3429 

The Chairivian. Discussing this improved furnace of which you 
have spoken, is it more expensive to make than the other one? 

Mr. Walker. Slightly; yes, I would say. 

The Chairman. AVliy? 

Mr. Walker. Well, first you have slightly more iron in it; second, 
the method of molding is more expensive and it takes a different type 
of equipment. The reason we have been able to do these things is 
because in making molds under high pressure — that is known to the 
trade as sand slingers — we force the sand into the mold under air 
pressure and make a very much tighter and more compact mold, and 
that, of course, costs more money than tapping it in with a stick. 

The Chairman. The old firepot, as I understood you to describe 
it from the first chart,^ was one that had a larger diameter at the 
top than at the bottom and the alteration that you put into effect 
was to make the bottom diameter more nearly equal to the top 
diameter. 

Mr. Walker. Yes. 

The Chairman. So as to give the firepot a larger cubical content. 

Mr. Walker. Yes. 

The Chairman. That necessarily, I suppose, required some sort 
of a remodeling of the devices by which the firebox is cast? 

Mr. Walker, Yes. 

The Chairman. That, of course, would entail some expenditure 
in the remodeling of the machinery. 

Mr. Walker. Yes. 

The Chairman. But after that has been done, is the manufacture 
of the new firebox materially more expensive than the manufacture 
of the old? 

jNIr. Walker. It is today; eventually I hope we can get it down. 
You have to use equipment today that you didn't use in those days ; 
in other words, when I say you have to have a very large compressor 
that forces this sand by compressed air and pounds it in, into the 
molds, as against in the former days we tapped it in with a stick. 
That is quite expensive machinery and also, the sand being very 
abrasive going in under high pressures, very quickly cuts up your 
molds, and things of that sort. 

I am sure we will be able to overcome that in time by experience. 

The Chairman. By how much is the new method of manufacture 
more expensive than the old? 

Mr. Walker. ]Mr. Chairman, when you speak of costs, so much 
depends upon volume. I mean on fixed costs of that sort. In our 
own case, for instance, in the Rundle Co., it costs them — I am speak- 
ing now of overhead and all — around 10 or 12 percent more to make 
the new product than it does the old. 

The Chairman. What is the difference in the price between the 
two products which you sell ? 

Mr. Walker. I would say it runs about 12 to 15 percent; in other 
words, the starting size, one of them sells for $49 and the other sells 
for $59; in the larger sizes the percentage is not so great. 

The Chairman. So that the actual cost of manufacture of the 
new product is. between 10 and 12 percent more than the old? 

Mr. Walkjeb. Yes. 



* See "Exhibit No. 539," supra, d. 341G. 



3430 CONCENTRATION OF ECONOMIC POWER 

The Chairman, But the price to the consumer is from 12 to 15 
percent g.^eater than the old. 

Mr. Mu-iMA. May I describe the situation further in answer to the 
gentleman's questions on standards? A year and a half ago the 
Boiler and Radiator Institute, which is an association of 15 manu- 
facturers, set up an excellent testing code for residential boilers. 
They were all for it at that time.. Then each of the 15 submitted 
his product for actual tests and under this test code there were five 
of them whose product did not show up any too well. In other 
words, their design was wrong. So those five men, when it came 
to approval of the code, voted against the cod6, so it was not adopted. 
In other words, ther-e we have a selfish movement which you cannot 
get out of unless you have authority above a n;ian"'s selfish interest. 

Mr. Montgomery. One more point I want to clear up. In testi- 
fying that the use of standards would be better, you don't mean at 
all that the number and variety of products that are manufactured 
should be rigidly standardized so there would be only one kind of 
thing available in each commodity? 

Mr. Walker. No ; what I visualize is this : If we could say to the 
consumer, "This meets the United States Government standard"-— 
I mean, based on the United States Government standard this fur- 
nace will deliver so and so, he would have confidence in it. If I 
say to him that the Pittsburgh Testing Laboratory says this is some- 
thmg or other, it doesn't mean so much. 

Mr. Montgomery. So what you want is a standard available by 
which the commodity can be described and then you want to be sure 
that the manufacturer when selling that commodity properly de- 
scribes it according to that standard ? 

Mr. Walker. Yes ; I see no reason why these substandard furnaces 
can't be sold, but sold on the basis of what they will deliver, and if an- 
other man makes another product and it will deliver more 

Mr. Montgomery. In other words, you don't want misrepresenta- 
tion. 

Mr. Walejer. That is all there is to it. But in this thing, Mr. 
Chairman, I want to say this: You can justify the delivery in these 
products of any claim you want to make, because it just depends on 
how much fuel you put into it. If you want half your heat up your 
chimney and the other half in your house, you can justify a delivery 
of 25 to 50 percent more than the furnace is designed to deliver. 

Mr. Montgomery. That is the way it is today in the absence of 
any standards for describing the product. 

The Chairman. You sell today both substandard and the new 
standard furnace? 

Mr. Walker. About 85 percent of our sales are on the better 
furnace. 

The Chairman. Good. 

Mr. Walker. But the point is, we have to carry the other one just 
for illustrative purposes, really. 

The Chairman. You spoke a little while ago of desiring a standard 
with teeth in it. What did you mean by that? 

Mr. Walker. Well, if we had a standard so that the Federal Trade 
Commission could go to the manufacturer and say, "Here, you are 
nisrepresenting this product based on the Government standard," or 
^ome standard set up, then you would have teeth in it. In other 



CONCENTRATION OF ECONOMIC POWER 3431 

words, if you would set up and say tliafc- the standard is an 8-hour 
firing period, based on that you wo\i Id ^produce so much hcnit into a 
home, the stack tempers^ture should not be over 600° or something 
of that sort ; now on that basis this is the rating. 

The Chairman. In other words, you believe that the condition 
which you have described is an unfair trade practice? 

Mr. Walker. Absolutely. 

The Chairman. And that the Federal agency, preferably the Fed- 
eral Trade Commission, should be empowered to some degree at 
least to prevent such an unfair trade practice ? 

Mr. Walker. Yes. 

The Chairman. And you would not regard that as an unjustifiable 
interference by government with business? 

Mr. Walker. No, sir; I would not. 

The Chairman. And Sears, Koebuck is one of the largest business 
houses in the country? 

Mr. Walker. Yes. 

The Chairman. What do your aimual sales amount to? 

Mr. Walker. I think last year it was about $525,000,000. 

The Chairman. In how many States do you conduct business? 

Mr^ Walker. Every State of the Union. 

The Chairman. What is the capital stock of Sears, Roebuck? 

Mr. Walker. It is a no-par stock and I think over 5,000,000 shares". 

Mr. Mumma. 5,614,000. 

The Chairman. What is the invested capital of Sears, Roebuck? 

Mr. Walker. I can't tel! you offhand. 

The Chairman. But in any event it is one of the big distributors 
of the country operating in all of the States of the Union ? 

Mr. Walker. Yes. 

Mr. Montgomery. It is also a large manufacturer, is it not, Mr. 
Walker? 

Mr. Walker. We own and are interested in many, many manu- 
facturing companies. As Sears, Roebuck & Co. we manufacture 
nothing and we own stock in many manufacturing companies. 

The Chairman. As one representative of big business you are tes- 
tifying, then, to this committee that you are not afraid of Govern- 
ment interference. 

Mr. Walker. We have been helped, I think. 

The Chairman. Thank you very much. 

Mr. Montgomery. May I ask you, Mr. Walker, if, as a representa- 
tive of big business, are you also testifying that you are not afraid of 
consumers ? 

Mr. Walker. Not to be facetious, but, of course, we live on con- 
sumers. 

Dr. LuBiN. May I ask you a rather broad question ? Perhaps yqu 
won't be able to answer it, but I would be interested in knowing what 
your attitude would be. You people deal with thousands of items; 
in fact, you deal with most of the necessities of life. If these stand- 
ards as you described for heating equipment, and which- could be 
made available perhaps for thousands of other items that enter into 
our standard of living, if the consumer actually wa-nts to take ad- 
vantage of these standards, in other words take advantage of-such 
information as would be available as to permit him to get the best 
product at the lowest unit price, what do you think would happen to 



3432 CONCENTRATION OF ECONOMIC POWER 

the cost of living in this countiy? In other words, how much do 
you think the average consumer who took advantage of those speci- 
fications coukl save in terms of his budget? 

Mr. Walkej?. I woukl just have to hazard a guess I have been 
very much interested in the testimony that is going on here. We sell 
drugs made by the same manufacturer tliat makes the advertised 
drugs. For example, your tooth paste yesterday: We have a tooth 
paste for 19 cents that is the same tooth paste that is sold in our 
store under different brands for around 49 cents, but the consumer 
buys the 49-cent generally from her store, almost the same thing. 
And you find that generally. As the chairman so wisely said yes- 
terday, you just can't stop advertising and the effects of it; and if 
the consumer kiiew the standards, I woukl say that in many of the 
products that he buys he would save, oh, 25 percent at least. 

Dr. LuBiN. Would it be an exaggeration to say that if this infor- 
mation were available and consumers took advantage of it the stand- 
ard of living could be increased by at least 10 percent, by and large, 
throughout the country? 

iNIr. Walker. Oh, mucli more than that. I would say 25 percent. 

INIr. MoNTOOMERY. Well, the point is that the consumer doesn't 
know that the 49-cent tooth psiste and the 19-cent tooth paste are 
the same. 

Mr. Walker. No; and we can't tell him. 

Mr. Mo>;TGO]MERy. Do you think if there was a standard that de- 
fined tlie tooth })aste we migltt educate consumers to believe that 
one was the same as the other? 

Mr. Walker. I don't think so. 

Mr. Montgomery. Yon ihink it would take an educational process 
ill addition to the standard? 

Mr. Walker. Yes. 

Mr. Montgomery. I agree witli you. 

The Chairman. Is that all ^ 

Mr. Montgomery. Yes. 

The Chairman. Thank you very mudi. Mr. Walker and jNir. 
Mumma. 

(The witnesses, Messrs. Walker and Mumma. Avere excused.) 

The Chairman. How about the next witness? 

STATEMENT OF EGBERT MAKTINO, CHIEF OF CONSUMER CONTACTS 
AND LABELING, NATIONAL BUREAU OF STANDARDS, WASHING- 
TON, D. C. 

Mr. Montgomery. Let's get your name in the report. 

Mr. Martino. Robert IVLartino. 

Mr. Montgomery. What is \our position with the Bureau of Stand- 
ards? 

Mr. Martino. Chief of Cv)i;sumer Contacts and Labeling Section. 
> I know nothing concerning the letter referred to by Mr. Walker. 
That probably was a policy matter. It may have been due to sev- 
er d things— the po'^^ibjlity Of not having the proper facilities for 
undottak.ng a standard for iurnaces: and, secondly, the lack of ap- 
propriations. 



CONCENTKATIOxN OF ECONOMIC POWER 3433 

FUNCTIONS AND ACTIVITIES OF NATIONAL BUREAU OF STANDARDS 

The Chairman. What are the functions and duties of the Bureau 
of Standards'? 

Mr. Martino. The Bureau of Standards was organized in 1901 
to assist technical societies, trade associations, manufacturing firms, 
distributors, retailers, and consumers in the development of standards 
and specifications and test methods. 

I would like to enumerate some of the activities of the Bureau. 

The Chairman. Well, what authority do you have to enforce the 
standards ? 

Mr. Martino. We have no authority to enforce the standards. 
That is a function that comes under the jurisdiction of the Federal 
Trade Commission. Incidentally, I might say, the Federal Trade 
Commission relies upon the Bureau of Standards in many cases in 
issuing the cease-and-desist orders. We ourselves have no police 
power. 

Mr. Montgomery. Let's get that clear. When you say the Federal 
Trade Commission enforces standards, I think that needs explana- 
tion. They don't require goods to be sold on those standards. 

Mr. Martino. No; they don't. When any commodity is sold on 
the basis of standards or specifications, there is a certificate or a 
label stating on that commodity that it complies with that specifi- 
cation. 

Mr. Montgomery. Whether or not a label or a method of sale 
claims that the commoditj^ Complies with a specification, it is entirely 
voluntary with industry, is it not? 

Mr. Martino. That is correct; but we do not force industry to 
adopt it. The Bureau of Standards is not developing standards or 
specifications as such: we cooperate with many technical societies, 
such as the American Society for Testing Materials, American Stand- 
ards Association, and various agencies in the Federal Government 
in developing. industrial and govermnental standards. Many mem- 
bers of the Bureau staft' serve on technical committees of the Federal 
Specifications Executive ( ommittee in the development of Federal 
specifications. Many peoj :e get the mistaken notion that Federal 
specifications are developed by the Bureau of Standards. We do not 
develop Federal specifications as such. 

Mr. O'Connell propounded a question that certain advertisements 
carry statements saying that they comply with Bureau of Standards 
specifications. Whenever those matters are called to our attention 
we always get in contact with the agency issuing such statement, 
advising them of the fact that the Bureau of Standards has no 
specifications. Of course, when they refer to the United States 
Government standards they mean Federal specifications. Most of oijr 
trouble is with manufacturers who really tell the truth when they 
say that their commodities comply with Bureau of Standards' specifi- 
cations, and while tliat is so in a specific (;ase where we have tested that 
particular item, we cannot permit a manufacturer to continue to use 
that statement for the simple reason that although the sample tested 
did comply with the specification requirements, yet -we don't know 
that similar commodities other than that same sanipJe do actually 



3434 CONCENTRATION OF ECONOMIC POWER 

comply with the Federal specifications, consequently, we do not 
permit manufacturers to make those statements. 

Mr. O'CoNNELL. How do you prevent them from doing that? 

Mr. Martino. Well, w^e have never had occasion to refer the mat- 
ter to the Federal Trade Commission. They usually stop. 

Mr, O'CoNNELL. You just tell them to stop? 

Mr. Martino. We tell them to stop and we point out to them that 
although the sample tested does comply with the Federal specifica- 
tion, that it has been tested by the Bureau of Standards, neverthe- 
less we ate not in a position to maintain a representative at the 
plant to test every conceivable item manufactured by them and permit 
them to use that statement. 

In one instance we do develop standards, that is imder our com- 
mercial standards service. We have the machinery at the Bureau of 
Standards whereby any industrial distributor or consumer group can 
come to the Bureau of Standards and ask for the development of a 
standard, and those standards as they are developed are known as 
commercial standards. The procedure is simply this : A proponent 
group, whether it be a manufacturer, distributor, or consumer, will 
come to the Bureau and ask that a certain standard be developed 
covering a given commodity. We canvass the entire field in this 
particular instance to determine if there are any standards in exist- 
ence, and we rely pretty much upon our own laboratory experience 
in the handling of that particular commodity if any test or research 
work has been made. Preliminary conferences are held with the 
proponent group to determine what type of standards should be 
established. Following that a general conference is held at w^hich 
are represented the producer, distributor, and consumer groups, and 
at that conference all diiferences are ironed out. Following the con- 
clusion of the conference the tentative standard is then sent out to 
industry for acceptance, and 65 percent, I believe it is 65 pei-^ent, 
acceptance on the basis of volume makes the standard effective. It is 
then promulgated and made available to anyone who wants to use it. 

Mr. O'CoNNELL. Wliat do you mean by promulgated? What do 
you do? Is it publicized? 

Mr. Martino. We print the standard and it is publicized. 

Mr. O'CoNNELL. How widely distributed is it? How do you do 
that? 

Mr. Martino. We have a mailing list composed of Federal, State, 
county, municipal governments, distributor, retail organizations, and 
consumer groups. 

Mr. O'CoNNELL. Would you make that available to consumer or- 
ganizations such as those testifying here? 

Mr. Martino. Yes. 

Mr. O'CoNNELL. Would they in turn be able to make it available 
to the consumers? 

Mr. Martino. That is up to them. It depends on whether they 
want to publicize it. 

Mr. O'CoNNELL. Suppose they wanted to publicize and put in their 
pamphlets saying exactly what you gave them, for the information 
of the consumers, would you have any objection to that? 

Mr. Martino. Oh, no. ^ You see, that standard when it has been 
promulgated is not Bureau of Standards standard; it is industry 



CONCENTRATION OF E<^ONOMIC POWlCIl 3435 

standard; it is oitlier tlie manufacturer's standard if tlic manufac- 
turer were tlie proponent, or it is tlie distributor's standard if the 
distributor were the proponent, or the standard of consumers if the 
consumer -were the })roponent. 
' Mr. O'CoNNELL. But it is approved by the Buieau of Standards. 

Mr. Marti NO. It is approved by the Bureau. 

Mr. O'CoNNELL. Would you let the consumer orfjanization tell its 
readers that it was approved by tlie Bureau of Standards? 

Mr. Maktino. Oh, yes; all that appears in print. 

Dr. LuBiN. As I understand it, the Bureau of Standards tests 
certain things purchased by the Government, in order to be sure 
that they meet the specifications that the purchasing agency has set 
down. Is that true ? 

Mr. Maktino. That is correct. 

Dr. LuBiN. I take it that you test rubber tires that are purchased 
by the Government to see that they meet Government specifications. 

Mr. Martino. That is correct. 

Dr. LuBiN. And you have certain standards by which you make 
these tests. 

Mr. Martino. Yes. 

Dr. LuBiN. Could I as an individual private citizen write you a 
letter and ask you what standards a tire should meet in order to meet 
the specifications? Would I be told? 

Mr. Martino. That again is a policy matter. We are not per- 
mitted, I don't know whether by law or whether by the Department 
of Commerce, to give out the results of tests. The procedure is this : 
If the Navy Department, for example, should send a batch of tires to 
the Bureau of Standards for test, we would make the report, the 
report would go to the Navy Department. That releases us of all 
responsibility and as far as giving out that information is concerned, 
we are not permitted, but if the Navy Department desires to give it 
out that is up to them. 

Dr. LuBiN. If I were not interested in how the various tires ranked 
but if all I were interested in was what specifications should a tire 
meet to meet your specifications, could I have that information? 

Mr. Martino. I -beg your pardon, I misunderstood your question. 
There is a Federal specification for tires and it is on the basis of that 
Federal specification that tires are tested. The test methods are 
likewise described in the specification. 

Dr. Ltjbin. Would I be able to find out what those specifications 
were ? 

Mr. Martino. Yes; those specifications are available in printed 
form through the Superintendent of Documents. 

Mr. Henderson. Mr. Martino, as a matter of cold reality, these 
various departments to whom you report the results of tests do not 
make those public so that the consumer would know what was the 
rank of commercial brands. 

Mr, Martino. That is the policy at the present time, Mr. 
Henderson. 

Mr, Henderson. I am not asking about what the policy of the 
Bureau of Standards is. I said as a matter of cold reality, the re- 
sults of your tests of standards for Government purchases do not find 
their way out tiirough any agency, so that they '"ould hr- available 
for consumers as standards in their purchasing. Isn't that true? 



3436 CONCENTRATION OF ECONOMIC POWER 

Mr. Martino. I can't answer for other departments. I don't know 
what the policy is. 

Mr. Henderson. Again I am not asking you to answer for other 
departments, but I am asking you as someone who has worked with 
standards and knows something about consumer standards, whether 
as a matter of general practice they do get out. 

Mr. Martino. Generally speaking, as an individual, I would say 
no. 

Dr. LuBiN. Do 3^ou do much testing for private industry? I mean, 
do they send materials in to be tested f 

Mr. Martino. We did tHat for a time, but the private laboratories 
said we were in competition with them so we had to stop it. 

Dr. LuBiN. Is it possible for any private citizen to secure infor- 
mation on such tests as you formerly did for these manufacturers? 

Mr. Martino. Much of the results — not the results but the methods 
of testing and some of the research work conducted by the Bureau 
of Standards are available in publications issued by the Bureau. 

Dr. LuBiN. Results are not available? 

Mr. Martino. Results of tests are not available. 

Dr. Lubin. Even though they were made by a Government agency 
for private individuals, no other individual could get those results? 

Mr. Martino. They are available in a general way, but not speci- 
fically as the average consumer would like to have them. 

Mr. Montgomery. Mr. Martino, this practice of arriving at a com- 
mercial standard is a voluntary operation, isn't it? It is done co- 
operatively between the Bureau and the trade? 

Mr. Martino. Yes, sir. 

Mr. Montgomery. Mr. Mumma testified awhile ago of the effort 
of the heating-boiler industry to work out a code defining standards 
and then getting that standard used in the industry.^ As I remem- 
ber his testimony, he said that there were four or five recalcitrant 
manufacturers who would not subscribe to it and therefore that 
standard is not operative. What would the Bureau of Standards 
do in a situation like that if they were working with a trade to try 
to get the standard approved? ^ 

Mr. Martino. Well, the Bureau of Standards would proceed with 
the development of the standard and, as I pointed out a moment 
ago, it would not be promulgated unless 65 percent of the industry 
based on volume of production would accept the standard. We could 
not promulgate it. 

Mr. Montgomery. And if 65 percent did accept it and the others 
did not, the standard could be promulgated? 

Mr. Martino. Yes; it could. 

Mr. Montgomery. But there is no requirement that the standard 
be used in the sale of the goods? 

Mr. Martino. No; there is no requirement, but if anyone did use 
that standard 

Mr. Montgomery (interposing). Or claimed to use it. 

Mr. Martino. Or claimed to use it and labeled a commodity or 
issued a certificate saying that the furnace did comply with that 

> Under date of May 2r), 1939, the Director of the National Bureau of Standards sub- 
mitted 'a nieino re Mr. Mumma's statement which was entered in the record as "Exhibit 
No. 639" during hearings held May 20, 1939, and is included in the appendix to this Part 
on p. 3475. 



CONCENTRATION OF ECONOMIC POWER 3437 

coniniercial standard when in fact it did not, then it would become 
an action for the Federal Trade Commission. 

Dr. LuBiN. Could any taxpayer write vou a letter and ask for 
those specific standards even thoujrh they weren't proniuh^ated ' 
Would you put them out yourself? Would you make that informa- 
tion public? 

Mr. Martino. If they were not promulgated? No; because fhey 
are not approved standards, 

(Representative Williams took the chair.) 
^ Dr. LuBiN. What w^e are trying to get at is this. The Bureau of 
Standards makes these specifications and says: This should be the 
standard. Now, the industry refuses to accept those, in other words 
65 percent of the industry refuses to accept those. The information 
is available. Yon know what you think the standard should be. 
Despite the fact that it is never "publicly promulgated, is that infor- 
mation available to the taxpayer? 

Mr. Martino. That is a question that I really couldn't answer be- 
cause if the standard is not promulgated we just do not consider that 
informalHiii any more, we just forget about it. 

Dr. Luet:;. L didn't forget about it. I would like to know what 
that stall lard is so when I buy that product I could ask for and read 
those specifications. 

Mr. Martino. Yon see, that information would be incomplete be- 
cause if the standard were not developed, that would mean there were 
some essentials lacking; that is that the majority of the industry 
would not accept it because of certain defects. If we gave out that 
kind of information, in many cases it would probably represent mis- 
information and not the accurate consensus of opinion of the 
industry. 

Dr. LuBiN. I am not interested in consensus of opinion of the in- 
dustry; I am as a purchaser interested in the opinion of the Bureau 
of Standards which drew up these specifications-. 

Mr. Martino. We don't draw them up. We do not draw up the 
specifications. We liaA^e nothing to do with the development of those 
commercial standards. Those are purely industry standards and it 
is up to industry to arrive at an agreement upon what should be a 
proner standard. We have nothing to do with that. 

Dr. Lttbin. What do you do, then? 

Mr. Mi^RTTNO. We are merely a cooperating agency whereby we 
have these various groups meet with the Bureau of Standards. It is 
done through the Bureau of Standards procedure. We assist them 
in technical advice, but as far as the development of the standard 
itself is concerned, that is purely up to industry. 

Dr. LuBiN. Do you people have your experts or technicians check 
on these standards to see whether they are reasonable? 

Mr. Martino. That is right. 

Dr. LuHiN. So you do play a part. 

Mr. MARTINO. We plaj^ a part in rendering technical assistance. 

Dr. LuBiN. Let's assume a certain standard were submitted to you 
and your technicians said, "These are good standards," but because 
of some difficulty in the industry you couldn't get 65 percent of the 
industry to accept them, yet your technicians having approved them, 

124491— 39— pt. 8 11 



3438 CONCENTRATION OF ECONOMIC POWER 

could I, as a taxpayer, get you to tell me what your technicians have 
approved of? 

Mr. Martino. I suppose you could. Of course, not being a technical 
man myself, I couldn't very well answer the question. As I said 
in the beginning, I am merely speaking in a general way. 

There is another activity going on at the Bureau of Standards, 
in fact has been going on for some 13 years, and that is in connection 
with the development of a label plan. We have been encouraging 
manufacturers to put on commodities, labels which indicate that the 
commodities comply with the requirements of certain nationally 
recognized specifications such as Federal specificatiori^, commercial 
standards, or specifications of some technical bodies like the Ameri- 
can Standards Association, the American Society for Testing Ma- 
terials, and we believe that that is something in the interest of the 
consumer and that many manufacturers are receptive to the idea, 
many of them are willing to indicate on the label if the commodities 
do comply with certain technical requirements of specifications. 

Mr. Montgomery. Can you tell us what commodities consumers 
buy that are generally available in the market with that label on? 
Frankly, I have never seen one. 

Mr. Martino. You have never seen one ? 

Mr. Montgomery. I don't think so. Maybe I wouldn't recognize it. 

Mr. Martino. There are labels on brooms, dry cells, Portland 
cement, lime, rope, dental alloys, furniture. 

Mr. Montgomery. What kind of label would be on furniture? 

Mr. Martino. One that comes to my mind is on a piece of ordi- 
nary furniture, saying that this is genuine mahogany, guaranteed by 
the association. 

Mr. Montgomery. Do you mean that is in general use, if we go out 
to the furniture store at lunch time and go around, would we find 
that on most of the furniture in the stoves ? 

Mr. Martino. I had occasion to finu it 3 or 4 months ago when I 
had to furnish a house from top to botton and in several instances 

1 was able to spot thj label on certain types of furniture; on two 
or three grades of furniture, of course, it was a very easy matter 
for me to select the one I wanted. I took the one with the label on it. 

Mr. Montgomery. Did the label show the grade? 

Mr. Martino. Yes; it showed the grade and also the character of 
the guarantee statement by the association that -it was genuine 
mahogany. 

Mr. Montgomery. Is that label available on most of the furniture, 
you say, or just a certain proportion? 

Mr. Martino, On a small proportion. 

There are labels on lamps. Woodward & Lothrop had quite a 
display of lamps not so long ago, lamps that are guaranteed to meet 
the standards of the Illuminating Engineering Society, tested by the 
Electrical Testing Laboratories. They call those I. E. S. lamps. 
Incidentally, I mi^ht say they are very good lamps, too, and some- 
what cheaper in price than other lamps on the market. 

Another activity that is ^oing on at the Bureau of Standards at the 
present time is the investigation of building materials for the pur- 
pose of developing low-cost housing. That activity was started some 

2 years ago at the instance of the Central Housing Committee, made 



CONCENTRATION OF ECONOMIC POWER 3439 

up of representatives of various Federal agencies of the Govern- 
ment interested in housing. 

(Discussion off the record.) 

Mr. Montgomery. Are you familiar with the wallpaper standards 
developed in the days of the N. R. A.? 

Mr. Martino. You mean the commercial standards of wallpaper? 

Mr. Montgomery. Yes. 

Mr. Martino. In a general way. 

Mr. Montgomery. Was there a request from the Consumers' Ad- 
visory Board that those standards include a standard of washability 
and, I think, also color fastness? ^ 

Mr. Martino. Yes. 

Mr. Montgomery. Were those two items included in the standards ? 

Mr. Martino. I think color fastness was not included in the stand- 
ard. That matter was referred to the standing committee of that 
particular standard, ajid wliat they did I don't know. 

Mr. Montgomery. Who were on the standing committee? What 
industries ? 

Mr. Martino. Representatives of manufacturers, distributors, and 
consumers. We always pick a standing committee composed of those 
three interests. That standard, incidentally, is somewhat out of date. 
It is my understanding that the industry is now thinking about de- 
veloping a new standard to include those features. 

Mr. Montgomery. Do you know whether the Boiler and Radiator 
Institute during 1938 brought this code of theirs to the Bureau for 
assistance in getting. it adopted as a standard? 

Mr. Martino. No; I don't. 

J believe that covers, gentlemen, in a general way what the Bureau 
does. If there are other questions you would like to ask I will be 
very glad to answer them. 

Mr. O'CoNNELL. You spoke very briefly about the work that the 
Bureau lias been doing recently in connection with building mate- 
rials. Could you elaborate a little bit on that as to what you do 
and what you intend to do? 

Mr. Martino. I would rather include that in a statement that will 
come from the director of the Bureau.' I am familiar with the 
activity but I do not know much about the technical details. 

Acting Chairman Williams. Are there any other questions? 

If not, it is the understanding that you want to submit a state- 
ment? 

Mr. Martino. I believe that is what the Senator requested and I 
will be very glad to ask the Director of the Bureau of Standards to 
submit a statement on tlie functions and activities of the Bureau 
of Standards for this committee's consideration.^ 

Acting Chairman Williams. All right. You submit that for the 
committee for its consideration. 



1 Under date of May 25, 1939, the Director of the National Bureau of Standards sub- 
mitted a memo re commercial standards of wall paper, which was entered in the record 
as "Exhibit No. 639" during hearings lield May 29, 1939, and is included in the appendix 
to this Part on p. 3475. „ . , „ ^ c. ^ , 

^ Under date of May 25, 1939, the Director of the National Bureau of Standards sub- 
mitted a statement of the functions and activities of the Bureau, which was entered in 
the record as "Exhibit No. 630" during hearings held May 26, 1939, and is included in 
the nppendix to this Part on p. 3475. 

• Ibid. 



3440 tM)NCEN'rKATlU.\ OF K(.'()N()M1(' I'OWEil 

Mr. l^loNTGOMERY. If you cun get a coyiy tor the record tomorrow 
showing the reference made to that other standard you probably 
will want to explain that situation, because if these men just had 
the letter they wouldn't know why it was. 

Mr. Martino. I will be glad to do that. 

Acting Chairman Williainis. You put anything in that statement 
that you please and submit it to the committee for our consideration. 

The committee ',rill stand in recess until 2 o'clock. 

(Whereupon, at 12:15 p. m. a recess was taken until 2 p. m. of 
the same day.) 

AFTERNOON SESSION 

The committee resumed at 2 : 85 p. m. on the expiration of the 
recess. 

The Chairman. The committee will please come to order. Mr. 
Montgomery, j^ou are ready to proceed ? 

Mr. Montgomery. Yes ; Mr. Chairman. Mr. Maddux. 

The Chairman. Mr. Maddux, do you solemnly swear the testi- 
mony you are about to give in this proceeding shall be tlie truth, the 
whole truth, and nothing but the truth, so help you God? 

Mr. Maddux. I do. 

TESTIMONY OF MILTON R. MADDUX, PUECHASING AGENT EOE 
HAMILTON county; OHIO 

VSE OF STANDARDS IN PURCHASES OF CONSUMER GOODS BY rUBUG AGENCIES 

Mr. MoNi-GOMERY. Will you state your name, please ? 

Mr. Maddux. Milton R. Maddux, 1628 Llanfair Avenue, Cincin- 
nati, Ohio. 

Mr. Montgomery. Tell us what your occivpation is, Mr. Maddux. 

Mr. Maddux. I am the purchasing agent for the County of Hamil- 
ton, Cincinnati. 

Mr. Montgomery. Do you in that position purchase consumer 
goods ? 

Mr. Maddux. Yes; some of our items are consumers' goods, al- 
though we buy them in large quantities. 

Mr. Montgomery. Will you just give us a list of some of the con- 
sumer goods that you buy ? 

Mr. Maddux. A few of them are coal, textiles, clothing, paints, 
lubricants, soaps, cleaning compounds, disinfectants, insecticides, 
canned goods, meats, flour, brooms, blankets, shoes, pillows, and hos- 
pital goods — things of that type — automobile batteries, furnitjLire 
and floor polish, and many others. 

Mr. Montgomery. I would like to point out to the committee the 
purpose of this ,testimony •^s • to show by contrast how consumers' 
goods can be bought in specific ways in which savings can be effected 
or the exact quality desired can be obtained by purchasing on a formal 
and scientific basis in contrast with tlie wa}^ consumers have de- 
scribed heretofore, the way they make their purchases. I tliink the 
testimony Avill bring out some very interesting possibilities for con- 
sumers, if something of a similar nature could be made available to 
them. 



CONCENTRATION OF ECONOMIC POWER 344]^ 

I think that can be developed better by the witness when we get 
through. Will you describe for us in general the purchasing plan 
with which you operate? 

Mr. Maddux. I will read a short paper here, or part of one, that 
I worked up a few weeks ago for univejlgity students concerning the 
purchasing of supplies, materials, ana services for 33 departments 
and institutions, departments in the County of Hamilton, which is 
centralized. The purchasing also is coordinated with the City of Cin- 
cinnati and the Board of Education. Purchases of each of these 
political subdivisions approximates or exceeds $1,000,000 a year; total 
purchases approximate $6,000,000 a year for the three coordinated 
units. 

The purchasing plan and system of all three units is generally the 
same; each purchasing agency strives to promote competition fairly 
and adequately, and constantly works to attain a goal of complete 
and adequate specifications for every competitive item purchased. 
Each unit has its particular laws and statutes under which it oper- 
ates. Essentially there are only technical differences, which are 
small obstacles in the matter of coordinating purchases. 

The purchasing agents of these units, including the agent of the 
University of Cincinnati, meet once a week and act upon bids on 
commodities or services taken for the joint requirements. They de- 
velop uniform specifications wherever possible and consider matters 
of policy of purchasing jointly with supervised testing, and act ac- 
cording to their combined best judgment. The county purchasing 
department individually serves the Tuberculosis Hospital, County 
Home, and Chronic Disease Hospital, County Jail, Juvenile Detention 
Home, County Engineers — that is the highway department, 28 admin- 
istrative departments, such as the auditor, recorder, clerk of courts, 
sheriff, and others. 

Uniform requisition procedure is employed with the exception of 
certain emergency items, and agreements are entered into by the 
purchasing agent and the department under his supervision. 

Great care in developing specifications is necessary because of the 
rule of accepting the lowest and best bids. Weight of furnishing 
unequivocal proof always is upon the purchasing department. 

Surveys are constantly being made of items which are used by two 
or more departments, with a view to furnishing the same grade and 
quality to as many departments as possible. This reduces labor in 
handling and promotes better control of quality and reduces the cost 
due to greater unit quantities. 

Our specifications — I think the question will be asked; I shall 
answer that now — are by subscriptions to trade papers, that is, they 
are made available and constructed from information received from 
trade papers, American Society for Testing Materials, National As- 
sociation of Purchasing Agents, Consumers' Publications, the United 
States Bureau of Standards; that is. Federal specifications, I should 
say correctly — State highway, manufacturers' trade associations, and 
other governmental agencies. 

Our testing facilities are the University of Cincinnati, Bureau of 
City Testing, and the commercial laboratories in or out of Cincinnati. 

Mr. Montgomery. Just state what a specification is. Wliat do you 
mean by a specification? 



3442 CONCENTRATION OF ECONOMIC POWER 

Mr. Maddux. A specification, in a broad sense, may mean anything 
from a small description to a detailed technical description of an 
item. It is an attempt to tell the bidder what you want so that his 
bid will be on the article .that you wish to purchase. That way you 
obtain bids on an equal basis and you can more easilty accept the 
lowest bid. 

Mr. Montgomery. Do your specifications usually describe, then, 
what the commodity shall be made of? 

Mr. Maddux. In some cases it does. 

Mr. Montgomery. Does it describe, sometimes, how those ingredi- 
ents shall be put together, how they shall be constructed? 

Mr. Maddux. In rare cases it does. 

Mr. Montgomery. Do they describe how the commodity shall per- 
form, what tests it shall meet? 

Mr. Maddux. The specifications, to be complete, should give some 
reference as to tlie service the commodity is to perform, or the 
method of test. 

Mr. MoNTGOMiHY. Do you buy all of your commodities on the basis 
of specifications that you have established for them ? 

Mr. Maddux. All commodities are not bouj^lit that way. Those 
that I have mentioned are. There are others that can't be, because of 
the complicated nature of the specifications. 

Mr. Montgomery. When you don't buy on a basis of specification, 
how do you make your selection? 

Mr. Maddux. Either by brand name or equal. 

Mr. Montgomery. What do you mean by that? 

Mr. Maddux. It means we will take a product we have probably 
used before, recognizing the brand hames as a standard for that par- 
ticular grade or quality, and ask for bids on that commodity or its 
equal. In that case we can require the bidder to furnish proof of its 
equality, or we can supply that proof ourselves. In any case, we 
must be sure, or as neai'ly sure as we can be, that we are buj'ing an 
equal commodity. 

Mr. Montgomery. When you buy by specification and samples are 
submitted on bids, do you have those samples tested to see if they 
meet the specification? 

Mr. Maddux. Sometimes we do; sometimes we don't. If it is a 
sample of something that can be tested quickly, we do. Sometimes 
a test takes a period of time, maybe 2 weeks. Maybe 2 weeks may 
be too long to wait. In that case we can assume legitimately that if 
our specifications are clear, without malving further remarks on his 
bid, that the bidder has quoted on our specification. We may even be 
compelled to take that stand, and accept his lowest bid. 

If he fails to produce goods on that order or contract to meet the 
specifications, he is then liable to cancelation of contract or damages 
in certain cases if we can buy the material elsewhere and charge him 
with the difference in cost. 

INIr. Montgomery. When you buy goods b}' brand, do you have your 
laboratories check them to see if they meet the quality that you 
want? 

Mr. Maddux. Not always. AVe do that occasionally, for our own 
information, and when Ave suspect that the quality of the brand has 
changed in the meantime, we might. If we buy by brand, we accept 
that manufacturer's standard on that item, and we can't kick too 



CONGENTRATTON OF ECONOMIC I'OWER 3443 

imich if wc don't like it. In othor words, wc will change our brand 
the next time if we don't like the brand purchased. 

Mr. Montgomery. In the case of purcliasing canned ve«retables, 
let's get down to some specific commodities now. In the case ol" pur- 
chasing canned fruits or vegetables, you buy by Government grades. 

Mr. Maddux. Yes; Ave use a Govermnent Department of Agricul- 
ture grade on canned fruits and vegetables. We buy all four grades, 
A, B, C, an(l substandard, according to the use to which we want to 
put t»he particular item. 

Mr. MoNTGOMKRY. When the vegetables are delivered do they have 
a brand on them ? 

Mr. Maddux. Sometimes they do. We don't require it. 

Mr. MoNTGOiNiERY. Have you found in the samples submitted in 
purchasing canned fruits or vegetables that there is a variation of 
grade within a single brand? 

Mr. Maddux. From year to year; yes. We find that the brand 
last year may not be the same as that same brand this year. 

Mr. Montgomery. Do you ever have the same brand ofTered to you 
in bids- to meet different grades in your specifications for your re- 
quirements ? 

IVIr. Maddux. Yes; we have. I have an instance here which might 
illustrate that. These are the last bids on the last quantity of canned 
goods purchased. One company quoted against our request for 
grade A merchandise, a brand, his first brand, the "Topmost" brand, 
on five items. Against our specification B he quoted "Sail-on" on 
nine items, and he quoted "Sail-on" on one item againsi specifi- 
cation C. 

Mr. Montgomery. You mean the specification for grade C? 

Mr. Maddux. Yes. 

The same manufacturer quoted "Sail -on" brand on two items speci- 
fied as grade A. The same manufacturer quoted Red Robe Brand 
on one item of grade A and one item of grade C. That may not 
necessarily condemn that manufacturer on some of his grades. He 
can quote on the grade specified or better. If his pack doesn't have 
the grade C, he can quote on grade B and take his chances on the 
price. 

Another manufacturer quoted a brand on all three grades, the 
same brand on 8 items of grade A, 10 items of grade B, and 1 item 
of grade C. 

Mr. Montgomery. In that case, did that manufacturer become the 
successful bidder in those cases? 

Mr. Maddux. That manufacturer was a successful bidder on a great 
lot of canned goods. I think our contract amounted to $22,000 and 
he got $12,000 of that. 

Mr. Montgomery. The products he delivered on yout specifications 
for grade B, and on your specifications for grade C — do you know 
what he delivered, whether what he delivered actually measured up 
to grade A? 

Mr. Maddux. No; what he delivered measured up to the specifi- 
cation and to the standard sample retained at the time the bids were 
taken. The brand he quoted on was his first quality brand. We 
have no objection to a bidder quoting us a low price on a brand 
which he represents to the trade as his best brand and including it 



3444 CONCENTRATION OF ECONOMIC POWER 

under our grade B or grade C. That is no crime. He can offer 
that or better. 

Mr. Montgomery. This testimony might be incorrect or carry a 
wrong inference. I want to get it right. Did he in that case de- 
liver grade B goods under that brand? 

Mr. Maddux. I can't say. 

Mr. Montgomery. It may have been top grade ? 

JNIr. Maddux. It may have been first grade. It was a grade equal 
to the standard sample which was accepted at the time the cutting 
took place, ar^l indicated to us as grade C or better in that classifi- 
cation, or grade B or better in that classification. 

Mr. Montgomery. So that your testimony doesn't necessarily indi- 
cate a variation of quality within the brand, does it? 

Mr. Maddux. Not necessarily. 

Mr. MoNT(iOMERY. Do you buy creosol compound? 

Mr. Maddux. Yes. Creosol compound is a disinfectant. It is 
commonly known by the public as Lysol, which is a highly advertised 
product. Lysol is a creosol compound. At the time I came to the 
county they were paying $1 .25 a gallon for it. 

Mr. Montgomery. That is, you were buying it on the basis of the 
brand name? 

Mr. Maddux. Yes; the brand name, and paying $1.25 a gallon. As 
soon as I was able to convince our superintendents that we could 
apply a specification to that item we bought according to specification 
and our price is now 70 cents a gallon. We are in fact, however, 
still quoted $1.25 against our specification; they are consistent in 
their prices, but the compound can be bought according to the proper 
specification at 70 cents a gallon. 

Mr. MoNTGoiMERY. Your specifications are substantially the same as 
Lysol? 

Mr. Maddux. They are. The tests we have run on both products 
show that the bacteria count after sterilization by our creosol com- 
pound is equal — I won't go any further than that — to Lysol. 

Mr. Montgomery. Your specifications for that product are based 
on its actual performance in killing bacteria? 

Mr. Maddux. Yes: in that it specifies that the phenol coefficient of 
the item. 

Mr. Mont(;omery. You buy flour, do you not ? 

Mr. Maddux. Yes. 

Mr. Montgomery. What do you require on flour? What are the 
items? I don't think we care about the percentages, but what quality 
factors in flour do you call for in your specifications ? 

Mr. Maddux. Flour is bought on the basis of specification. The 
specification includes the requirement and the detailed analysis. I 
will read it: 

Type A flour — 

that is the standard flour — 

shall be made from dark Kansas, sound, hard wheat, free from smut and weed 
seeds, shall be strong, high ground, well dressed, of a good creamy white color, 
and capable of yielding a loaf of good volume, texture, odor, and taste ; shall 
not be lower than a strf.ight grade, shall contain not more than 15% moisture, 
determined by the vacuum oven method ; shall not exc(H'd 0.4(5 percent of ash. 
not less than n.6% of protein. The flour shall be capable of ahsorbiufr not 
less than G0% by weight of water. The ash, protein, and ab.'^orpiion sh.Tll be 
computed on the basis of ].">% moisture. 



CONCKXTItATIOX OK Kc'O.Xt >.Ml( ' I'OWKK 



3445 



Any flour that Ave buy can be analyzed and found to nicel that, 
requirement. 

Mr. MontO():meky. Do you ever buy Hour :it retail for use in your 
home ? 

Mr. Maudux. I just asked Mrs. Maddux about that and we df>n't 
buy much bread flour at home, and she doesn't know the price, 
either. 

Mr. MoNTooMEKY. Do you buy lubricatino oil by specification? 

Mr. Maddux. Yes, sir: automotive lubiica(in(;"oils and industrial 
oils both are bought by specification. 

Mr. MoNixsoMEnY. Did you always buy it that way ^ 

Mr. iNlADDUx. No. Automotive lubricating; oil at one time wa- 
bought by brand, but that was a year before I came with the county. 
I discovered that the City of Cincinnati had a specification, and'l 
used theirs the first and second year, and from then on we cooper- 
ated on our specification writing and' have specification data that 
we both use jointly. 

Mr. Montgomery. Tell us how you buy lubricating oil, will you. 
and what you have been able to do to save money for the county 
and tlie city by the way you buy lubricating oil? ' 

Mr. Maddux. Automotive lubricating oil, a good oil, ordinarily 
will sell in wholesale quantities around 65 to 75 cents a gallon. Tlu' 
first time we took bids we had a price of 25 cents a gallon and we 
got fairly satisfactory results, but we realized throuirh our own use 
and other information received that that oil wasuT the best. In 
order to hold our position as quality buyers as well as price Inn'ers, 
we decided to step up our requirement and specificatifms to provide 
an oil that could not be criticized, and knowing that by using a 
quality oil we probably would benefit our equipment by providing a 
better lubricant. Through the University of Cinciimati and con- 
versation with lubricating engineers, we ff)und that we could develop 
a better specification, and did. We are paying hoav 83 cents a gallon 
for our lubricating oil. I am going to avoid definitely mentiojuug 
the brand of this lubricating oil for obvious reasons. 

Mr, Montgomery. Thirt3'-three cents a gallon? 

Mr. Maddux. Thirty-three cents a gallon — without tax. 

Mr. MoNTGOiNtERY. What were you paying before ? 

Mr. Maddux. We were paying previously 65(1 au-d down to 2Z(^, but 
the 230 oil was not what we considered a satisfactory oil. 

Mr. ]Mo^^TGOMERY^ Do you know what the brand of the oil is — I am 
not asking you to name it — under your specification ? 

Mr. Maddux. Yes. 

Mr. Montgomery. Is that sold at retail in Cincinnati? 

Mr. Maddux. Yes; it is. 

Mr. Montgomery. What is the charge for it at retail? 

Mr. Maddux. Thirty-five cents a quart. 

Mr. Montgomery. As compared with 33 cents a gallon? 

Mr. Maddux. Yes. 

Mr. Montgomery. That is an indication of part of the distribution 
cost; at least, it shows the difference in cost of distribution at retail 
to the consumer and distribution to a large buyer under specifica- 
tions, 35 cents a quart to the consumer and 33 cents a gallon to you. 

Mr. Maddux. Yes. 

Mr. Montgomery. The same oil? 

Mr. Maddux. Yes, sir; the same oil. 



3446 CONCENTRATION OF ECONOMIC POWER 

Mr. Montgomery. Have you finished on lubricating oil? 

Mr. Maddujj:. That is all I have; that is all that is necessary. 

Mr. Montgomery. Do you buy aspirin? 

Mr. Maddux. Yes; we buy aspirin, but we don't buy it as such, 
although aspirin is a name for acetylsalicylic acid tablets, 5 grains. 

Mr. Montgomery. How much do you pay for it? 

Mr. Maddux. Fifty-two cents a thousand. 

Mr. Montgomery. Wait a minute; the consumer buys that by the 
hundred. How much does that figure out per hundred ? 

Mr. Maddux. That is $5.20 a hundred. 

Mr. Montgomery. Fifty -two cents a thousand? Five cents a hun- 
dred, isn't it? 

Mr. Maddux. Five cents a hundred, yes; excuse me. 

Yes ; that is 5 cents a hundred, of course. 

]\Ir. Montgomery. Have you always paid 52 cents a thousand for 
it? 

Mr. Maddux. No ; we bought aspirin as aspirin, although we always 
did specify 5 grain, I believe; our prices at one time ranged from 65 
cents to $1.10, and I looked at my record before I came up here to 
see whether or not there was any particular brand specified and I 
couldn't find any, although there were brands on the orders, but I 
couldn't find where the brand was specified in our inquiries. 

The brand was offered on the bid. Sixty-five cents, $1.10. The 
reduction in price from 65 cents to 52, I think, was brought about by 
our estimating our amiual requirement, coordinating with the city, 
and making one joint agreement, which is 500,000 tablets. 

Mr. Montgomery. You buy cleaners, of course? 

Mr. Maddux. Yes ; w- e buy cleaning compounds. 

]VIr. Montgomery. How do you buy those ? 

Mr. Maddux. Those are brought strictly by specification. 

Cleaning compound is a subject that you always get a laugh out of 
when the salesman tries to sell it to you. For 6 months after I took 
ofRce at the courthouse I think every other salesman sold a cleaning 
compound, insecticide, or deodorant, or disinfectant, something in a 
can, that he was willing to demonstrate and show me how it worked. 
Upon questioning on vs^hat basis he would demonstrate, he would say: 
"Give it to your janitor and let him try it." If you know the aver- 
age intelligence of a janitor, you know that he might test it and say 
it was good or it was bad. He may be indifferent, but he will not 
in any two cases make his test alike, and therefore there is no stand- 
ard of testing. So that was out. 

We decided that it was better to write our own specifications. We 
found first of all by laboratory research that most of the cleaning 
compounds are trisodium phosphate; some have ammonium chloride 
in them; some, chloride of lime; some, a few other things to fortify 
them or give them a slight disinfecting property. In cleaning 
compounds we decided to have two types — a general cleaner, and a 
dish-w^ashing compound which comes in that classification. The 
general cleaner we worked up is a combination of trisodium phos- 
pliate and ammonium chloride and soda ash. If used in the proper 
quantities, it is the best kind of cleaner you can want. For dish 
wnshing the same ingredients, but including pyrophosphate, which is 
a lime-suspending agent. 



CONCENTRATION OF ECONOMIC POWER 3447 

Those will give us as good a compound as could be obtained and as 
good a compound as known, I think, On the market, with the excep- 
tion of some very late developments in the sulphate alcohols and 
expensive items of that kind which we are not interested in. 

The cleaning field often is a funny subject. One night a salesman 
came in the office about a quarter after four (the office closes at 4:30) 
and wanted to tell me something; he didn't look like he was very 
wealthy and probably was out trying to do a job. I listened to 
him until quarter of five or 5 o'clock; he was demonstrating and he 
cleaned our filing cabinets and the linoleum and the marble between 
my office and the one on the outside, and when he finished he had 
cleaned the top of my desk, and it all worked, it was all right. He 
wanted 10 cents a pound for it in drum lots. I reached in my desk 
drawer and pulled out some furniture polish that I had made myself 
and polished the top of my desk, and he was very enthusiastic about 
it and wanted to buy my formula. I told him if he wouldn't bother 
me about any 10-cent cleaning compound I would give him the 
formula. It was 33 percent paraffin oil and 67 percent naptha. So 
he had my formula for furniture polish and I wasn't bothered with 
him any further. He did leave a sample, and we had it analyzed, as 
we usually do, and it should have cost us about 2.8 cents a pound, 
that is on the basis we were buying other items. So that puts us 
really on the offensive now when we are buying cleaning compounds. 

Mr. Montgomery. Generally speaking, these people that want to 
sell you a cleaning compound under some name, ask what in price ; 
around 10 cents? 

Mr. Maddux. About 8 to 12 cents a pound is the price they quote 
us in drum lots. 

Mr. MoNTGOMEBT. What are you paying for that under your 
specifications ? 

Mr. Maddux. $2.80 to $4.30 a hundred pounds, 2M or 4.^ a pound. 

Mr. Montgomery. Something less than half the price quoted to 
you under names. 

Mr. Maddux. Yes. On our dish-washing compound we had four 
approved brands at one time, and they were all very satisfactory. 
I tried to find out how to specify it, and I wasn't very successful, 
so we simply bought some, or we took it from our supply and had 
the university test it. We talked to the gentlemen that were 
selling the- product and they had no objection to our stealing the 
formula if we could find out what it was. By doing our own work 
and paying for it we didn't consider it stealing anybody's formula. 
We wrote our own specification, and on the next contract the price 
dropped from fiA cents a pound to $4.50 a hundred pounds, or 41/2 
cents a pound, and from that time on our use of that compound 
declined, probably due to its better quality, and recently when I tried 
to supplement thAt particular specification with one which I consider 
a. better one now, the departments objected because they were having 
such good results from that particular specification. 

Mr. Montgomery. Do you happen to know what some of these 
cleaning compounds sell for in the market? Do you have any fig- 
ures? 1 1 «. • 

Mr. Maddux. No, I can only guess. There is no standard of price 
on that. I really couldn't say. I recall times when we have made 



3448 CONCENTRATION OF ECONOMIC POWER 

comparisons I think up to 7 cents a pound on some of thfem wholesale. 
There is no basis for it, and I don't recall any particular one, except 
that sometime ago I figured it was 7 cents a pound for material 
we could buy for 31/2 to 4. cents a pound. 

Mr. Montgomery. Three or three and a half cents cheaper? 

Mr. Maddux. Yes. I. think the public could know very easily that 
there are some ordinary chemicals that they can buy in any whole- 
sale or retail store that might sell it; I know you can buy trisodiuni 
j)hosphate that will clean practically anything you want to clean in 
the way of grease or greasy dirt, things of that kind, and that can 
be bought for 10 cents retail in small quantities. 

Mr. MoNTGOMEitY. You buy flashlight batteries, don't you? 

Mr. Maddux. We buy both flashlight and automobile. 

Mr. MoNTGOMEnT. Will you tell us about the various items? 

Mr. Maddux. The city of Cincinnati buys considerably more flash- 
light batteries than we do, but as we both operate under the same 
agreement, the county gets the benefit of the lower prices. The 
story in connection with flashlight batteries is that on a certain Thurs- 
day when the Coordinating Group was to consider bids received 011 
flashlight batteries, a publication came to my dfisk, which happened to 
be the Consumers Union Reports, with information concerning the 
relative qualities of flashlight batteries. I do not use the decisions 
of the Consumers Union Reports in the purchase of my commodities, 
although it is interesting to compare the riesults of tests as reported 
in this publication with our own. 

Mr. MoNTGOMT^RT. Wlio had had a re])ort. Consumers Union? 
- Mr. Maddux. Yes. They had a certain battery listed as not accej^t- 
able. It so happened that that very battery was quoted to us at the 
lowest price. I mentioned this to the committee, which caused us all 
to laugh ; in other words, the coincidence seemed rather strange. We 
decided the best thing we could do would be to work out our own 
test inasmuch as w^e did not want to take the Consumers Union re- 
port for our reference because it could not be used later legally. We 
bought three batteries of each make on the open market, and let them 
burn "for periods of 2 hours. They Avere then shut off for 1 hour, 
and then burned for 2 more hours as long as the day lasted. They 
were started in the same manner the next niorning, and the test con- 
tinued until the batteries failed. We found that the battery rated 
as number one in the publication rated as number one w^ith us. The 
three batteries of this make not only rated the highest in average life, 
but were most uniform. 

The battery rated second by the ]jublication rated second with us. 
We considered these batteries good batteries and acceptable. Of the 
make of batteries that rated worst, one gave 25 hours service and 
one .15 hours, and the life of the third one I do not recall, but they 
showed a lack of uniformity, and therefore were not acceptable to 
us. It is interesting that our test did bear out someone else's test; 
and the test was one that could be done by anybody. 

Mr. Montgomery. Hoav do you i)urchase insecticides? 

Mr. Maddux insecticides at one time were bought by brand. Prices 
are show. on. our records of $1.25 to $2.50 a gallon. Insecticides 
are necessa'r t the County I »pie and the places where the old folks 
visitors come m and often bring bedbugs and the like into the insti- 



CONCENTRATION OP ECONOMIC POWER 3449 

tutions, and we have to keep after themall the time. Also, the build- 
ings are old and are a breeding place for roaches and other insects. 
So we liave to buy insecticides ni considerable quantity. It occurred 
to me that there was something to do about the price and quality, so we 
developed our own specification 4 years ago. We had a specification 
that worked very successfully and reduced our price from $1.25, 
which was the best price we had up to that time, down to about 55 
or 58 cents a gallon. And the strange part about it was we received 
positively no criticism from the trade for buying a cheap product, 
or buj^ing at that price, and we did receive letters of commendation 
from insecticide manuiacturers and "Soap" publications as to the 
specification. 

We now are using a commercial standard published by the Govern- 
ment Printing Office, I suppose with the aid of the Bureau of Stand- 
ards, in which that commodity is graded. There is a law, I believe the 
Insecticide Act, that requires all containers to be grade marked. In- 
stead of using our own specification now we are using Govermnent 
rating of plus double A ; that is 16 over the standard, over the average 
kill (flies). There are 3 grades; A, double A, and B. We are using a 
double A and are having success with that. 

Mr. Montgomery. Do you use Government grades in the purchase 
of meats? 

Mr. Maddux. Our meats are purchased, first of all on Government 
specification, or grading, I should say ; that is the description of grade. 
Secondly, we have an authorized inspector under the Department of 
Agriculture, Bureau of Agricultural Economics. The Government 
grades our meats before they go into the institution; every piece of 
meat must be accepted as being equal to the grade specified, and so 
stamped. 

Mr. Montgomery. Consumers buy something ctilled mineral oil ; do 
you buy that ? 

Mr. Maddux. Yes; we buy mineral oil which we call liquid petrola- 
tum, U.S.P. That is bought on the specification which is in the 
main a requirement of the U. S. Pharmacopoeia. That was bought on 
brand sometime ago as a cost of 72 to 91 cents a gallon. We are now 
paying 731/2 cents a gallon, based on U.S.P. specifications. 

Mr. Montgomery. What does that sell for at retail; do you know? 

Mr. Maddux. I^think I paid 80 cents for a bottle of about a pint 
not long ago, and of course that will last a long time in a home — or 
we hope it will. 

Mr. Montgomery. As compared with 73V^ cents a gallon. I think 
that gives a good example of the ways in which a purchaser in your 
position goes about ascertaining what one is getting, and also in get- 
ting them at a good price. You are a consumer as well as a purchas- 
ing agent, aren't you, Mr. Maddux? 

Mr. Maddux. Yes; I am. 

Mr. Montgomery. What do you think about the way we consumers 
buy goods out in the retail market ? 

ikr. Maddux. I believe first of all there are a lot of common things 
that can be bought by their own names that would save consumers a 
lot of trouble and money. I mentioned one, trisodiiun phosphate, in 
the cleaning field. You can buy coffee by buying coffee ; that is No. 3 
Bourbon Santos, which is a trade reference you see quoted in the 



3450 CONCENTRATION OF ECONOMIC POWER 

papers every day ; buy that from a recognized coffee house as such and 
have it ground fresh and have an excellent cup of coffee for less 
money than you can buy branded coffee. 

Mr. Montgomery. How much can you get it for, do you know, 
retail? 

Mr. Maddux. About .14 cents a pound, I believe, retail, and that 
same coffee in a package would cost you 18. I know those figures 
are correct because I have had contact with one packer in Cincinnati 
who furnishes special blends and I know what he puts in his coffees. 
A coffee that is offered to the county, one that we buy, is costing us 
131/2 cents a pound. We specify what the coffee shall be and mix it 
ourselves, so we know what we are getting. 

The consumer that goes for a lot of package goods and canned 
goods is admitting that he doesn't know how to buy those things by 
their own names, or he wants to save trouble in preparing it, or 
storing. In that case I think he can expect some difficulty in grad- 
ing, because a constant grade can't always be accomplished. However, 
there are some things that can be graded and I think ought to be 
graded. I feel in the textile field that textiles can be graded much 
easier than some other commodities. I am still waiting for the time 
when I can go into a store and buy a shirt with a Federal specification 
marked on it, or something that would indicate to me that that shirt 
material is comparable to a specification that I have in mind, and know 
that the next time I want to buy that shirty if it is satisfactory, I can 
get one like it. 

It is hard now to buy the same shirt unless you buy the same brand. 
If you like a certain quality of shirt and you want to buy the same 
grade the next time you must buy that same brand ; for if you change 
your brands you are not certain what you are getting. If the shirt 
tail is marked with an indication of the quality of broadcloth, at least 
you can see the workmanship, and you are protected that far. 

Mr. Montgomery. Have you had bad experience in buying shirts? 

Mr. Maddux. I have had my share of it ; yes. One of the leading 
stores in Cincinnati sold a shirt, $2.95 shirt, for $1.95 on. sale; I 
bought half a dozen of them and found they weren't worth $1.95. 
I don't. believe that that store knew that the shirt wasn't good; the 
broadcloth split and the collar band wore out far too soon. Shortly 
after that I talked before a consiuners' group in Cincinnati which in- 
cluded representatives of department stores and I suggested in an off- 
hand way that they use the University of Cincinnati, or set up an inde- 
pendent laboratory of their own on a cooperative basis to find out 
what they were selling. 

In another instance a store in Cincinnati that advertises one particu- 
lar brand of goods has gone over completely to nationally advertised 
products. That is all right in a way. On the other hand, that store 
would be better off, in my mind, at least so far as I am concerned, if 
they would establish their own grades, or tie their grades up with 
something that would indicate to me that the quality is there, and not 
necessarily the brand. The average department store and whole- 
saler will buy what he can sell and without regard to grade. I kno^v 
that because I have asked a number of them. When it comes down 
to our taking bids they offer brand. "Does that brand meet specifica- 
tions?" They will often take a chance; they will say "Yes." 

I say, "How do you know?" 



CONCENTRATION OF ECONOMIC POWER 345 J 

"Oil, because this is a reputable mill." 

"Do you know that tliis item meets with our specifications?" 

No; they don't know that; they haven't made any tests; alth()u«,'h 
they sell thousands of dollars' worth of merchandise they haven't 
made tests. They pass it on to me as representing what I want, 
and at the same time they don't know. 

Mr. Montgomery. As a purchasing agent you buy some textiles, 
don't you ? 

Mr. Maddux. Considerable. 

Mr. Montgomery. Do you buy any of them by brand? 

Ml'. Maddux. AVe buy those by s[)ecification. We have a complete 
set of specifications. I brought along copies of it. Our office copies 
of these specifications include not only the specifications but a piece of 
the material, and in case of manufactured goods, a drawing of the 
garment itself. This is primarily designed for our own help, so that 
the superintendent of an institution will know what our standard 
is and will order according to our specification number instead of a 
lot of descriptive matter that means nothing. These specifications 
are complete in that sense. 

Mr. Montgomery. I think that is all the questioning I want to do. 
Does any member of the committee have any questions? 

The Chairman. Are there any questions to be propounded of this 
witness ? 

Mr. Montgomery. Have you anything else you would like to add, 
Mr. Maddux? 

Mr. Maddux. No I believe not, except in the case of fruits and 
vegetables, speaking of grades, my food buyer has a copy of the 
publication put out by the Department of Labor, Consumers' 
Project, Analysis of United States and State Standards for 
Fresh Fruits and Vegetables. This goes into detail as to what a 
U. S. No. 1 potato is from Idaho or Vermont or anywhere else, and 
it is up to him to be able to interpret this specification when he buys. 
At the same time we find that most of our fresh fruits and vege- 
tables are being graded on the packages by government graders, 
which assists us materiall}^ I believe if the consumer could see 
those grade marks when he buys it would probably assist him. We 
are in this instance a consumer and if a small consumer could buy in 
larger packages it would assist him. 

Mr. Ballinger. You have been giving illustrations of how you 
can buy more cheaply. Is it due to the fact that you are a volume 
purchaser and you can get a better price, or because you can specify 
the elements in it ? 

Mr. Maddux. It may be both. In the case of our dishwashing com- 
pound, that is a direct specification saving. We were paying 71/2 
cents a pound. The same manufacturer supplied us the same material 
when bidding on our specifications, at 41/^ cents a pound, 

Mr, Montgomery. That is, when you were buying by name you 
paid 7I/2 cents, and when you bought by specification, 41/2 cents. 

Mr. Maddux. There may be a reason for that from a marketing 
standpoint. He can sell us and put our specification number on the 
package and get around the laws that require him to sell at the 
same price to everyone in a certain group. He can't sell his Emeralite 
dish-washing compound at 4I/2 cents a pound. If he did, he would 



3452 CONCEMTRATION OF ECONOMIC POWER 

have to sell at that price to hotels. But he can sell our specification 
No. 6 at that price. 

Mr. Ballinger. Then you believe if products were bought more 
and more on specifications, if there were some way the consumer 
could buy on specifications, there would be a real saving? 

Mr. Maddux. I don't think there is any question about it, particu- 
larly under our marketing }Dractices today and the laws which permit 
ihe governing of resale prices. If a brand is sold at one price to 
one type of consumer or buyer, it must be sold at that price to the 
other buyers in the same classification. 

In the case of our oils ; the oil company is selling its oil at a much 
higher price to commercial users, but is showing a brand name on 
that product, whereas on ours we have our specification number, but 
our analysis shows it is the same product. 

Mr. Montgomery. Thank you very much indeed, Mr. Maddux. I 
think that was very interesting and a real contribution to this record. 

(The witness, Mr. Maddux, was excused.) 

The Chairman. What is the next order of business, Mr. Mont- 
gomery ? 

Mr. Montgomery. Mr. Chairman, I prepared this morning, not 
knowing whether the hearings would conclude in sufficient time for 
me to make a statement, summarizing what I believe the testimony 
to have been during these 3 days, this statement of my summation 
of the testimony. I would like to read that into the record and 
then have any discussion of it that the committee may desire. Is that 
satisfactory ? 

The Chairman. It will be quite all right. Without objection, you 
will be permitted to proceed. 

Mr. Montgomery. The first subdivision is under the heading of 
"Standards": 

All of the witnesses testifying on May 10 and May 11 have shown the diffi- 
culties confronting consumers in malilng their purchases. 

Mrs. Alice Belester, Chicago housewife, testified that the facts given in 
advertising, on labels, and by sales clerks are not the facts which she needs. 

Mrs. Paul S. Roller, Berwyn, Maryland, of the American Association of 
University Women, testified that neither she nor other consumers can rely 
upon brand name as a basis for judging quality, although consumers are 
repeatedly urged to make their selections on the basis of brand. She showed 
that brand and quality do not necessarily correspond. 

She testified also that variations in the size of package deceive consumers with 
respect to comparative prices. 

Dr. Ruth Ayres, New York City, an economist, testified to the impossibility of 
making intelligent selection from among the confusing variety of sizes, brands, 
and prices, with quality factors not disclosed. She illustrated by her own pur- 
chases the deception which may follow the packaging of commodities in oiT sizes. 

Mr. Jerome W. Ephraim, New York City manufacturer, testified that his tooth 
paste which meets standards of the American Dental Association can be sold to 
consumers at about half the price charged by the ten leading brands of tooth 
paste which occupy 90 percent of the market. He testified that only one of the 
ten leading brands has received the Association's acceptance. 

Mr. Dexter Masters, New York City, testified to the unreliability of price as an 
indicator of the quality of merchandise. He, too, illustrated the need of stand- 
ards whereby commodity characteristics can be accurately described to con- 
sumers, presenting evidence of the unreliability of the "grades" that are used 
in *^he sale of milk in one market ; of the superior utility of a low-priced vncuum 
cleaner compared with others costing more than twice as much ; of the great 
range in actual prices of toilet soaps all having substantially the same quality 
for cleansing purposes ; of the range in price of lipsticks having the same approx- 



CUNCKNTUATION OF KCUNO.MKJ I'OWElt 3453 

imato quality and the same low ingredient and container costs; and ot ihe wide 
differences in qualities of different brands of shoes and tires selling at the same 
prices. 

Witnesses nppearin^' on INlay 12 showed (1) the need for standards in the 
merchandising of 0( rtain liouschold oiiuipinont, and (2) the use of standards in 
purchases nnule by three public agencies in Cincinnati, Ohio. 

Repre.seiitative Iveece. Are those beino- printed as conclusions ul' 
the coniniittee or ;i hunimation of the evidence? 

Tlie CiTAiioiAN. This is just Mr, Montgomery's suniniatioti of the 
evidence. They are not at all conclusions of the committee. 

Mr. M()>'TO0ArEi{Y (reading) : 

The first of these, Mr. L. K. Walker, of Sears, Uoebuck & Comiiany, testified 
to his opinion that sale of goods to consumers on the ba.sis of standardized 
descriptions of (juality and performance would be beneficial to manufacturers, 
distributors, and consumers and would contribute to the maiiitcnauco ol' 
competitive enterprise. 

CONSUMER CREDIT 

Dr. Ayres presented evidence of the deception practiced by well-established 
stores and others with respect to interest charges quoted in installment contracts. 
She testified also that this deception was only a minor part of the injuries 
inflicted upon consumers through the methods by which credit is extended to 
consumers on their purchases, stating that the terms of installment contracts 
frequently run severely against the interests of the purchaser. 

CONSUMKB SERVICES AND ORGANIZATIONS 

Mr. Masteis testified to the need for a standard basis upon which the per- 
formance of commodity rating agencies might be compared and made known to 
consumers. 

Miss Persia Campbell, New York City, executive secretary of Consumers' 
National Federation, offered evidence to show why consumers doubt the reliabil- 
ity of commodity rating services furnished by commercial agencies. She offered 
evidence to show the unreliability of consumer educational materials furnished 
by commercial sources to the schools. She offered evidence to question the pur- 
poses of consumer organizations sponsored by commercial sources. She called 
attention to a newspaper report to the effect that a leading trade association 
attorney had recommended regulation of those who say they represent consumers 
professionally. 

RE.SALE PRICE MAINTENANCE 

Dr. Ayres submitted extensive quotations from the trade press which re- 
ported (1) the organization of political pressure by retail druggists in favor 
of price-maintenance legislation, (2) the organization of boycotts and other 
forms of coercion by retail druggists \ipon manufacturers and the press, and 
(3) the effort of retail druggists to obtain an assured mark-up of 33% percent 
(of selling price) on advertised products. She testified that, because of such 
evidence, consumers have reason to fear the effects of price-maintenance legis- 
lation, and she stated that consumers, because of this fear, want an inve.-tiga- 
tion and a report of the actual effect of such legislation upon themselves and 
upon other factors involved. She testified that some large biisine.-js intere.sts 
are reported to be in favor of such legislation, while other large interests are 
reported to be in opposition. 

ADVERTISING 

None of the witnesses testified on the merits or demerits of auveitising as 
such. Since this interpretation, however, vi-as placed upon the testimony, the 
testimony of the witnesses is here summarized separately under that heading. 

The witnesses stated that advertising does not give them the information 
they need to make intelligent purchases and that other types of information 
are necessary. They testified to the harmful effect upon consumers of false and 
misleading advertising, the examples of which were taken from official reports 

124491— 39— pt. 8 12 



3454 CONCENTRATION OF ECONOMIC POWER 

of actions by the Federal Government. They testified that they are urged by 
advertising to make their purchases on the basis of brand name, and they cited 
a number of instances to show that such names do not assure consuiners 
that the quality of products under a given brand name is either uniform*or 
satisfactory for their purposes. One vpitness cited Federal Trade Commission 
cases to show that "guaranteed" advertising and advertising purporting to be 
scientific and impartial may be false and misleading and not impartial. 

EECOMMENDATIONS 

The following specific recommendations have been urged upon the com- 
mittee by these witnesses : 

(1) That standards of consumer goods whereby their quality and usefulness 
for consumers may be accurately described be made available for use in the 
sale of such goods. The witnesses indicated that the definition of such 
standards should be undertaken by the Government. 

(2) That the sizes of packages in which foods are sold to consumers be 
standardized to eliminate confusion and deception. 

(3) That the committee ascertain and m:>Uo known to consumers the effects 
of resale price maintenance legislation upo retail prices and upon the other 
factors involved. 

(4) That this committee investigate and make known to consumers the 
facts concerning the performance of commodity rating agencies, the use of 
advertising material in the schools, and the purposes, financing and programs 
of organizations which are, or which purport to be, organizations of consumei's. 

(5) The proposal made in February, 1938, by a number of consumer spokesmen 
that a central agency of consumer services be established in the Federal Gov- 
ernment was placed before the committee. 

I obtained and assisted the services of these witnesses at the request of this 
conmiittee. The testimony which they have presented is their own. Their 
resources for preparing and presenting this testimony are extremely limited. 
To the recommendations which they have made to this committee I wish 
respectfully to submit my recommendation that this committee undertake 
to examine adequately and thoroughly the questions of vital household con- 
sumer importance which they have presented to you, and further that it 
investigate the costs of distribution of consumer goods in general and of 
the effect upon retail prices and consumer costs of the various practices which 
these witnesses have described to you in particular. 

The Chairman. Mr. Montgomery, do you mean to state by your 
comment on advertising that there was no basis for the interpreta- 
tion that was placed upon the testimony of the witness, Ephraim ? 

Mr. Montgomery. I am referring, Mr. Chairman, to these state- 
ments from the transcripfc that I received this morning, on page 307. 
I am at this point quoting yourself as the chairman : 

That seems to do away with the whole testimony of the witness because you 
brought him here to make an attack on advertising, but when he is brought 
lace to face with that he denies the attack on advertising. 

That statement was carried in the press this morning, and it has 
been represented generally throughout the country that I have been 
engaged here in making an attack upon advertising. 

The Chaurman. And of course you are neglecting to read the 
two sentences that follow: 

Mr. Montgomery. I certainly object, sir, to the statement that we brought him 
here to make an attack on advertising because that implies a motive that 
doesn't exist. 

The Chairman. I don't want to imply this motive, but that is what he is-^ 

and then Mr. Montgomery interjected and interrupted the explana- 
tion of the chairman. 

Now let me ask you two or three questions about your own testi- 
mony and that of Mr. Ephraim, on page 304, inasmuch as you have 



CONCENTRATION OF ECONOMIC POWER 3455 

chosen to challenge the interpretation that I placed upon the testi- 
mony of the witness Ephraim. On page 304 of the transcript: 

Mr. Montgomery. What did you find out it would cost you to put your 
product on- the marlcet the way these outlets were suggesting to you? 

Mr. Ephbaim. I took the matter up with several advertising agencies and It 
involved, according to one well-known advertising agency, at least $100,000 to 
find out how the thing might go * ♦ * 

and so forth. 
In the second column : 

Mr. Montgomery. Let me get that clear. The $100,000 outlay that the 
advertising industry suggested was solely for the purpose of determining how 
this product could be put across to the public? 

Mr. Ephbaim. Correct. 

Then, on the bottom of the column : 

The Chaieman. Then what is the purpose of this story? What are you 
driving at? 

Mr. Ephbaim. What I am driving at is this, that you have heard the testi- 
mony of people before me, more or less representing the consumer, who want 
a certain type of thing, certain information, and so on, and so forth. I am 
on the other side of the fence here. I am trying to get it to them. The pur- 
pose of all this is to attempt to show, at least, that we have a stone wall 
existing. I cannot get to them because I cannot get my tooth paste in the 
usual outlets because no store is going to carry the tooth paste unless I create 
the demand that I have indicated to you. 

Mr. Montgomery. That stone wall is these ten brands which have been able 
to make outlays to establish themselves in the market, is that it? 

Mr. Ephbaim. You have a sjone wall, a monopolistic situation or anything 
you might want to call it, in which ten brands control 90 percent of the 
business, according to the Fawcett Publications. 

Then we go across to the next page, page 305, in the first column : 

Mr. Ephbaim. It is no reflection upon the elected members of that body that 
that always hasn't been true — 

which was a reference to my facetious remarks with respect to ad- 
vertising in political campaigns. 

But what I wish to say here is that advertising has, in this particular in- 
stance, 'created what might be termed almost a monopolistic situation. 

Now that is clearly, it seems to me, susceptible to the interpreta- 
tion which I placed upon it, that Mr. Ephraim was objecting to 
advertising per se, and then Mr. Montgomery, in the second column, 
says: 

Mr. Montgomery. Let me get it clear. Then, in order to compete, you must, 
as I understand your testimony, be able to do two things. Tou must be able 
to expend a great deal of money for advertising, considerably more capital 
outlay than is required to set up your factory and produce the product, and 
in addition you must sell it on some basis that you call sales appeal, which is 
not related to the actual quality or use of the tooth paste. 

I could read a lot more to the same effect and I could read the 
answers to the questions propounded by Mr. Ballinger, in response 
to which the witness acknowledged that there was no uniform owner- 
ship among these other 10 companies. 

So it comes down to this, in my judgment: False advertising and 
advertising. Nobody can complain about an attack .upon false a(^ 
vertising. We all wiU agree upon that. But it seemed to me that 
the testimony of this single witness was certainly open to the inter- 



3456 <J()N(1ENTRATION OF ECONOMIC POWER 

pretation which the chairman put upon it, and because I put that 
interpretation upon it I wanted this record to be clear that it was not 
your poHcy in bringing these witnesses here to make an attack upon 
advertising per se, and I understand that to be the position which 
you now take. 

Mr. Montgomery. That is ri^ht. I think Mr. Ephraim again 
and again in his testimony stated that he was not making an attack 
upon advertising. I think you do find that inconsistent with the 
things he said. 

The Chairman. Oh, yes ; in response to the questions I propounded, 
he made that answer. 

Mr. Montgomery. I think you find that inconsistent with the things 
he said, and he doesn't. I think his position is that advertising is 
all right if there is another basis in addition upon which a manu- 
facturer can get his product through and offered to the consumer, 
namely, some standard description of the goods. In any event, 1 
think that is the position generally of consumers, and that is the 
reason for summarizing under the head of "Advertising" what seems 
to me to represent the consumers' position with respect to advertising 
generally. 

The Chairman. That consumers should be protected against false 
advertising I think everyone will agree. 

Mr. Montgomery. And in addition that they need information 
about commodities which ordinarily, and as illustrated by numerous 
exhibits and testimony here, they do not get from advertising. 

The Chairman. Of course. 

Mr. Montgomery. They need something else in the way of facts if 
they are going to be ever able to make sensible purchases to meet 
their own needs. 

The Chairman. Are there any other comments'^ 

Then we will close this phase of the hearing, and let me say in 
closing, Mr. Montgomery, that I think the committee is very much 
indebted to you for a very lucid presentation of the problem. 

Mr. Montgomery. Thank you, Mr. Chairman. 

The Chairman. We are recessed until the call of the chairman. 

(Whereupon, at 3 : 40 p. m., an adjournment was taken pursuant 
to the call of the chairman.) 



APPENDIX 



Exhibit No. 503 

A PnOPOSAL FOR AN iNVESTIOATinN TO ANALYZE THE WAYS AND MEANS PT WHICH 

CtTKRKNT Practices, anu Huw Far Thkse'Practues. Lead lu Undercon.si mp- 
TioN. Inadequate Returns to Farm and Factobt Wokkeb, and to Business 
Bankbuptcy 

[This Investiaratinn to be condnpted by a joint ooniinlttee which Is to be nppolntpd one- 
third by the President of the Senate, ono-third by the Speaker of the Hou«je, and 
one-third by tlie President of the United Siutes] 

Submitted by a delegation of consumer, ciric, and labor representatives under 
the sponsorship of the Consumers National Federation, 110 Morningside Drive, 
New York City, February 24th, 1938. 

All our national life we have put our faith In production as the road to 
public welfare. We have studied production and set up federal agencies to 
further it. Today we have a productive system that is the envy of the world. 
It can do ranch — but it does not create sustained welfare. In our concern for 
production we have allowed it to exploit consumption and, in the process, to 
cripple its customers for whom, and for whom alone, it confessedly exists. 

So exclusive has been our emphasis upon production that we have believed 
consumer welfare to flow anfotnatically from business prosperity. We have 
neglected largely to ask: How effectively do our elaborate proiluctive and mer- 
chandising structures really .serve the consumer? We know today virtually 
nothing with accuracy as to the scores of points at wliich "business competition," 
"monopoly," "administered prices," and other routine aspects of business and 
financial processes cripple the consumer. In a democracy no economic system 
makes .sense which Is not run so as to maximize consumption. Yet our 
economic system is primarily nui to maximize profits — and the consumer takes 
the hindmost. The underlying assumption has been that "free competition" 
affords the best possible protection to the consumer. Aftually, no candid person 
today pretends that "free competition" controls our economic life. Such com- 
petition *as does remain is dwarfed by the price and other control policies and 
devices of dominating elements in the business c<mimunity. 

No one knows preci.sely how free or tin-free our economy Is. What we know 
is that there is a network of arbitrary interference with competition whereby 
production is rendered wasteful and insufficient, and consumers — if indeed they 
are lubky enough not to l>e unemployed — pay tribute to it in the form of a 
sizeable deduction from their purchasing power. 

The long-run test of "business efhciency" is the kind of living It can build 
for the public, for whom business patently Is run. A ma lor need at present Is 
to put current business under the microscope to ask: How does it operate and, 
operating as It does, how and where does It promote or curtail the welfare of 
our people who live by It and its products? 

We believe that a major investigation by a special commission should be set 
up to analyze how current business stnu-ture and prartires lead to undercoq- 
sumption, inadequate returns to farm and factory workers and to recurrent 
business bankruptcie.s. Not until such a detail analysis Is available ran ef- 
fective remedial legislation be planned in the public interest. Furthermore, this 
understanding is essential if court aftlon against monopolies is to be more 
than a temporary palliative. Until such knowledge Is available to -the public, 
the goal ol self regulation of their economic destiny by the American people is 
impossible. Self-regulation at a round table must Include splf:regulation by the 
whole people through government participation. Government can only plan 
an effective role If its policies are based upon an understanding of what Is 
wrong and what needs to be done. The consumer can only play an intelligent 

8457 



3458 CONCENTRATION OF ECONOMIC POWER 

role at that table when he knows the facts and how they affect him, and he 
is powerless to collect these facts himself. 

One thing should be made unmistakably clear : We want all the abundance 
that lies within our grasp, but we do not want that abundance to be wrung out 
of sweated labor or dispossessed farmers. American abundance means abund- 
ance for all the people. 

We suggest that such an investigation be carried on by a thoioaghly staffed 
special commission, one-third to be appointed by the President of the Senate, 
one-third by the Speaker of the House, and one-third by the President of the 
United States. 



ExHiBi'r No. 504 

[From the Journal of Marketing, July 1938, pp. 4-5] 

Recently an estimate was made by the Crowell Publishing Company that 
more than 5,000,000 women in various organizations are affected by consumer 
educational material and are more or less active in efforts to secure legislation 

favorable to consumers. These organizations are as follows: 

Approximate 

Women's Joint Congressional Committee consisting of — membership 

American Association of University Women 55, 000 

American Dietetic Association 

American Federation of Teachers - 

American Home Economics Association ]2, 000 

American Nurses Association lc>l, 000 

Council of Women for Home Missions- 

Girls' Friendly Society of the U. S. A 

Medical Women's National Association 

National Board of the Y. W. C. A 

National Congress of Parents and Teachers 1, 877, 073 

National Consumers' League 3, OOO 

National Council of Jewish Women 48, 000 

National Education Association (several hundred thousand). 
National Federation of Business and Professional Women's 

Clubs 62, 000 

National League of Women Voters 48, 000 

National Service Star Legion. 

National Women's Trade Union League. 

Women's Homeopathic Medical Fraternity. 

The group of women making up the membership of this committee is one of 
the most iwtent organizations in the country in obtaining the support of women's 
organizations for legislation of interest to women. 

In addition to these there are the following who may be moved to aid in 
securing action : Approximate 

membersMp 

American Association for Adult Education 1, 100 

Consumers' National Federation 

Federal Council of the Churches of Christ in America 20, 000, 000 

General Federation of Women's Clubs 2, 000, 000 

League of Women Shoppers I 25, 000 

National Council of Catholic Women 1,000,000 

National Women's Relief Society ^ 69, 700 

International Garment Workers Union 250, 000 

. It will be noticed gpme of these groups contain men and if full strength is 
given to all of them the number affected may reach nearly a third of the total 
population. 

These groups are not yet as closely organized as they could be and therefore 
their effectiveness is not what it may possibly become. But even at the moment 
to treat the movement lightly would be a mistake. Members of many of these 
organizations are leaders in other organizations and as such may be powerful 
factors in canalizing consumers' thoughts along specific lines. As examples, 
Hekh Hall, director of Henry Street Settlement in New York, is president of 
Consumers' National Federation; Mary K. Simkovltch, director of Greenwich 
House, has just been elected chairman of the newly formed Lower West Side 



CONCENTRATION OF ECONOMIC POWER 3459 

outside forces to secure the desiicd ends. Ihe^^^^^^^ ^^^ l„ 

l,S'co''ndL"c-; rhic'SmSt gte htm°Sr goods for UU e.,K.„.V„„re. 



"Exhibit No. 505" appears in text on p. 3292 



"Exhibit No. 506" appears in text on p. 329G 
"Exhibit No. 507" appears in text on p. 3297 



'Exhibit No. 508" appears in text on p. 3299 



"Exhibit No. 509" appears in text on p. 3300 



'Exhibit No. 510" appears in text on p. 3302 



'Exhibit No. 511" appears in text on p. 3315 



"Exhibit No. 512" appears in text on p. 3317 



"Exhibit No. 513" appears in text on p. 3321 



"Exhibit No. 514" appears in text on p. 3324 



"Exhibit 



No. 515" appears in text on p. 3334 



....H.B.T NO. 516, .ntroauced™p.^33«, appears >o Hearings, Part V,. 



"Exhibit 



"Exhibit 



'Exhibit 



No. 517" appears in text on p. 3348 



No. 518" appears in text on p. 3350 



No. 519" appears in text o^ p. 3355 



"-Exhibit No. 520" appears in text on p. 3357 



3460 CONCENTRATION OF ECONOMIC POWER 

"Exhibit No. 521" appears in text ou p. 3358 

"Exhibit No. 522" appears in text on p. 3359 



"Exhibit No. 523" appears in text on p. 3361 



"Exhibit No. 524" appears in text on p. 3362 



Exhibit No. 525 

Quotations Feom Trade Press on Resai.e Pmce, Maintenance 

1. peesbube on congress, and president 

There is ample evidence that druggists, through the National Association of 
Retail Druggists, have used a concerted campaign of pressure on Congressmen 
and the President in the form of legislative contact committees, and barrages of 
letters and telegrams in order to Qjjtain passage of the Robinson-Patman, and 
Miller-Tydings Bills. 

As early as October 1935 we find indications of the pressure machine tnat was 
being built up. Writing in the association's Journal for October 3, 1935, pp. 
1223-4, Rowland Jones, Jr., its Washington representative, reported as follows 
on the formation of Congressional Contact Committees, which were to play an 
important part in druggists' lobbying activities. 

"At the time of the opening of the present Washington oflSce, a careful 
study was made of the methods used in the past in attempts to influence 
the legislative mind. After examining all the facts and the results ob- 
tained, we came to the inescapable conclusion that a new approach was not 
only in order but absolutely necessary if we were to expect results. 

"With this opinion crystallized, we conceived the idea of the Congressional 
Contact Committees in every Congressional District and in every state. 
This was based on the theory that in every such political subdivision there 
resided several retail druggists who were close personal or political friends 
of their Congressman or Senator and that an appeal or a request from one 
or two such individuals would be of far greater value than a hundred 
letters or telegrams from persons unknown to the legislator. 

* * « 

"In many states the response was prompt and enthusiastic; in others 
half-hearted ; and in some, I regret to say, negligible. But we did succeed 
in building up a list of some eight liundred names after eliminating a great 
many whom we found upon inquiry to be unknown to the specific legislator. 

"These men have been asked from time to time to \Vrite their man in 
Congress on various legislation. From the start we realized that our first 
task was to educate the legislator in the problems which face the American 
independent businessman. This process has been slow but it has been 
extremely effective. There are many evidences of this in the record of the 
session just .closed." 

Pressure on Congressmen got under way in this month, when druggists were 
urged, in the Journal for October 17, 1935, p. 1274, to make it their personal busi- 
ness to see their legislators and to get their pledge to support the National Fair 
Trade Enabling Act, before they returned to Washington for the 1936 session. 
According to the Journal — 

"This is a task that must be accomplished by individual druggists in 
their own home territories. These legislators are now at home, and their 
ears are keenly attuned to the things their' constituents desire. Do not 
overlook I he fact that every Congressman and at least one-third of the 
Scnntois are keenly aware of the fact that there will be an election in 
1936— nnd this will make them particularly attentive to your message." 



CONCENTRATION OF ECONOMIC POWER 3AQ1 

This was only the start of the widespread pressure cnmpniKu directed by the 
Association's Washington oflice to inllnence Congressmen. Representative state- 
ments talcen from tlie N. A. R. D. Journal sliow the constant luimbarduieut on 
Congressmen. 

J,Ten days after the Fair Trnde Erabling Act was introduced, druggists were 
warned in the January 16, 1936, p. 77, issue of the Journal, that— 

"OflBcers and members of state and local associations and members of 
Congressional Contact Committees from these states should i)e prepared to 
use every intluence at their command to bring to the attertioii of their 
Senators, the justice and the economic necessity for this legi-slation as soon 
as it is called for by the Washington office. * * * At least one tliousand 
communications should be placed in the hands of each of these Senators 
[on the judiciary committee] when the call comes from Washington. No 
threatening statements should be included, but the letter sliould be written 
in the strongest possible language. Stress the plight of the small man in 
business and the fact that iie is numerically supreme at the polls." 
As soon as the Fair Trade Enabling Act was referred to the Judiciary 

Committees of both houses, J. W. Dargavel, executive secretary of the N. A. R. 

D., in an open letter to members published in the February 20, 1936, issue of 

the Journal pointed out that — 

"N. A. R. D. members, and particularly those from states from whom 
these committeemen come, should concentrate their efforts upon members 
of the Judiciary Committees. A favorable report from these Committees 
will aid greatly in the passage of this bill. Write to these Committeemen 
today !" 

When there was a prospect that the 1936 Congress would adjourn without 
passing the Tydings Bill, the 20,000 members of the N. A. R. D. were told, in 
the April 16, 1936, issue of the Journal, p. 480, to write — 

"a letter or a telegram to each of their Senators and their Representative 
telling them to pass the Robinson-Patman bill and the Tyding.s-Dies bill 
BEFORE CONGRESS ADJOURNS. * * * We ask that you comply 
100% with this request during the week of Aori] '''^ to 24." 
The Robinson-Patman bill became law June 19, 1936. 

Because of the failure of the 1936 Congress to approve the Tydings bill, the 
N. A. R. D. remobilized its pressure activities in the latter part of 1936- in an 
effort to open the way for passage of this bill in 1937. » Referring to the re- 
organization of the Congressional Contact Committees on a county-unit basis, 
instead of a Congressional District basis, the November 5, 1936, issue of the 
Journal, p. 1552, points out that — 

"On September 1 the N. A. R. D. asked the state and local associa- 
tions, and the members of the Congressional Contact Committees to 
contact every candidate whose name appears on the ballot for election 
to the Senate and the House of Representatives. * * * We now 
ask again that every state and local association ♦ * * select a 
qualified man in every county in every state to serve on the Congressional 
Contact Committees. * * * We further ask that when these county 
selections are made complete that an organized effort be made to contact 
personally every Congressman and every Senator upon the Tydings-Miller 
bill. The average Congressional District is not large. Usually they cover 
only four or five counties. Officers of state and local associations are urged 
to make this contact work their primary function during the next two 
months." 

When Congress convened in January 1937, the reorganized Congressional 
Contact Committees were ready to place pressure on Congressmen on a nation- 
wide ba.sis. According to January 7, 1937. issue of tlie Journal — 

"Forty-four states of the Union are now" organized as never before in 
history for the purpose of furthering legislation. * * * We have the 
proper contact men in this country. They now number over two thousand. 
We are now asking that each of these 2,000 men form a committee of their 
own in their own local community consisting of ten other independent busi- 
ness men who will work and move as a unit when called upon by the 
N. A. R. D. Washington office." 



3462 CONCENTRATION OF ECONOMIC POWER 

As soon as Congress opened, the flood of letters commenced. The January 21, 
1937, issue of the Journal, p. 124, reports — 

"The first call went out January 15 when we asked every member of these 
committees to write their Senators and Congressmen asking early favorable 
action. * * * These letters are already coming in and based on the 
experience of the last two years, we know they will be effective. Now we 
ask every member of the N. A. R. D. who reads this column to vyrite his 
Senators and Congressman in the same manner." 

In February another call was made for more letters and telegrams. Rowland 
Jones, Jr., writing in the February 18, 1937, issue of the Journal, pp. 278 and 282, 
pointed out that — 

"On Febrjiary 11 the N. A. R. D. Washington office mailed the accompany- 
ing 'Friends of Fair Trade' letter to over three thousand pharmacists. 
* * * This letter was designed to produce a flood of appeals to all 
members of Congress asking for early favorable consideration of this 
legislation and timed to come at the right psychological moment to have the 
greatest effect." 

"Again we ask every loyal N. A. R. D. members to sit down immediately 
upon the reading of these columns and write again to the Senators and 
Congressmen and to repeat that performance every week until you are 
advised that this legislation * * * has passed the last barrier in the 
Congressional steeplechase." 

Secretary Dargavel in another article in the same issue, p. 273, told the mem- 
bers what point they ought to include in their letters. He concluded his advice 
with the warning that — 

"A constant barrage of letters and telegrams and letters should be kept going 
to your Senators and Congressmen until these bills are passed." 

When the House prepared to vote on the Tydings bill in April 1937, the 
N. A. R. D. asked for another flood of communications. Every member was 
urged, in the April 1, 1937, Journal, p. 504, to send a telegram — 

"regardless of previous commitments by your Congressman. The friends 
of this bill must be on the floor of the House when the bill comes up in 
order to insure the forestalling of emasculating 'amendments or other 
parliamentary tactics which would result in delaying the final vote." 

President Roosevelt's request to Congress (April 26, 1937) that consideration 
on the Tydings-Miller Act be delayed resulted in a still further flood of letters 
to Congress, as well as to the President, and Postmaster James Farley. Under 
the heading "We Have Just Begun to Fight," p. 684, the May 6, 1937, issue of 
the Journal requested all members to — 

"Write letters to your Congressmen and two Senators * ♦ * advising them 
of your action in writing the President and soliciting their cooperation in 
convincing the administration that its fears of the effect of the Tydings- 
Miller bill have no basis of fact." 

The pressure on Congress to obtain passage of the Tydings bill was only one 
part of the N. A. R. D. campaign, for the Association also found it necessary 
to use this same type of letter and telegram barrage on the President. Members 
were told not only to write themselves, but also to get their friends and their 
governors and state legislature to do the same. The N. A. R. D. had tried the 
letter-barrage method in 1936 when the Robinson-Patman bill was pending and 
Rowland Jones, Jr^, asked the members (Journal, May 21, 1936) — 

"to send a telegram to President Roosevelt urging him to redeem the 
pledge of the 1932 Democratic platform." 

Rowland Jones had arranged for a similar barrage after passage of the 
Tydings-Miller bill. In a letter dated March 25, 1937, reported in the April 1, 
1987, issue of the Journal, pp. 504-5, he asked the President and secretaries of 
all state pharmaceutical associations to — 

"arrange, at once, for a committee to call upon the Governor of your 
State, at the proper moment, with the request that he communicate with 
the President of the United States, urging his prompt approval of the 



CONCENTRATION OF ECONOMIC POWER 3463 

Tydings-Miller bill. * • • You will receive a wire from this office upon 
the final passage of the bill by Congress and I suggest that you be prepared 
at that time to present the matter to your Governor with the shortest 
possible delay." 

However, when the President asked for a delay in consideration of the 
Tydings bill, the flood of telegrams and letters were unloosed. The N. A. R. D., 
in its May 6, 1937, Journal, p. 684, asked members to — 

"Write a letter to the President of the United States, respectfully request- 
ing that he reconsider his action in delaying the Tydings-Miller bill. 
"Write a letter to your Representatives in your state legislature, asking 
them to write to the President requesting bim to reconsider his action." 

The results of this appeal are summarized clearly in the May 20, 1937, Journal, 
p. 768— 

"A flood of communications protesting this action by the President is flowing 
in upon the WMte House in unprecedented numbers." 

* • * "To those who have cooperated, we ask that they continue to 
send letters to the White House in ever-increasing numbers in order that 
the public reaction in this crisis will be conclusive and overwhelming. 

"Friends- of Fair Trade in states whose legislatures are still in session 
are urged to have resolutions introduced and passed memoralizing the 
President and Congress to approve the Tydings-Miller bill. We believe 
that such resolutions can be passed easily, particularly in the states which 
have already approved State Fair Trade Acts. 

"Circulate petitions, in your city or town, addressed to the President, 
your two Senators, and your Congressman, urging the passage of the 
Tydlngs-MUler bill. (Be sure that these petitions conform to the legal 
requirements of your state)" (N. A. R. D. Journal — May 20, 1937 — pp. 768-9). 

* . * * "Now, our chief concern is to get the President's signature on 
the bill, thus completing its course and making it a law." 

* * * "Therefore I earnestly urge you to deluge the President with 
telegrams, urging that he sign the bill at once and make it a law" (N. A. 
R. D. Journal— Aug. 5, 1937— p. 1168). 

The Tydings-Miller bill became law August 17, 1937. 

2. LINING TIP CONSUMES SXTPPOBT FOB FAIB TRADE 

(Italics have been added in this section to those passages which refer to retail 
prices. ) 

*. * * "It now appears that the druggist must enter another role of 
leadership — his drug store must become an outpost of political influence 
and education in his community." 

* * « * • • • 

"The drug store is one of the focal points of the community. Almost 
every person in the vicinity visits the drug store at some time within each 
fortnight ; many oftener ; some daily. Because of the fact that the drug 
store is open evenings, when other businesses are closed and when people 
have more leisure, the druggist is placed in a particularly advantageous 
position to talk to his patrons. He has an unparalleled opportunity to put 
in his best licks for the fair candidates for oflSce, and to take care of 
those who are unfair." 

* * • * * * * 

"If the individual druggists will take the trouble to do so, they can make 
their drug store a powerful factor in the political life of the community 
If they will work carefully and consistently, they can develop a voter 
following that will mean something when candidates or incumbents are 
planning their policies. The druggist in most cases enjoys the confidence 
of the people. They will listen to him, if he will talk sense to them, and 
put the facts before them" (N. A. R. D. Journal, Jan. 2,. 1966, p. 36). 

* * ♦ "That is the job that the druggist must undertake — to point 
out to the people in his community just how the advantages of Fair 
Trade legislation will be to their advantage, or its absence to their detri- 
ment" (N. A. R. D. Journal. Jan. 2, 1936, p. 36). 



3464 CONCKN'I'UAi ION Ol' E<M).N(»,M1C i'OWKll 

"I '.vfint to stress agnin tlio iic'tossity for each niid every one of you to 
fight this battle in your own home eonnnunities. ' * * * 'Get the publie 
ear; point out liow the public would suffer if these monopolies are allowed 
to get a foolhold ; the advantages fair business methods would give to 
them" (J. AV. Dargavel, N. A. R. D. Journal, Feb. 20, 1936, p. 189). 

^'No driifffjist ran nffot'd to he citrclesx in the slatemcnts which lie makcy 
regording Fair Trade, or regarding srich price adjustments as may result 
from it. Whenever lie is questioned regarding it i>y a customer, he mu-<<i 
be quick to seize the opportunity to point out to the customer hoiv Fair 
Trade will prove to the fustonier's advantage. C'crtdinly, if he hasn't 
sufficient inricnuitu to do fliat, the least he can do is 1o say nothinq at all 
(N. A. K. b. Journal, April 15, 1937, p. .19."). 

"In cities whore mass meetings can be held, get other independent 
retailers or groups to cooperate in staging such a meeting. Get speakers 
who will emphasize the importance of the Fair Trade movement and 
clarify its beneficial angles to those who do not understand the meaning 
of the Fair Trade efforts. Play these meetings nr> 'nd get out a crowd. 
Get each and everv person attending these meetings to send a night letter, 
to the President (N. A. R. D. Journal, May G. 1937, p. 085). 

"We cannot urge too strongly that you use extreme caution in using 
remarks that even tend to intimate that the fair trade laws are respon- 
sible for increases in prices. As a matter of fact, tii£ tendency has been 
to level prices, and many are the inst;inces of reduced prices to the consumer. 

« * * * "- i' 

"In our opinion there is on intelligent ans'.ver to price complaints, and 
it is reasonable and honest. Let the retailer tell h's customer that he 
used to have to sell this item below cost and overcharge on other items 
in order to make a living. Now, with price stntiillzation, it is true some 
items have increased a few cents, but that the prices on other items have 
been reduced (Druggist Circular, March 1938, p. 15). 

"Consumer support, essential to any program lov the furtherance of 
Fair Trade merchandise, in reality is not hard to win. 

"Handling the customer who complains that he or she is asked to pay 
more for an article than he or she has been accustomed to pay ♦ * * calls 
for diplomacy — ^and every druggist not only ^hcvild exercise such care 
himself — but should be certain that everyone m his store is thoroughly 
cognizant of the facts about Fair Trade and of the importance of exer- 
cising similar diplomacy. 

***** V * 

* * * "There are certain statements which should not be made. First 
of all, avoid all reference to Fair Trade laws, iej^ui or contractual obliga- 
tions, unless the customer himself brings them up. The principles which 
are fundamental to the Fair Trade movement ire aeep, and for an unin- 
formed customer to fully understand them world recjuire a lengthy ex- 
planation which might lead to an argument — uuv no one ever wins an 
argument. 

"Courteously point out that you believe the price is to be as low or 
lower than that charged in other stores. Yon believe that it is the lowest 
price at which this particular brand and quality item can fairly be sold. 

"Another suggestion which has merit, is: 'Yes, we tiave sold this item 
cheaper — in fact, below our cost — to meet the urnair competition of some 
stores who formerly used a loxo price on this item to hire people into their 
stores. They offered you those prices, not because they made a profit ou 
the sales, or because they wanted you to benefit — but to try to sell you 
some other products at exorbitant prices. Tlus method of deceiving you 
as a customer has largely been discontinued. Therefore, ice are offering 
you this quality merchandise at the lowest price which we believe co-zj- 
aistent with fair value — and, I believe, as low or Iciver than that for which 
anyone else will sell it.' 

"If the subject of Fair Trade is raised by tne customer, it calls for an- 
other tactful treatment, and one which should be as orief as possible. 



CONCENTRATION OF KCONOMK; POWKR 3465 

"'Yrs; this item is priced in accordance with the methods permitted bg 
the state Fair Trade laio. Fair Trade permits us to offer this merchandise 
to you at the lotvcst price which is consistent with the product's quality, 
and the cost of distributing it to you. It sometimes has been sold below 
cost; but I believe that you will agree that this practife is unfair, and' 
that in the long run it was unfair to you, loo; because in order to make 
up for tlie loss, something else had to hv sold at too high a price. We 
believe in offering everything we sell ac as low a price as good business 
practice will permit for an item of this quality.' 
*♦♦♦♦•« 

•'May we point out that tliese are buggestions only; Be sure to give thia 
problem your careful attention, and to school your salespeople !n tactful 
and diplomatic relations with customers" (N. A. R. D. Journal, June 16 
1938, p. 42). 

:i. UNING VP NONDRUOGIST MERCHANT 8UPP0ET FOB FAIB TRADE 

* * * "Druggists must do their best to convince these men, and mugt 
actively enlist the cooperation of their fellow merchants— hardwaremen, 
grocers, and others — to demonstrate that they, too, are behind Fair Trade 
legislation" (N. A^ B. D. Journal, Oct. 17," 1935, p. 1274). 

* * * "How many of you are pointing out to the butcher, the baker, 
the grocer, the hardwareman, and others in your community, the benefits 
that will accrue to them if this Fair Trade legislation is passed? How 
many of you are pointing out to the small dry goods dealer the fact that 
it is to his benefit to align himself with the Fair Trade program, rather 
than with the bosses of Big Business?" (N. A. R. D. JbuYnal, Jan. 1€, 

1936, p. 68). 

* * * "We have asked -each of the twenty-two hundred fifty members 
of these (Congressional jContact) committees to set up their own local 
committee in their own community, consisting of ten other independent 
retailers who will amplify their ;ictivities when calls for action come from 
Washington" (N. A. R. D. Journal, Jan. 21, 1937, p. 124). 

* * * "I am bold to ask that you send, at once, a fifty-word night let- 
ter to your congressman and each of your Senators, requesting that they act 
at once to secure the final favorable consideration for this legislation at 
the earliest possible moment. I also suggest that you get retailers in 
other lines to sign this telegram with you" (Rowland Jones, N. A. R. T). 
Journal, Ftb. 18, 1637, p. 278). 

."get every independent businessman in TOUR COMMUNITY — WHATEVER 
HIS LINE — TO SEND A WIKE OR LETTER AT ONCE TO THAT SENATOR OR CONGRESS- 
MAN, TELLING HIM TO USE EVERY EFFORT TO SECURE A FAVORABLE REPORT TO HIS 

HOUSE ON THESE BILLS. (Do thls at once!)" (N. A. E, D. Journal, Mar. 4, 

1937, p. 344.) 

POUCY OF (A) POYCOTTINO MANUFACTURERS AND NEWSPAPFR3 UNFAIR JO FAIR- 
TRADE LAWS, (B) MAINTAINING WHITE UST3 FOB COOPERATING MANUFACTURERS. 
AND. (O) COERCION j)N MANUFACTURERS AS TO MARK'-UPS AND CONTRACTS 

"A boycott of the products of manufacturers who do not use and 
enforce fair-trade contracts, and expos6 of manufacturers who are 'secretly 
allied' with R. H. Macy & Co., and a concerted effort ti) fight private brands, 
were threatened by druggists at the ujilitanU fair trade victory meeting 
held in conjunction with- the convention of the New York rharmaccutical 
Council at Hotel Pennsylvania, New York City, recently" (Drug Tfade 
News, April 26, 1937 (Page 1). 

"Following a mid-Janiyiry mass meeting, druggists of the New York 
metropolitan area seemed likely to clear their shelves of items mnnu- 
factured by five leading national manufacturers." ♦ ♦ * "To inject 
action into the meeting, in place of talk, the younger element among the 
druggists 'tossed out' the 'old guard" and replaced -them with younger 
leaders headed by George Gottesman and Leo Branche, according to re- 
ports." 



3466 CONCENTRATION OF ECONOMIC POWER 

"Simultaneously with the suggested removal of products of the five 
bamied manufacturers from their shelves, according to Drug Trade News, 
the retailers launched an attack on two New York newspapers, the Times 
and the World-Telegram. In their news and editorial columns, it was 
charged, these newspapers have been antagonistic to the Fair Trade 
Law." * * * 

"Speaking for himself, he (Gottesman) named five manufacturers whose 
products he intended to discontinue to carry 'until the five manufacturers 
learn that I cannot go on losing 100 or more on their products while they 
are making fortunes.' He also listed seven manufacturers as fair, and 
urged the druggists to give them every bit of cooperation possible — not just 
lip service" (N. A. R. D. Journal, Feb. 6, 1936, p. 146). 

"Perhaps the question most often asked in discussions of price stabiliza- 
tion, fair trade legislation, and the like, is will the retail druggist actually 
support the manufacturer who 'plays ball' witli him or will he use the 
manufacturer's sales policy as an umbrella to protect sales of unknown 
brands of merchandise. Just what can the druggist do and what will he 
do in support of a manufacturer is the question of second frequency. 

"Pages of theoretical consideration could be written on this subject and 
yet not be as convincing as the program which the druggists of the State 
of California are now putting into effect to demonstrate their support to the 
Dr. Miles Laboratories, Inc. 

"A month or two ago the Southern California, Northern California, and 
California State Pharmaceutical Association invited tlie Dr. Miles California 
Company to participate with them in staging a Dr. Miles Week as a testi- 
monial of appreciation of the company's stabilization efforts under the fair 
trade act of that state" (Druggist's Circular, Jan. 1935, p. 42). 

"A recommendation made by Everett E. Duncan, of Oklahoma City, retir- 
ing president, that a list of manufacturers who are cooperating with dealers 
in various states having fair trade laws be carried continually in the asso- 
ciation's (Oklahoma Pharmaceutical Association) ofiicial publication, was 
adopted as a resolution." * * * 

"Stand pat for the 33% percent margin of profit which is strongly advo- 
cated by the national association. Even though fair-trade legislation is 
passed, the chains would still have a 16 percent advantage for buying direct 
and would still have their hidden discounts unless an anti-discrimination 
bill is passed such as that represented by the Patman bill" Drug Topics, 
May 18, 1936). 

(The 1935 N. A. R. D. Convention) "adopted as the principle for the 
guidance of members in their support of manufacturers the stabilization of 
prices, discounts, and profits to assure the eflicient individual retail drug- 
gists at least 33% percent margin from suggested minimum selling prices ; 
commended the retail druggists of California for their constructive work 
along fair-trade lines and for their handling of the Pepsodent case involving 
withdrawal of contracts" (Druggist's Circular, October 1935, p. 41). 

"Stabilization of prices, discounts, and profits to assure the efficient small 
individual druggist at least 33% percent margin on minimum selling prices. 

"Toward this end your Association (N. A. R. D.) has been active during 
the year. Countless conferences have resulted in the adoption of many new 
sales policies by manufacturers, some perhaps still short of the stated 
objective, but at least headed in the right direction. When the retail 
druggists of the nation join their Association and give it their full support, 
not only in their individual interest but in the interest of all — the power 
of the Association to bring about these changes will be greatly amplified. 
The solution of this lies to a great extent in your hands — increase your 
Association's numerical strength and carry out its suggestions" (Report of 
Executive Committee, N. A. R. D. Journal, Sept. 22, 1936, p. 1298). 

"* * * in the drug and cosmetic fields many manufacturers are being 
compelled to operate under these laws against their wishes and better judg- 
ment. Pressure is being brought to bear through the retailers' associations 
and their fair-trade committees. 

"Manufacturers who do not file minimum prices arc having their troubles 
with independent outlets in some States. Those manufacturers, such as 



CONCENTRATION OF ECONOMIC POWER 3467 

ourselves, who have filed prices have had to set higher mlnimimis thun they 
desired in some instances. The committees are not iiermitted, supposedly, 
hy law to dictate what the minimum prices shall be but they are doing 
just that by refusing to approve contracts containing prices which do not 
give the retailer what they consider to be a fair-profit margin. In most 
cases the committees are insisting on a mark-up of at least 20 percent and 
usually 33% percent" (Printers' Ink, vol. 180, No. 9, August 26, 1937, p. G). 

"Fair-Trade Committees, composed of independent retailers for the most 
part, have been organized and the manufacturer who wants to avoid trouble 
will work through these groups. Some of these committees, particularly in 
the drug field, have copies of model contracts which bear their ofTicial 
approval. Members of the retail associations which these conamittees repre- 
sent may refuse to sign any contracts that do not carry the official approval 
of the committees. This usually means that manufacturers with noncon- 
firming agreements may have difficulty in getting cooperation and their 
sales may start sliding down. * ♦ ♦ 

"Not only is the Illinois Pharmaceutical Association, through its Fair- 
Trade Committee, scrutinizing manufacturers' agreements and awarding its 
stamp of approval as to 'form' but it is also actively campaigning against 
manufacturers who have failed to file minimum prices under the State law. 
As a part of the campaign, six meetings have been scheduled in various 
parts of the State to 'let Illinois druggists know who their friends are and 
their enemies, too'" (Printers' Ink, vol. 180, No. 8, August 19, 1937, p. 80). 

"A poster containing the salutation, 'Good Morning ! Fair Trade,' and 
listing the names of manufacturers and wholesalers under fair trade con- 
tract in the state, has been mailed to every druggist in California by the 
fair trade committee of the California Pharmaceutical Association. 

"The poster also contains four reasons why druggist? should support the 
firms listed. A resolution requests them to place the poster in a conspicu- 
ous spot in their stores, so that it may be referred to daily." 

* ****** 

"Louis J. Fischl, president of the state association, whose picture appears 
on the poster, said : 'AVe believe the poster will serve to awaken the drug- 
gist to the need of cooperating with those firms who give him a fair margin 
of profit. It also gives recognition to these firms, and in this way promotes 
the cause of fair trade.'" (Drug Trade News, August 16, 1937, p. 2>) 

"I shall quote from the August 28 issue of BUSINESS WEEK: 'Most 
importantly, it set up the National Association of Retail Druggists as a 
power which in three short years was to roll up a record of accomplishment 
unmatched by any other pressure group in the country's history.' BUSI- 
NESS WEEK states further: 'Having won the resale price maintenance 
fight in the face of the most overwhelming obstacles, the National Asso- 
ciation of Retail Druggist is entitled to take rank as the Nation's most 
powerful trade association today.' " 

"During the last twelve months, the N. A. R. D. has become even more 
firmly entrenched as the national spokesman of American pharmacy in its 
commercial aspects. The prestige of the N. A. R. D. in Washington and in 
the Congress has continued to grow until we have at last reached the 
time when the oflSce of every Senator and every Congressman is open to 
the representatives of the N. A. R. D., as well as every department of our 
national government." (Report of the Secretary by John W. Dargavel, 
N. A. R. D. Journal, Oct. 7, 1937, p. 1632.) 



'Exhibit No. 526" appears in full in the text on p. 3382. 



'Exhibit No. 527", introduced on p. 3383, is on file with the committee. 



"Exhibit No. 528", introduced on p. 3383, is on file with the committee. 



3468 CONCENTRATION OF ECONOMIC POWER 

"ExHiBU No. 529", introduced on p. 3383, is on file with the committee. 



"Exhibit No. 530", introduced on p. 3384, i.s on file with the committee. 



Exhibit No. 531 

[Program and Report on Public Relations for the Institute of Distribution, submitted by 

Miss Persia Campbell] 



FOB THE CONFIDENTIAL ATTENTION OF MB. 



Herewith, a copy of the Program and Report prepared in accordance with 
the following Resolution, offered by Mr. Wurd Melville, President of the Mel- 
ville Shoe Coi-pora.tion, seconded by Mr. F. G. Coburn, President of the Mc- 
Leilan Stores Company, and unanimously approved by the executives of the 
25 companies represented at the luncheon-meeting of the Institute of Distri- 
bution, held at the Hotel Astor. New York City, on November 30, 1936. 

"That the Managing Director of the Institute of Distribution be and hereby 
is instructed to prepare a detniled. comnreheusive program of public relations 
for the direct distributors of America * ♦ * and, as well data and budget 
suggestions estimating the probable costs of various alternatives therefor 
* * * in addition to, and in expansion of, the initiating program of con- 
sumer contact placed before and endorsed by this meeting * ♦ * and thar 
s:dd all-industry public relations program, when completed, be referred for 
action to a future meeting to be called at the invitation of those present at 
this November 30 meeting and to be extended, on their behalf, to any other 
executives of companies in direct distribution who, though absent from the 
instant meeting may, nevertheless, be sufficiently interested to attend." 

The meeting to discuss the vital problem underlying the above Resolution — 
and the data and plahning prepared in response. to it — will be held on Monday, 
March 15, 1937. in the East Ball Room of the Hotel AstoP, New York City, 
starting promptly at 10 a. m. Luncheon will be served at 1 p. m. The meet-' 
ing will end nt 3:30 p. m., if it has not previously ended, thereby permitting 
the executives going out of town to make train connections, and local execu- 
tives to keep necessary appointments. 

In the belief that "taking a few hours time out" to consider this problem 
that so vitally affects all direct distributors will pay real dividends, you are 
invited by the 25 direct distributors concurring in the above Resolution to 
meet with them at thnt time, aud to luncheon with them, for a frank and open 
discussion of the subject. 

The purpose of the meeting is primailly to provide an interchange of ideas. 
Accordingly the attached summarized — and also detailed — analysis of the 
material brought together in response to the foregoing Resolution is offered 
merely to supply an initial bnsis for discussion. 

It comes to you vow so that you may have an opportunity to go over it 
before the meeting. " 

SUMMARY 

This Outline of Direct Distribution Public Relations— with the Consumer 
Speaking is based on these four fundamentals : 

One. That a public relations program, like all selling, is most effective when 
built around some compelling theme — service to consumers of modest Incomes 
being the outstanding one in the case of Direct Distribution. 

Two. That the case for Direct Distribution is most effectively stated in 
terms of consumer interest instead of company or trade statistics and 
arguments. 

Three. That service to the consumer provides Direct Distribution with a 
case so undeniable and so irrefutable, that it can be relied upon without 
hesitation or qualification. 

Four. Til any effective program of public relations involving an entire 
Industry, and particularly an Industry made up of trades with varying 
characteristics — as is the case with Direct Distribution — requires both a cen- 
tralized handling of certain activities that can be most economically done 
jointly, and a bringing-together of qualified executives in a position to obtain 
decentralized action thereby calling into harmonious play at least the larger 



CONCENTRATION OF ECONOMIC POWER 3469 

companies' tremendous opportunities to create and strengthen improved public 
relations. 

The Outline then undertakes to satisfy these fundamentals with: 

One. ^1 nathmal cnnsiimcr organhntion. — The lyoaRue of Women's Buyers and 
Taxpayer.s — made up of women representing homes with incon)es of $2,500 a 
year or less: the women who predominately suiiport Direct Distribution and 
handle the expenditures of the majority of all consumers. 

Two. A national consumer rallying point — Vonsumcr Foundation, Inc. 

Three. A national consumer mouthpiece or voice — "Cfnisunwrs Nrics," or 
any similar publication acting for the consumer organizations mentioned above, 
and, as well, all other suitable consumer organizations or related organizations. 

Four. A facilitating organization to handle these steps which can most 
economically be done jointly: The Ivstititte of Distribution, Inc. 

Five. A committee intended to bring together qualified executives of the 
larger companies and representatives of all other interested concerns, organiza- 
tions, and individuals. 

Six. Detailed suggestions for public relations activities of the usual sort, 
but with opportunities to utilize the consumer angle, in order to gain greater 
effectivenes.s, indicated. 

Seven. A plan such as would undoubtedly be necessary for immediate opera- 
tive purposes is also presented. 

A plan for the customary steps in a public relations program would not be 
ii contribution of any unusual importance. Many organizations and individuals 
are available with extensive technical experience in such work. 

If, however, the ])ublic relations program for an Industry, particularly an 
Industry mad(> up of trades with varying characteristics, and a public relations 
program built around a central theme that v^'ill give it real punch, call for 
more than the u.sual company public relations program, the following sug- 
gestions may at least prove challenging to those who feel that the time for 
speaking out on behalf of Direct Distribution — for energetically placing its 
case before those whose verdict coimts — is already long overdue. 

Wheei.ek Sammons, 
Managing Director, Institute of Distribution, Inc. 

I. The PnoBLEif Faced and the On.rEcrivE Sought in the 
Consumer Background Work 

The inimrdiate problem involved. — To develop a method for effectively inter- 
jecting the consumer into the discriniinntory tax leiji-tlafivc .fituatio)!, particu- 
larly in states, and particularly in a manner counteracting the physical appear- 
ance before committees and legislative sessions of middlemen or independent 
merchants in numbers and groups. 

The underlying ohjcetive. — To provide a tangible ba.sis for gauging and test- 
ing the practicalities of widespread consumer mobilization and continuing cojt- 
stimer education, and the possible reactions thereof on national legislation. 

II. The Preliminary Consumer Background Steps Already Taken 

1. Door-to-door surveys were made in a number of typical communities In a 
variety of selected localities. 

2. Tliese surveys demonstrated : 

a. That consumers predominately favor Direct Distribution and find it satis- 
factory {ereept, of course, those in competition with chains or connected icith 
middlemen — about 20% \) 

b. That consumers, unless so informed, do not iinder.'<tand that discriminatory 
ta-ration penalizing Direct Distribution is levied on direct distributors' outlets 
only, and therefore may become a tax and a higher living-cost clement falling 
on them; 

c. That consumers are keenly responsive to the "poelcetbook nerve" — regtila- 
tory measures and discriminatory levies which become hidden taxes; savings 
in buying; restrictions on distribution tchich raise living costs — and welcome 
facts thereon; 

Note. — The door-to-door checkings revealed an 81% (over-all average) ap- 
proval of Direct Distribution. Even the lowest percentages among those aver- 
aged — 5S% for a community in which the local independent merchants had 
124491— 30— pt. 8 13 



3470 



CONCENTRATION OF ECONOMIC POWER 




1 



CONCENTRATION OF ECONOMIC POWER 347 J 

been carrying on an Intensive anti-dlrect-distrlbution drive and 47% in Cali- 
fornia after the passage of the discriminatory retail tax law — were Just above 
or very little below the 50% line, showing that a very slight degree of direct 
and effective consumer education was required to put the percentage well over 
50%. As to taxes that might affect their living costs, consumers were found 
to be even more antagonistic — but of course they must be warned of specific 
instances. 

d. That women are more responsive than men to the subjects mentioned in 
(c) above, and particularly the housewives buying for homes unth $2500-or- 
less-a-year — the homes which account for over 15% of the consumers and even 
a laryer percentage of the nation's purchases of necessities, and the homes 
almost all of vihich trade more or less toith direct distributors' and their 
outlets. 

3. Based on the above, experiments were undertalien to find out whether 
or not housewives in the $2,500-and-less-a-year group could be singled out in 
suflBcient numbers to: 

a. Establish the background necessary to make effective the appearance of 
selected housewives typical of the $2500-or-less-a-year group before legislative 
committees and meetings of state legislators — and 

b. If the selected groups to so appear could be obtained. 

4. These experiments were finally centered on the formation of a state group 
of women of $2,500-a-year-or-less households as the League of Women Buyers 
and Taxpayers — this to be, in other words, the background mentioned in (3-a) 
above — which would have as its stated purpose, consumer education on the 
subjects mentioned heretofore in (2-c), of course on a nonpolitical and non- 
sectarian basis. Because it was felt wisest, during the formation of the group- 
ing, to lead up to specific discriminatory taxation and restrictive distributive 
regtilations through broader tax and cost-of-living matters, general hidden tax 
and cost-of-living indirect taxation, as well as state and local governmental 
costs, were used to supply the detailed matter necessary to the routine involved. 

5. This initial state experiment was successful to the extent that it 
demonstrated: 

a. The background availability of housewives in the particular group selected 
and at a cost vnthin reason; 

b. The availability of selected housevyives for appearances made logical and 
effective by the group background. 

6. The state experiment was next attempted on a national basis, and as a 
result it was : 

a. Confirmed that a national duplication — The League of Women Buyers and 
Taxpayers of the Nation, Inc. — of the state results was possible at better than 
estimated costs. 

7. The continuation of the above activity toward a national background 
sufl3cient for actual use In Connection With the Original Objectives Listed has 
been more successful than anticipated. It is apparent that an adequate initial 
level — 200,000 or thereabouts as members of the national league — will actually 
be obtained early in 1937. 

This 200,000 membership listing Is national throughout the 48 states, the 
District of Columbia, and the Hawaiian Islands. This is considered sufficient 
to provide the necessary starting background for the direct work which is 
the final objective. 

Exi)erience to date demonstrates, however, that It can be expanded to direct 
memt)ership listing of any size desired up to several millions at approximately 
$6,000 per 100,000 direct cost— aside from overhead— and $10,000 per 100,000 
per year servicing on a satisfactory minimum basis. (There are over 6,000,000 
consumers, of the type involved, p.vailable in organized form of one sort or 
another for direct or indirect extension work.) Indirect expansion (that is, 
through other organizations in bulk) is available in almost any quantity desired 
at merely whatever servicing expense it might be decided to involve. 

The actual state split-ups of the 160,000-odd members affiliated with the 
league as of November 4th of last year demionstrate a continuous and progres- 
sive growth of such memberships in every state in which a league division 
existed. 

The current 200,(X)0 membership of the League is the starting background 
necessary to effective direct state consumer appearance against discriminatory 
legislation, as mentioned above as a primary objective. It is also a starting 
point for other consumer activity of various sorts, if and when undertaken. 



3472 CONCENTRATION OF ECONOMIC POWER 

WHAT THE 200,000 LEAGUE MEMBERSHIP IS— WHAT IT, IS NOT 

It is 110 more than that hucl-ground, for it was the establishment of such a 
background which alone is involved in the undertaking. 

Howevei", it is more than a mere listing — each individual is of a certain 
definite type, and each has signed an application, received detailed evidence of 
acceptance, and been serviced with initial cost-of-living and budgct-pockelbook 
material to which response" has been satisfactory, as well as participation in 
verious contests, etc. — even the response to recpiests for legislative action by 
mail has been tested, as well as arranged physical appearances of selected 
nnmbei'S. 

This is equal to, or in excess of, membership relationships in many of the 
most widely known national organizations, except that a paid publication has 
not been interjected, as is done in some instances, although it is felt one could 
be if felt desirable. 

IT IS NOT THIS, nOWtVEK 

However, it is not advanced that a membership in the sense of stated meet- 
ings or the marshalled mobility of a trades union, or anything of tha^ sort, is 
involved. That degwe of organizalion was not^ contemi^lated as a part of the 
initial background Heeded for; direct co'isumer ayiipearances against discrimina- 
tory legislation, and extension to that ''Aegree, ijind as well to the deeper educa- 
tion of consumers on direct distribution, and similar questions, are taken up in 
the suggestions. 

AN ADDKU Ri:SUI.T OBTAIiNEL' 

An important additional result has been established as a result of the above 
undertaking. The principals of the various "fraternal" insurance and similar 
organizations, fdwnd to be so prevalent among the class of consumers in the 
nndertaki » , were interested (over six millions of members). As a result these 
groups h;ne been uniCornily interested in the work and its objectives, and 
have cooperated wholeheartedly. 

As a residt of tliis cooperation, and in the natural course of segregating 
consumers, there has come into the tiles as active cooperators in the work, a 
list of those housewives who have been out. standingly effective iu building up, 
throughout tlie country, the small study and social groups forming the heart 
of the vast organization of milllon.s eonnecled with the mutual insurance of 
women and children. Tliese housewives are the "key" workers ctf that move- 
ment, and can likewi.se become the "key" elements at a nominal cost in any 
l(>gitimate referenda lu'tilion signature work, the sale or distribution of a 
consumer periodical carrying memberijhip, or any other task involving production 
of definite results. 

These "key" women numbered 83G on November 4, 1936, and will probably 
number around 1.000 early in this year. It is believed that no similar list has 
previously existed outside of the organization circles mentioned, and that it can 
lie used constructively, to the mutual advantage of consumer protection and 
tho.se on it. A map showing, graphieally, the locations of the S3U hou.sewives 
on this list on November 4th, of last year is to be found in the envelope on 
rage 2 of this booklet. 

SUGGESTIONS FOB FUTUKK WORK 

As following figures show, it is suggested that the work be carried forward 
(o both actmd tests of etlectiveness in connection with (1) stare legislative 
discriminatory proposals and (2) in the direction of feeling out the usefulness 
ot" giving the consmner a real voice and a degree of .sound protection on regvda- 
tions and legislation lestricting the direct fiow of distribution from producer to 
sale at retail. 

ADDITlO.N'Ah UKVKLOP.MENTS 

DevelopnuMits ntider (2) above involve new work. It is suggested that the 
following be specificilly eonsidered : 

(a) The establishmi nl of The Coiiiiiihicrs Foundation (this is being incor- 
porated). 

The CuHsiDttcrs FonndalUni would be lie.ided up by a small board of leading 
economists, distributive experts, outstanding wnuien, and others interested in the 



THE MEANS MAKING POSSIBLE 
EXECUTION OF "C Clast to r.ght) IN 
TERMS OF THE CONSUMER. 



DIVISION a 



THE VOICE OF THE CONSUMER. 



THE CONSUMER FOUNDATION | 
A rvon- partisan national represent- j 
atton of the consumer headed by a ^ 
Iboard of men and women natioiuillij 
i known and outstandinq m rtspect to 
' consumer prot)!ens 



CENTR^UZED COORDINATION 



FACIHTATING ORGANIZATION FOW JOINT ACTION 
(INSTITUTE OF DISTRIBUTION) 

RESEARCH 



llnterctvange of f iqures 
LISTS 



Suppliers 

[Official 
[Olher 

LEGAL 

[Cooperative action 

TRADE AWO OTHER INFORMATION 



[TeletHp^ service 
MEETINGS 

PROJECT S 
Mfltional 
5tatt 
Special 




COORDINATIOW 
CfNTRftLlZATION 



DIRECT 

OlSTRIbUTIQ'Kr 

PUBLIC 
RELATIONS 

-VV/rt the Cons4/mer Speakmg i 




iJUiii .-!!)- -pt.s (Fiw(.|). :i47r;) 



CONCENTRATION OF ECONOMIC POWER 3473 

consumers welfare. The direct distributors Initially founding (he Foundation 
would be represented on this Board, but would not'dominate It, althouRh contri- 
butions would effectively, in fact, control the existence of the Foundation, ad- 
mittedly. The Board would pass on the publications • of the Foundation and 
its publicity releases. 

Although the Foundation would, at least initially. Involve no staff or other ex- 
pense than its charter and provision for periodic meetings of the H.>ard. Uh or- 
ganization could of coune be expanded to any degree found effective. The 
Board, once contributions had been made to its work, would have control 
of them. The 200,000 initially in the League, and future members of it or any 
similar organizations that might be undertaken, would automatically become 
afliliated with the Foundation, but on the present program of objectives, namely : 

(o) To bring home to the average consumer — the customer of direct dlstribu 
tion — as forcibly, fearlessly, and effectively as possible, the advantages of direct 
distribution and the inevitable effect on the consiftner's pocketbook and the 
cott of living if it is penalized and handicapped by law and legalized arbitrary 
trade practices. 

(6) To interest and educate consumers in discriminatory taxation, laws, 
legalized fair trade practices and governmental or trade regulations affecting 
the cost of the things they buy. 

(c) To interest and educate consumers in actual-example facta and pocket- 
book figures on the most economical and the least wasteful methods of produc- 
tion and distribution. 

(d) To interest and educate consumers in judging value and quality in con- 
sumer goods. 

(e) To aid and assist consumers in organizing to the end that they may have 
a voice and exert effective representations in respect to legislation and trade 
practices which affect their living costs. 

if) To aid and assist consumers in interchanging ideas and experiences on 
legislation, methods of production and distribution, and trade practices which 
affect their living costs, either by means of the printed pages, conferences, meet- 
ings, debates, study groups, or other effective channels. 

ig) To aid and assist consumers to form intelligent and united groups to 
take such action as may be deemed by them wise or expedient on proposed 
or impending legislation affecting their interests in the distribution of merchan- 
dise and the cost of living. 

(h) To aid and assist consumers to use greater knowledge of the most 
economical and effective trade practices and methods of production and distri- 
bution constructively in their own interests and the interests of the Republic. 



"Exhibit No. 532", Introduced on p. 3387, is on file with the committee. 



'Exhibit No. 533", introduced on p. 3388, is on file with the committee. 



"Exhibit No. 534", introduced on p. 3393, is on file with the committee. 



'^Exhibit No. 535", introduced on p. 3393, is on file with the committee. 



'Exhibit No. 536", introduced on p. 3394, is on file with the committee. 



Exhibit No. 537 

[Memorandun proposing a Consumer Agency in the Federal Government, submitted by 

Miss Persia Campbell] 

The interests of labor, business, and agriculture are each represented in the 
central administration of our government. The consumer has no comparable 
representaton. The bargaining positions of labor, of farmers, and of capital 
are strengtueneH by organization and by legislation. The growing complexity 
of our economic life leaves the consumer in a progressively worse bargaining 



3474 CONCENTRATION OF ECONOMIC POWER 

position. Only an expert can judge the relative worth and value of goods made 
by new techniques and processes. A vital factor in the present lack of balance 
in our economic life is the resulting relative incompetence of consumers as 
theoretical equals in the market place. The wage-earner's or farmer's bargain 
for his income is of little or no avail if his wife's bargain over the counter is 
ineffectual. 

A central consumer agency in the Federal administration is vitally needed. 
Several departments now have bureaus which afford limited types of assistance 
to consumers, but none takes into account, nor do they collectively take into 
account, the consumer's total position. A central service agency for consumers 
should be established: 

1. To initiate proceedings for the definition of standards and qualities of 

consumer goods, and to make recommendatioms from time to time on 
the adoption of mandatory or legal standards, and to check the use of 
such standards in the labeling of consumer goods. 

2. To conduct research and to collect and publish information of value to 

consumers. 

3. To represent the consumer before regulatory bodies and in the adminis- 

tration of laws vitally affecting consumer interests. 

4. To cooperate with an advisory interdepartmental committee for the 

coordination and extension of consumer services now being performed 
in the other departments. 

1. Standards. — The consumer agency should carry on research in the field of 
standards and grades of consumer goods to determine "what commodities present 
the greatest need and the greatest possibility for the development of grades 
and standards. It should initiate proceedings with other interested govern- 
mental and nongovernmental agencies for the definition of qualities upon which 
consumer standards and grades can be based and for the setting up of such grades 
and standards. It should utilize the National Bureau of Standards for necessary 
technical testings. It should promulgate and promote the use of such standards 
not in conflict with other provisions of the law. And from time to time it 
should recommend to the President and the Congress the establishment of 
additional legal and/or mandatory standards or grades for consumer goods. 

2. Educational and information services. — The consumer agency should be 
enabled to conduct research into and collect information on matters affecting 
the consumer interest, both in order to carry out its functions adequately and 
in order to inform and advise consumers and organized consumer groups on 
matters affecting their interests. The agency should be empowered to prepare 
and publish material collected by itself or other governmental or nongovern- 
mental agencies on matters affecting consumers. This should include an 
expansion of the Consumers' Guide, now confined to agricultural products. 

3. Representation of the Consumer interest. — (a) The consumer agency 
should have the right to appear and be heard on behalf of consumers before all 
regulatory bodies whose decisions affect the consumer interest and to make or 
file complaints to or with any such body to institute hearings, investigations, 
or proceedings. The consumer agency should have the right to require such a 
regulatory body to use its. subpoena power on behalf of consumers for the 
purpose of such proceedings. 

(&) In addition to appearing before regulatory bodies, the consumer agency 
should also have the right, upon order of the President, to represent the con- 
sumer interest in the administration of those federal laws which affect the inter- 
ests of consumers — the specific laws to be determined by the President. For 
this purpose the consumer agency should have access to relevant information of 
the Department administering such laws and for this purpose should be brought 
within and made subject to the rules governing confidential treatment of infor- 
mation in possession of such Department. 

(c) It should be clearly understood that nothing in these provisions should in 
any way limit the rights of consumers or organized consumer groups to speak 
for, or on behalf of, consumers and to prepare and present their views directly 
on matters affecting the consumer interest. 

4. A consumers Advisory Committee, including representatives of agencies of 
the government performing services to consumers should be established. The 
consumer agency should from time to time submit matters affecting the con- 
sumer interest to the committee for its advice and recommendations. 



CONCENTRATION OF ECONOMIC POWER 3475 

The Commit! oe should have power to make recommendations to the President 
or the responsible Cabinet Officer on matters affectinR coiisinniTs and to inves- 
tigate and report on any subject pertaining to the improvement of the consumer 
services of the government 



"Exhibit No. 538," entered on p, 3413, appears in Hearings, Part V, appendix 
p. 2298. ' 



"Exhibit No. 539" appears in text on p. 3416. 



"Exhibit No. 540" appears in text on p. 3419. 



SUPPLEMENTAL DATA 

The following letter and memoranda were entered in the record 
during hearings held May 26, 1939, and are printed at this point in 
connection with testimony supra, pp. 3425, 3436, and 3439. 

Exhibit No. 639 

U. S. Department of Commerce, 
National Bureau of Standards, 

Washington, May 25, 19S9. 
Subject: Statement of Functions and Activities of the National Bureau of 

Standards. 
Hon. Joseph C. O'Mahonet, 

Chairman, Temporary National Economic Committee, 

Senate Office Building, Washington, D. C. 

My Dear Senator : In compliance with your request made to our Mr. R. A. 
Martino during the recent consumer hearings before the Temporary National 
Economic Committee, I am pleased to transmit herewith a statement concerning 
the functions and activities of the National Bureau of Standards. The state- 
ment covers in a general way some of the more important activities being cp rried 
on by the Bureau in the, public interest. 

There is also being sent herewith a statement relative to remarks made by 
Mr. George E. Mumma, representative of Sears, Roebuck and Company, Chicago, 
111. This matter relates to a letter addressed by Mr, Mumma to the National 
Bureal of Standards under date of October 26, 1938, requesting it to establish a 
rating method for hot-air furnaces, and this Bureau's renly dated November 
3, 1938. 

During the course of Mr. Martlno's testimony before the Committee, Mr. 
D. B. Montgomery requested an explanation relative to lack of washability and 
color fastness requirements in Commercial Standard CS 16-29 for Wall Paper. 
Mr. Martino was not prepared to reply specifically to Mr. Montgomery's ques- 
tion, for the reason that he did not have documentary evidence before him at 
the time. In order that the members of the Committee may have a complete 
picture of the development and e.stablishment of the commercial standard for 
wall paper, I am forwarding herewith a detailed statement, with special ref- 
erence to washability and color fastness requirements referred to by Mr, 
Montgomery. The subject is also referred to in the transcript of the record. 

If you desire more si)ecific or detailed information concerning the func- 
tions and activities of the National Bureau of Standards, I shall be glad to 
cooperate with you in every way possible. 
Respectfully, 

Ltman J. Briqos, Director. 



3476 CONCENTRATION OF ECONOMIC POWER 

Functions and Activities of the National F.tmEAu of Standabds, United 
States Depabtment of Commerce 

Tlie National Bureau of Standards is charged by law with "the custody of 
the standards; the comparison of the standards used in scieutitic investiga- 
fions, engineering, manuiaciuring. commerce, and educational institutions with 
the standards aiiopted or recognized by the government, tlie construction, when 
necessary, of standards, their multiples and subdivisions, the testing and 
calibration of standard measuring appaiatus; the solution of problems which 
arise in connection with standards, the determination of physical constants 
and the properties of materials, when such daia are of great importance of 
scientitic or manufacturijig interests and are not to be obtained of suflicient 
accuracy elsewhere. 

"The Bureau shall exercise its functions for the Government of the United 
Stales; or for any scientitic society, educational institution, firm, corporation, 
or individual within the United States engaged in manufacturing or other 
pursuits requiring the use of standards or standard measuring Instruments." 

functions 

The Bureau's functions are exercised for the Federal and State governments, 
and, subject to reasonable fees, the general public. 

Its unique research and testing facilities are used to discover and evaluate 
material standards and to solve basic technical problems. 

The Bureau's work on standards of measurement is designed to assist in 
the standardii-ation of containers and products, in promoting systematic 
inspection of trade weiglits and measures, and facilitate research in science 
and technology. The establishment of more precise values for the standard 
constants furnishes an exact basis for scientific experiment and design and 
makes possible the efficient technical control of industrial processes. 

T'he Bureau's work on standards of quality sets up attainable standards and 
test methods to assure high utility in the products of industry and furnishes 
a scientific basis for fair dealing by promoting truthiul branding and 
advertising. 

The Bureau likewise develops standards of performance; that is, specifica- 
tions for the operative eflSciency or accuracy of machines or devices. These are 
numerical statements of speed, uniformity, durability, output, economy, and 
other factors which together define the net efliciency of an appliance or 
machine. The ultimate purpose is to make exact knowledge the basis of the 
buyer's choice and to clarify the understanding between the manufacturer, 
distributor, retailer, and consumer. 

Another function of the National Bureau of Standards of very general interest 
is the development of standards of practice; that is, collection of data and 
formulation of codes of practice for public utilities and other services. These 
codes are prepared in cooperation with the technical and commercial agencies 
concerned, and relate to the technical regulation of construction, installation, 
and operation. They are necessarily based upon standards of .measurement, 
standards of quality, and standards of performance. The purpose of such 
work is to afford a single impersonal standard of practice mutually agreed 
upon by all concerned and clearly defined in measurable terms. 

The Bureau cooperates with tax-supported purchasing agencies, industries, 
and national organizations in developing specifications and facilitating their 
use; it encourages the application of the latest developments in the utilization 
and standardization of building materials, and in the development of engineering 
and safety codes, simplified practice recommendations, and commercial standards 
of quality and performance. 

beseabcu associate plan 

Frequently laboratory procedure must be supplemented with the skill and 
experience of practical craftsmen, if outstanding results are to be obtained. 
In situations of that sort the desired objective is attained under the Research 
Associate Plan of the Bureau. A specific group — manufacturers, distributors, or 
consumers — usually through its recognized national association, maintains its 
own technicians in the laboratories and shops of the Bureau under the super- 
vision and regular procedure of the Bureau, for the purpose of research in 
a field of mutual concern. The interested groups and the Bureau are thereby 
brought into close and cordial working relations, with the results of the joint 



CONCENTRATION OF ECONOISIIC POWER 3477 

effort made availnj>le to these gronps and the piihllc. At (he prosont time there 
are more than oO oiich research af:sociales at the Bureau, represeutlng 
various fields. 

An examination of the lists of projects upon which research associates are 
now working at vne Bureau discloses the fact that ahout 44 percent of the 
research associates receive all or part of their pay from orRanlzatloiiH that 
are interested In the research problems Irom the staiulpoint of the consmner 
rathc>r than the producer. 

Several examples of the practical operation of this cooperative arranuement 
will serve to illustrate the work under the research associate yilan. 

Motor fuels present manv difficult prohloins which involve both the producers 
of ftiels and the huilders of motor vehicles in whicli rlny are used. The Na- 
tional Bureau of Standards hjis for years been carryinp on ii trianpular research 
with several national organizations for the purpose of reachinp: a solution to 
problems which will be mutuallv beneficial for all concerned. Since the Fed- 
eral Government Itself is one of the larcest consumers of motor fuels, Its in- 
terests in this respect are ;ilmost identical with those of industry and the public. 

Another research which is worth mentioning, and one which affects everyone, 
has to do with -inman teeth. Since lOfS an extensive research nrotrram has 
been maintained in cooperation with the .\merican Dental Association. Current 
results of this research are made avnilaVile to the profession. Denial KinjilRam 
fiHinps have been used for more than 100 years, but It is only recently that the 
dentist has been advised on its two greatest defects — excessive shrinkage and 
flow. The dental research program which is a continuing one at the Bureau, 
has attacked these defects, and rated manufacturers' products, with the result 
that defective amalgams have been practically driven from the market. 

SOME BUREAU ACTINTnES 

Bureau activities cover mnny subjects which are of interest to industry, 
government, and the consuming public. They embrace various fields, such as 
electricity, weights and measures, heat and power, optics, chemistry, mechanics 
and sound, organic and fibrous materials, metallurgy, clay and silicate products, 
simplified practice, trade standards, and codes and specifications. 

The following are some typical examnles of the work now in progress: 

(1) Aid to State governments on technical details of weights and measures 
inspection service. 

(2) Investigation of railroad track scales, mine scales; motor truck and 
other large .scales used principally for interstate shipments. 

(3) Preparation, analysis, and certification of the composition of technical 
materials. 

(4) Investigations of fire resistance of building materials. 

(5) Determination of the pro])erties of stone, clays, cement, and other struc- 
tural materials, nnd the formulation of building codes and researches to pro- 
mote, improve, and make possible less expensive building construction. 

(6) Development of f5tfindards of quality and methods of measurement of 
textiles, paper, leather, riibber. and organic plastics. 

(7) Tests of paint, varnish, soap, ink, and other supplies for the Govern- 
ment services. 

(8) Study of ceramic materials and processes used in their manufacture. 
(91 Dev lopment of test methods to insure compliance with speciflcatious. 

and simplification of rarieties of products. 

TESTING AND INSPECTION FOB OOVEBNMENTAJ. AGENCIES 

The law requires 'hat the National Bureau of Standards carry out Investl 
gations and tests fo.- the Federal and State Governments, and for many years 
the Bureau has served as a testing and research laboratory for practically 
every branch of the Government service. 

The testing of scientific ;ipi»aratus, marerials, and supplies by the Bureau 
for other Government departments and for the various State govemmerts Is 
widely appreciated and utilized, and requests for the Bureau's assistance in 
such matters are steadily increasing. 

Another important service is the calibration of instruments and apparatus for 
Federal and State Governments in terms of the national standards. 

Commodities purchased by the various departments and establishments of 
the Federal Government, excepting foods, drugs, and cosmetics, are tested 
by the National Bureau of Standards to determine whether they comply with 



3478 CONCENTRATION OF ECONOMIC POWER 

the requirements of the specifications on which they are purchased. This 
gives the Bureau an unusual opportunity to observe hov? buying under speci- 
fications works out in practice. The experience 6f the National Bureau of 
Standards in this field is available in the preparation of performance stMid- 
ards. 

FEDERAL SPECXFICATIONS 

The Federal Government is the largest single purchaser of consumer goods 
in this country. Its purchases are made on the basis of Federal specifications, 
of which there are over 1,200 now in use. These specifications are prepared 
by more than 75 interdepartmental committees made up of technical men 
drawn from all branches of the Government working under the general direc- 
tion of the Federal Specifications Executive Committee. Members of the 
staff of the National Bureau of Standards take an active part in the work 
of many of these technical committees, except those engaged in the preparation 
of specifications for foods and drugs. In this way, the results of the investiga- 
tions and tests made in the Bureau's laboratories are made available to these 
technical committees in the formulation of Federal specifications. All Fed- 
eral specifications prepared by the various technical committees are sub- 
mitted by the Chairman of the Federal Specifications Executive Committee 
(who is the Director of the National Bureau of Standards) to the Director 
of Procurement for approval, after which they are printed and oflScially pro- 
mulgated by the Director of Procurement for use by the several departments 
and establishments of the Federal Government. They are available to the 
public at large by purchase from the Superintendent of Documents, Govern- 
ment Printing OflSce. 

Considered as a whole, the more than 1,200 specifications already promulgated 
represent the best group of commodity specifications thus far compiled. 

In many cases the products of industries have been improved as a direct 
result of the investigations made in connection with the preparation of Federal 
specifications. Much of the information contained in many of these specifica- 
tions can be utilized in the preparation of consumer performance standards. 

TESTINQ AT THE NATIOWAL BUBEAU OF STANDARDS IN EELATION TO OVEB-aHE,- 

COUNTEB BUTINQ 

Some people have been led to believe that because the National Bureau of 
Standards does a large amount of testing for the Government, it should be in 
a position to say which is the best of any group of products, or to arrange 
these products in order of excellence. A glance at the testing procedure actually 
followed will show that it does not give this information, and that the 
Bureau's knowledge of a whole line of competing products is necessarily very 
limited. 

Each specification lists the required properties of the article which Is being 
purchased. In supplying rope, for example, the requirements of the specifica- 
tion as regards the kind of fiber, the diameter, the weight per foot, the oil con- 
tent and the breaking strength must be met No brands or trade names are 
used in the specification and any manufacturer who can supply the article 
with the required characteristics is free to bid. This eliminates favoritism and 
promotes free competition. 

The order goes to the lowest bidder, and the goods are tested after delivery 
to determine whether or not they meet the specifications. A large amount of 
testing of this kind is carried out for the Federal Government by the Na- 
tional Bureau of Standards. If the material meets the required tests this 
closes the transaction. If not, the procedure is repeated with the next lowest 
bidder. 

It will thus be seen that in a transaction Involving bids from perhaps a 
dozen manufacturers the product of only one or two is actually tested. This 
saves an enormous amount of time and labor, but gives little or no informa- 
tion about the relative value of the products of 'the various manufacturers. 
It does not tell which is the best. It says only that a product has been found 
which meets the specification — that it is good enough for the Government's 
requirements. The award may change with the next order for the same com- 
modity. New bidders may compete or prices change relative to earlier bids. 

The Bureau has occasionally been urged to extend its tests to Include whole 
lines of competing products, and to make the results of its tests available to 
consumers. The Bureau has neither authority nor funds to do this. Bills 
which would authorize work of this kind have been introduced in Congress, 
but they have not as yet found congressional favor. 



CONCENTRATION OP ECONOMIC POWER 3479 

WEIGHTS Ain> iie:asube8 

The Bureau of Standards renders an Important nation-wide service to the 
consumer through the indirect standardization of devices used in welRhlnj? 
and measuring commodities purchased by over-the-counter buyers. Tlie Hureau 
is the custodian of the national standards of weight and measure ; it tests, on 
the one hand, the control standards which govern the manufacture of com- 
mercial weighing and measuring devices, and on the other hand, the reference 
standards of the States upon which their official tests of commercial devices 
are based. The Bureau exercises no regulatory powers along weights and 
measures lines, such supervision having been left by the Congress almost 
exclusively to the jurisdiction of the States; however, by cooperative action 
the Bureau promotes uniformity of weights and measures laws and admin- 
istration throughout the country, and serves as a clearing house for informa- 
tion on this subject. 

The Bureau's work on weights and measures led to the formation of the 
National Conference of Weights and Measures which is composed of State and 
local officials engaged in the Inspection of weights and measures and in the 
enforcement of laws and regulations on the subject. Although it is an unofficial 
organization with no direct authority to enforce its recommendations, the Con- 
ference exerts a powerful influence on weights and measures affairs, largely 
through the adoption of codes and specifications, tolerances, and regulations for 
commercial weighing and measuring devices which are recommended to the 
States for official promulgation. These codes are published by the Bureau from 
time to time. 

The National Conference seeks to place weights and measures administration 
on a uniform basis throughout the country. It looks toward adopting the most 
efficient methods for carrying on all phases of the work. Its annual meetings 
held at the National Bureau of Standards bring together officials and others 
interested in weights and measures matters from all sections of the country for 
discussion of the problems and interchange of ideas. Reports of the proceedings 
of each meeting of the National Conference are published in the Miscellaneous 
Series of the Bureau. 

Since 1914 the Bureau has been conducting field tests of railway track scales 
such as are used for the weighing of railway freight cars; these tests have 
played an Important part in the improvement effected during the past two 
decades in the accuracy of these large scales, the weights from which are used 
not only for assessing freight charges for rail transportation but also as the 
basis of sale for goods sold in carload lots. Three railway track scale testing 
equipments' are maintained in service by the Bureau, with which more than 
1,000 tests are made annually. 

In 1936 the Bureau inaugurated a program of testing vehicle scales (wagon 
and motortruck scales) in cooperation with the States. The majority of the 
States are without adequate equipment with which to test vehicle scales. The 
primary purpose of the Bureau program is to supply each State not having such 
equipment, with authoritative data on the performance of a representative num- 
ber of vehicle scales in use In the State ; these data may be used in supporting 
a request for funds for the procurement and operation of suitable testing appa- 
ratus for this very important class of commercial weighing devices. On October 
1, 1938, testing schedules had been completed In nineteen States, and approxi- 
mately 1,200 scales were tested and reported upon individually to both scale 
owners and the operating officials. 

VJfiXTIUBS 

Textile studies at the National Bureau of Standards are concerned with a 
variety of problems of interest to the consumer as well as the manuacturer. 
They range from studies of the ultimate nature of the fibers themselves, 
through Investigations of the relation of the yarn and fabric construction and 
finish, to the properties of the finished product, and Include studies of utiliza- 
tion, storage, and maintenance. Many of these studies have led to the develop- 
ment of standards, specifications, and test methods which are utilized by manu- 
facturers and large department stores maintaining testing laboratories of their 
own. Some of the subjects to which the Bureau has given consideration in 
the textile field include: Carpets, cotton textiles, dress fabrics, dry cleaning 
solvents, gloves, hosiery, silk textiles, underwear, and waterproofed fabrics. 

To Illustrate the variety and scope of the Bureau's activities with reference 
to textiles, there are set forth below some examples of Its studies that affect 
the consumer most directly. 



3480 CONCENTRATION OF ECONOMIC POWER 

The wear of carpets of known construction with and without underlays was 
studied with the aid of a carpet wear testing machine developed at the Bureau. 
This machine produces the bending, slipping, twisting, and compression of the 
pile that takes place when a carpet is walked upon. The durability of a 
carpet was found to be increased materially by Increas;e in density or height 
of pile and by the use of underlays. This machine is being used by a number 
of carpet manufacturers in improving their processes and products. 

In order to know how fo make cotton textiles that will meet the require- 
ments of users with respect to such properties as strength, stretch, tear re- 
sistance, weight, and air permeability, it is necessary to known how these 
properties vary with changes in the size and twist of yarns and with the 
way the yarns are woven to form the cloth. Systematic studies of these inter- 
relationships have been made at the Bureau. In addition, the conditions of 
mercerizing cotton to obtain maximum strength has been investigated. Light- 
weight cotton fabrics having maximum strength per unit weight for aeronau- 
tical purposes liave been developed. 

In cooperation with the American Home Economics Association, a study of 
the serviceability of 69 silk dross fabrics was made. Home-economics students 
located in different parts of the United States purchased silk fabrics in local 
stores, made dresses from them, and observed the performance of the dresses 
in service. Samples of the new material and the worn dresses were analyzed 
at the Bureau. Failures in service were found due to unsatisfactory color 
fastness to light, laundering, or perspiration ; slippage of yarns at the seams 
and In the fabric, particularly across the shoulders and hips ; inadequate 
strength ; and poor aging characteristics. 

The tendency of yarns to slip in fabrics, as indicated above, is a frequent 
cause of dissatisfaction. In cooperation with the American Society for Testing 
Materials, a method for measuring this property has been developed. 

In view of the difficulties experienced by drycl^aners in obtaining a suitable 
solvent for drycleaning purposes, and of the fire hazard, often resulting in 
property damage and loss of life, the National Association of Dyers and 
Cleaners, in cooperation with the Bureau, made a study of the relative merits 
of the drycleaning solvents, carbon tetrachloride, Stoddard solvent, and tri- 
chloroethylene. The effects of the solvents on fabrics, the stability of the 
solvents, their detergent efficiency, and their toxicity were considered. All of 
the solvened examined were found to be satisfactory when used under suitable 
conditions. 

At the request of the General Federation of Women's Clubs, methods were 
developed for testing women's washable cotton gloves for shrinkage due to 
laundering, strength at seams, and resistance to abrasion. The results of the 
tests on a variety of different types of gloves indicate that numerical limits for 
shrinkage may not be necessary. The data obtained afford some basis for select- 
ing tentative minimum values for seam strength and resistance to abrasion, but 
tests of many more gloves would be necessary to establish minimum standards 
on a sound basis. 

Also, at the request of the General Federation of Women's Clubs, a hosiery- 
testing machine was developed to stimulate the forces Ticting on a stocking at 
the knee and garter clasps in use. The applicability of this machine to the 
evaluation of variations in knitting, degumming, dyeing, finishing,' laundering, 
and aging has been demonstrated. 

A survey was made of women's full-fashioned silk hosiery from retail stores 
throughout the United States to provide a basis for a performance specification. 
The brand, retail price, appearance, and construction werje found to be inade- 
quate guides to the performance of stockings as indicated by the hosiery testing 
machine. 

Standard methods of measuring and standard measurements for men's, 
women's, and children's hosiery are provided in Commercial Standard CS46 for 
Hosiery Lengths and Sizes, which has been accepted by the industry for guid- 
ance of producers, distributors, and users. This standard is also intended to 
eliminate confusion resulting from a diversity of measurements and methods, 
and to provide a uniform basis for guaranteeing lengths and sizes of hosiery. 

When laundered cotton fabrics are dried outdoors during the winter, particu- 
larly in New England, they frequently undergo excessive deterioration of a type 
called "winter damage." An Investigation of the trouble showed that it was 
due to sulfuric acid formed in the damp fabric by oxidation of atmospheric 
sulfur dioxide, and that the damage could be remedied by using a small amount 
of calcium carbonate in the final rinse water. 



CONCENTRATION OF ECONOMIC POWER 3431 

There has been developed an accelerated aging test for silks which makes It 
possible to predict how silk, and particularly weighted silk, will withstand the 
deteriorative effects of light, heat, and moist air, which are the agencies largely 
responsible for its deterioration in service. Jt furnislics a laboratory method 
for indicating the relative stability of different silk fabrics. 

The effect of light on silk, untreated and treated with dilute acids and alka- 
lies, was studied. The results show that the stability of silk in light is dei>endent 
upon the acidity or alkalinity of the finishing solutions. 

The trade practice ruling of the Federal Trade Conuni.ssion regarding the 
labeling of weighted silk textiles, together with the widespread interest of con- 
sumer groups in the amount of weighting in silk fabrics, led to the development 
of a method for analyzing weighted silk fabrics. 

Standard sizes for knit and woven underwear were developed at the Bureau 
through a research associateship established by the Underwear Institute. These 
sizes are in general U!;e in the industry. 

The Bureau has also cooperated with the Underwear Institute in a study of 
the proiJerties of underwear fabrics made in a variety of weights, thicknesses, 
and constructions from cotton, wool, silk, rayon, and combinations of these 
fibers. The results of this study furnish data on representative underwear 
fabrics relative to the properties that appear important from the standpoint of 
comfort and health. The relative warmth, air permeability, thickness, weight, 
"softness," and "smoothness" for 97 fabrics were determined. 

The service to be expected fropa wool textiles depends to a considerable extent 
on the quality of the wool used and on the treatments given the wool in the 
process of manufacture. Wool that has been exjiosed to strong light for long 
periods of time, or to certain bleaching, lustering, or dyeing processes, may 
undergo Incipient damage that Is not disclosed by inspection of the material. 
These effects have been studied and methods for determining the susceptibility 
of wool to deterioration in use have been developed. They are being applied 
by the manufacturer of wool textiles to the improvement of his processes. 

BtnLDING MATERIALS BESEAECH 

Much interest is evidenced at the present time In the movement going forward 
In the development of better housing facilities throughout the country, par- 
ticularly with reference to low-cost housing. At the Instance of the Central 
Housing Committee, compo ed of repreesntatlves of Federal agencies interested 
In housing matters, the National Bureau of Standards was selected as the 
agency to conduct investigations and tests on the physical properties of ma- 
terials, except wood, entering into housing construction. 

It is believed that the results of the present program haveiully demonstrated 
the value of this type of research on housing not only to the government 
housing agencies but also to the architects, the building Industry, and the public. 

Widespread interest has been shown in the reports which are now appearing 
In printed form and available to all groups Interested In housing. Some of the 
benefits to be derived by these groups may be listed as follows : 

1. Factual ivformatiMi is being developed with regard to the actu-al per- 
formance of building materials by an agency which has no commercial interest 
in any material or group of materials and which is not prejudiced for or against 
any material. 

2. The information developed is based on objective tests tchich may he re- 
peated by any competent engineer. The development of these objective methods 
of measurement is essential to progress in housing. 

3. The way to the use of performance standards In building codes is being 
opened. The substitution of performance standards for descriptions of par- 
ticular types of construction will accelerate the Introduction of better and 
cheaper methods. 

4. Laboratory studies of failures point the way to methods of successful use 
of building materials, and demonstrate that many failures are due to improper 
application rather than to any inherent defect in the materials themselves. 
There are no perfect materials suitable for all applications. 

Many of the agencies have found it practicable to make decisions on the 
basis of objective tests by the Bureau and other i>ertinent data rather than an 
individual experience, perhaps satisfactory in some cases, but not necessarily of 
general application. 

Some specific examples of results of the building materials research program 
which lead to a reduction of cost are set forth herewith. 



3482 CONCENTRATION OF ECONOMIC POWER 

Methods have been developed for the successful application of -plaster on fiber 
insulating lath. Thus, a single material serves as plaster base and as thermal 
insulation and it is possible to obtain a specified degree of insulation at lower 
cost. The research also indicated that the plaster must be a strong plaster 
and at least one-half inch thick if cracking of the plaster is to be avoided. 

Structural tests have shown the possibilities of using fiber insulating boards 
as sheathing. Here again one material serves two functions and the cost of 
obtaining a specified thermal insulation is reduced. 

In cooperation with various manufacturers of masonry materials, methods 
of constructing masonry walls of less material and of less costly materials, such 
as cinder block, concrete block, tile, etc., either singly or in combination, have 
been investigated. It has been determined that 8-inch walls may often be 
substituted for 12-inch walls and that the cavity type of construction offers 
opportunity for obtaining a given performance as to structural strength and 
resistance to rain penetration at lower cost. 

The results of studies of mortars in relation to building walls which prevent 
the penetration of rain have been incorporated in the specifications for new 
housing projects. The maintenance and repair costs of these structures mi be 
expected to be considerably reduced. 

The results of research have prevented the unnecessary expenditure of money 
on plasticizers and other admixtures in mortars; 

Accelerated aging tests on wall boards give the basis for a specification for 
obtaining a material of longer life at the same cost. 

In many localities there are legal requirements as to fire resistance. 
Research has shown how to secure a given fire resistance at lower cost. A 
method recently developed is the use of incombustible fillings. In a recent 
housing project, the required resistance was obtained by filling the partition 
around a stair enclosed with scrap brick, mortar, and plaster. In other cases 
partition walls filled with mineral wool and plastered with gypsum plaster 
could used instead of tile partitions. By the use of incombustible fillings, 
the fieiu of application of the less-expensive wooden construction can be 
extended. 

In cooperation with manufacturers, several types of fire-resistant floor con- 
struction, which are less expensive than reinforced concrete slabs, have been 
studied. 

Studies of paints by practical performance tests make possible the avoidance 
of unnecessarily expensive materials. The relative merits of various types of 
paints and pretreatments for sheet steel, both galvanized and ungalvauized, 
have been determined. The work on cement-water paints is expected to lead 
to formulae by which any contractor may mix satisfactory paint on the job 
from relatively inexpensive materials. Research has already shown that these 
paints properly applied are a reasonably satisfactory means of waterproofing 
leaky masonry walls. 

Formulae for satisfactory nonproprietary calking compounds have been 
developed. 

Tests of heating equipment enabled a satisfactory evalulation of costs of the 
equipment. In recent tests, one class of devices was found to be considerably 
overrated so that the bids including that type did not correspond to the same 
actual heating capacity as bids on other types. An oil-burning combination 
domestic hot-water supply and hot-water heating system was found satisfactory 
for small houses in a recent project. 

The use of 3-inch soil stacks in the plumbing systems of small houses rather 
than 4-inch stacks has been found entirely satisfactory. Simplified piping 
systems have been developed for small houses and apartment houses. The 
adequacy of various methods of protection against the back flow of polluted 
water into the water supply system has been studied. All contribute to cost 
reduction, but major cost reductions in this field are to be expected only with 
prefabricated equipment. 

The Bureau cooperates with industry to eliminate superfluous sizes and 
varieties of building materials, avoiding waste and reducing costs. Recent 
recommendations cover concrete building units, lumber, and roofing ternes. 

The Bureau assists Industry in the development and establishment of com- 
mercial standards of quality for building materials. Recent work has cov- 
ered stock doors, windows and frames, plywood, and hardwood paneling, trim, 
and molding. 

The Bureau takes an active part in building code revision and moderniza- 
tion. It lends Its influence toward the use of performance requirements and 



CONCENTRATION OP ECONOMIC POWER 3483 

toward setting the requirements only as high as the safety and health of the 
public require. Placing the requirements on a perfornmnce hasis makes pos- 
sible the use of lower cost methods of giving the performance as soon as they 
are developed. 

TEOHNIOAI. INFORMATION ON BUILDING MATEBIAL8 

There have also been issued by t»-- National Bureau of Standards 61 re- 
leases covering investigations of the ^ manency of building materinls. partic- 
ularly with reference to durability of masonry, plaster, stucco, wiillboard, 
floor coverings, roofing materials, thermal insulating materials, plumbing pipes 
and joints, and metals used in dwelling construction. These releases, known 
as technical information on building materials, which were prepared prin- 
cipally for the guidance of Federal agencies engaged in housing, are of direct 
interest also to the building industry and the public. They present, very 
briefly, essential facts developed through research work at the National Bureau 
of Standards and refer to longer publications where methods of investigation 
and results obtained are given in greater detail. 

, OOMMBXCIAL STANDABD3 

The National Bureau of Standards aids business, distributor, and consumer 
groups in the voluntary establishment of grades, quality, and other standards 
as a national basis for purchasing, testing, marketing, and certification of 
manufactured commodities, other than foods, drugs, and cosmetics. These 
are known as commercial standards and set limitations below which the 
quality or gi-ade of a commodity should not fall. These standards, of which 
there are now approximately 75, cover a wide range of commodities of interest 
to the consuming public. They include standards for wool and part wool 
blankets, Venetian blinds, wire cloth, colors for kitchen and bathroom acces- 
sories, disinfectant, Douglas fir plywood, testing and reporting of woven dresa 
fabrics, dry cleaning solvent, mohair pile fabrics, clinical thermometers, oak 
flooring, fuel oils, marking of gold-filled and rolled-gold plate articles, mark- 
ing of articles made of karat gold, household insecticide, mattresses for hos- 
pitals and institutions, mirrors, sizes of men's pajamas, wood shingles, and 
knit underwear. 

Many of these commercial standards can well be adapted for use as con- 
sumer standards. As a matter of fact, serious consideration is being given 
to a number of these standards for recommendation as American standards 
by the Advisory Committee on Ultimate Consumer Goods, functioning under 
the procedure of the American Standards Association. This committee Is 
composed of representatives of retail and consumer organizations and several 
agencies of the Federal Government. 

SIMPLIFIED PEACTICB 

The National Bureau of Standards serves also as a clearing house or 
centralizing agency through which manufacturer, distributor, and consumer 
groups cooperate in furthering a nation-wide program for the elimination of 
excessive and needless variety of sizes, types, and dimensions of manufactured 
products, which cause the processes of manufacturing and distribution to be 
more costly than necessary. From time to time these costs of avoidable waste 
are estimated by economists, and while there may exist a difference of opinion 
as to the magnitude of the costs, there is a consensus regarding the fact that 
there is always room for improvement 

It is important to note that simplification programs never originate with the 
Bureau, but, instead, are developed voluntarily by manufacturers, distributors, 
and consimaers of the specific commodity. In this connection it is notable that 
several of the most successful undertakings have been Initiated by dlstt'ibutors 
and consumers. The Bureau's function is purely cooperative, as a neutral 
coordinating body to assist in developing the best thought and practice in the 
production, sale, and use of manufactured articles. 

Simplified practice offers itself as one means of reducing the costs of produc- 
tion and distribution. Successful. application of simplified practice is dependent 
upon the degree of cooperation accorded by manufacturers, wholesalers, retail- 
ers, and consumers. The 173 simplified practice recommendations promulgated 
to date reflect admirably the excellent cooperation received from these groups. 



3484 CONCENTRATION OF ECONOMIC POWER 

Industry and Government are obvious beueflciaries of simplified practice. 
However, the ultimate consumer is also directly concerned in any program 
which results in saving money in the manufacture or distribution of the prod- 
ucts he buys at retail. His interest in simplified practice is therefore dir^ct, 
though too infrequently expressed or even realized. The benefits he gains from 
simplified practice accrue to him primarily through industrial competiiion. 
If a manuxacturer reduces the total cost of his product, he may be able to 
retain a portion of the savings, but sooner or later he will take advantage of 
reduced costs to seek more business, through reduction in price, improvement in 
quality, or better service. The distributor does likewise, and the consimier gets 
the final benefit in price, quality, service, or otherwise. 

STANDARDIZATION OF CAN SIZES 

For a number of years the National Bureau of Standards has cooperated 
with manufacturers and users of different types of containers in connection with 
the development and promulgation of standard sizes of containers and packages. 

A committee on the simplification ot containers of the National Canuera 
Association has been emphatic in its desire lo be placed on record as in favor of 
eliminating the large variety in sizes of cans in order to minimize possible 
coniusion among consumers in the purchase of canned goods. 

In 1984, a list of 27 standard sizes was adopted by the canning industry for 
general use which resulted in the estahlislnneiit of simplifi.d practice recom 
mendation R 155-34 — Cans for Fruits and Vegetables. 

After giving the recommended list ol 21 siaiidard sizes a trial for over two 
years, the members of the standing committee in charge of the recommendation 
decided that the original recommendation should be re\ ised. As a basis for 
levising the list, the committee used data furnished by two leading can com- 
panies, covering sales for 1933, 1934, and 1935. Ele\en of the sizes included in 
the original list of 27 recommended sizes were eliminated and ti\e new sizes 
were included in the revised list, which resulted in a reduction from 27 to 21 
standard sizes. The revised recommendation, as accepted Wy the indnstry, 
designated as Simplified Practice Recommendation U 155-^7, was inatle elteciive 
in 1937. 

To the end that the standardization of can sizes might be brouglii iiii in dale 
and abreast of existing best practice in the packing and in;nketii;g ol canned 
foods, and in order to eliminate consumer confusion in the imrcha.^ie of 
canned goods, the National Canners Association requested tlu- cooperation of 
the National Bureau of Standards in making a complete surxey of the sizes 
of cans used for each product and the quantity of each product packed in «'ach 
size of can during the year 1937. This survey has been completed and a repoit 
has been submitted to the National Canners Association. 

The industry's committee on simplilication of containers made a study of the 
report and has made an earnest effort to select a list of cans for each of tlie 
products that will eliminate confusion in buying and at the snnie time create a 
minimum of inconvenience to the industry. The list of recommended standard 
cans as selected by the committee was discussed and adopted unanimously at a 
meeting of the Board of Directors of the National Canners Association on 
May 18, 1939. 

CERTIFICATION PLAN 

From time to time the State and other public purchasing agents have sought 
the assistance of the United States Department of Commerce in the solution of 
their purchasing problems. As one means of aiding these tax-supported purchas- 
ing agencies in overcoming their difficulties in purchasing materials, equipment, 
and supplies, there was launched by the National Bureau of Standards, in 1925, 
the "certification plan." In accordance with this plan, there are compiled and 
distributed by the National Bureau of Standards to all interested tax-supported 
purchasing agents, lists of sources of supply of com.modities covered by selected 
Federal specifications and commercial standards. These lists contain the names 
of responsible officers of firms who have indicated their willingness to certify 
to purchasers, upon request at the time of phicing the contract, that the material 
supplied by them on contracts based on the selected specifications nnd stiiiidnrds 
dots actually comply with the requirements and tests thereof and is so guaranteed 
by them. 

As of May 15, 1939, there had been compiled by the Bureau 717 lists of willing- 
to-certify manufacturers relating to 663 Federal specifications and 54 commercial 



CONCENTItATlON OF ECONOMIC I'OWEU 34^5 

standards, and representing a total of about 25,000 requests for lisUiiK from 
about 14,000 separate firms. 

The reception given to the certification plan by many rosi)onsibh> manufac- 
turers and representative trade associations has iu-cn vcrv cncoiiniKing It Is 
being widely utilized by "pnl)lic purohasei-s," tliat is. punliiiscrs for the Kcderal. 
State, and municipal governments who are spending th»» money collfctcd from 
the public in the form of taxes. It is also being welcomed" by other large 
purchasers, whose recpiirements are of such magnitude as to justify tlio use of 
specifications. 

Many of the specifications to which the certification plans has been, or will be, 
applied cover commodities of much interest to consumers. 

QUALITY-GUAEANTEEING LABELING PLAN 

Since the use of specifications is not practicable for most consumers who buy 
goods sold in the over-the-counter trade, the National Bureau of Standards has 
done what it could to encourage the use of a procedure which would secure for 
the over-the-counter buyer the advantage of quality specifications similar to those 
which the Government utilizes. 

About 13 years ago, as a supplement to the "certification plan," the National 
Bureau of Standards introduced a self-identifying quality-guaranteeing labeling 
plan to aid in passing along to the non-contract or over-the-counter buyer some 
of the benefits derived by the large-quantity purchasers who make use of 
nationally recognized specifications under the certification plan. In accordance 
with this plan, a firm desiring to bring effectively to the attention of the non- 
contract or "over-the-counter" buyers, at the time of making a purchase, com- 
modities guaranteed to comply with the requirements of certain nationally 
recognized specifications, places on the individual commodities or their containers 
labels which definitely identify both the specification and the manufacturer or 
the trade association which holds itself responsible for the guarantee. 

Labeling plans, in one form or another, have been in operation for many 
years, and identifying labels (some carrying guarantees) are being advocated 
by about 100 national technical societies and trade associations, many of whom 
maintain inspectors for making their labels effective. 

The Bureau's investigations have revealed the fact that many firms manu- 
facturing goods on the mass-production basis are willing to make use of quality- 
guaranteeing labels provided they ca.i be assured of a sufficient demand for 
goods thus labeled. 

There is already an encouraging movement in this direction. Certain in- 
dividual manufacturers have stated that they are now using or planning to use 
quality-guaranteeing labels, or their equivalent, with goods manufactured to 
comply with Federal specifications for brooms, dental alloys, dry cells, fireproof 
safes, gypsum, ink (writing, colored and indelible), library paste, lime, linoleum, 
lumber, paint, paper (corre.spondence, carbon, blue print), pipe, Portland ce- 
ment, rope, soap, textiles, and wall board. 

It is believed that demands of consumers for quality labeling can be brought 
about a a very large extent through the extension of the Bureau's own labeling 
plan or similar ones to include whole lines of competing products. In this 
way, much of the confusion now existing concerning proper labeling of quality 
or grades can be eliminated. 

CONSUMER PEEFORMANCE STANDARDS 

Through its contacts with Federal and other Governmental agencies, the Na- 
tional Bureau of Standards has been able to render much worth-while service 
to contract buyers, and its facilities are being used to the extent of its avail- 
able funds and personnel to render a similar service to over-the-counter buyers. 
The Bureau is particularly well qualified to develop specifications for a wide 
variety of goods entering the over-the-counter trade, and to aid consumers in 
securing commodities identified as complying with the specification require- 
ments. 

Experience has shown that in preparing a largely increased number of per- 
formance specifications for such goods, the Bureau would receive the very 
helpful cooperation of interested Consumer and distributor groups, which would 
be chiefly instrumental in selecting the commodities to be covered by specifica- 
tions, and in educating consumers to purchase quality-guaranteed goods. How- 
ever, the Bureau would give adequate consideration to the limitations in the 
availability of raw materials and manufacturing facilities throughout the 
124491— 39— pt. 8 14 



3486 CONCENTRATION OF ECONOMIC POWER 

country. The specifications, themselves, would include such features as are 
essential to insure reasonable consumer satisfaction. They would differ some- 
what from Federal specifications in covering many instead of few grades, and 
would include a much wider variety of commodities. 

Because of the highly eflicient personnel and laboratory facilities for Con- 
ducting scientific investigations and testing commodities (except food and 
drugs), and because of its contacts with consumer groups, distributor organ- 
izations, manufacturing concerns, as well as cooperation with technical societies 
and trade associations, the National Bureau of Standards possesses the neces- 
sary machinery for the development of commodity standards or specifications 
for consumer use. 

The Bureau's knowledge and experience of products, both as to service 
requirements and performance characteristics, places it in a unique position 
to develop the necessary kind of information. Its services in the public interest 
should be utilized to the fullest extent and in no way duplicated. 



In Re Statement of Geoege E. Mumma, Seaes, Robbuok & Company, Chicago, 
Ilt.., Relative to Lehteb of Novembee 3, 1939, Fbom the National Bueeau 
OF Standabds 

On October 26, 1938, Mr. George E. Mumma, of Sears, Roebuck and Company, 
wrote to the National Bureau of Standards regarding the capacity rating of 
warm-air furnaces. Mr. Mumma concluded his letter as follows : 

"I feel that if there is a recognized and approved method of rating as estab- 
lished by the Bureau of Standards, we will have the means to force our com- 
petition to conform to an accepted standard in making claims for its rating 
of warm air units." 

To this letter the National Bureau of Standards replied on November 3, 
1938, as follows : 

"In reply to your letter of October 26, we regret to say that this Bureau is 
probably not in a position to assist you in your present problem. The Bureau 
has not yet had occasion to establish a rating method for such furnaces, and, 
although much attention would be given to the work of the University of 
Illinois and to that of other authorities were the Bureau to become involved 
in the problem, we would not feel justified in underwriting any test method 
for general use without corroborative experimental work of our own." 

The Bureau now has under way studies of methods of testing and rating 
heating appliances and has done considerable work on radiators, convectors, 
and heating boilers. An experimental structure has been designed for practical 
tests of heating plants intended for small houses and work in this structure will 
be under way during the coming year. This work is being conducted under 
a three-year program which, under present legislation, will terminate in June, 
1940. The problem of rating warm air furnaces has been given some considera- 
tion and can be undertaken if the program is continued. 

It is believed that under present conditions the matter can be handled more 
expeditiously under the commercial standards service being offered by the 
National Bureau of Standards. If the industry is prepared and desires to have 
the Bureau determine the acceptability of its standards to distributors and con- 
sumers, under the commercial standards procedure, the standard proposed by 
the industry will be submitted to other interested groups and individuals to 
determine acceptability. 

In ee Me. D. E. Montgomeey's Remarks on Commeecial Standaed fob 

Wallpaper 

During the course of the testimony of Mr. R. A. Martino, there was called to 
his attention by Mr. D. B. Montgomery, the commercial standard for wallpaper. 
Mr. Montgomery referred to washability and color fastness requirements which 
he Inferred had not been included In the commercial standard. 

An examination of the record concerning the establishment of the commercial 
standard shqws the following facts: 

Pursuant to a request from the Wallpaper Manufacturers Association of the 
U. S. A., a general conference of manufacturers, distributors, users of wall- 
paper and others generally Interested was held on May 25, 1929, at the Com- 
merce Building, Washington, D. C, to consider the establishment of a minimum 



CONCENTRATION OF ECONOMIC POWER 3407 

commercial standard of quality for wallpaper on the baslg of a pn-liminary 
draft prepared by the Wallpaper Manufacturers AsBociatiou 

On June 12, 1929, a report of the general conference on the commercial 
standardization of wallpaper held on May 25 was distributed to maiiufacturerH 
distributors, and users of wallpaper. 

Jn July 29, 1929, a memorandum was sent to manufacturers, distributor.s and 
users of wallpaper announcing that the National Bureau of Standards' Imd 
received signed acceptances from a sufficient numbei- of manufacturers, distrib- 
utors, and users to insure the general adoption of the standard by the industry 
as a whole. 

The standard became effective for new production on August 1, 1929. 

So far as the record reveals, there was not discussed at the general confer- 
ence the requirements for "washability" by any of the representatives of the 
interested groups present. Consequently, no reference was made to It In the 
commercial standard. 

With reference to Mr. Montgomery's statement relative to lack of "color 
fastness" requirements, there is quoted herein the following paragraph referred 
to in the official document Commercial Standards CS 16-29 for Wall Piipcr : 

"Color Fastness. — All printed papers, grounds, backgrounds, or ink embrtssed ; 
in other words, all finished printed wall paper shall be resistant to light to the 
extent that they will show no discoloration or fading when exposed with printed 
side toward the rays of a carbon arc lamp, such as the Fade-Ometer or its 
equivalent, for a period of 24 hours. During this test the temperature of the 
atmosphere adjacent to the paper shall not be allowed to exceed 40° O 
(104° F.)." 

Since the establishment of the Commercial Standard for Wall Paper, the 
subject of "washability" requirements was discussed on several occasions and the 
matter was referred by the National Bureau of Standards to the standing com- 
mittee in charge of the standard for consideration. 

It is the understanding of the National Bureau of Standards that the industry 
is giving serious consideration looking towards the establishment of a new 
standard for wallpaper which* will include requirements for washability and 
other essential elements as a protection to the ultimate user of wallpaper. 

The following letter and memorandum were entered in the record 
during hearings held June 7, 1939, and are printed at this point in 
connection witn testimony, supra, p. 3366. 

Exhibit No. 660 

United States Department of Agricui-tube, 

Aqeicxji-tukal Adjustment Adminibtbation, 

Washington, D. C, May 29, 1939. 
Hon. Joseph C. O'Mahonet, 

Chairman, Temporary National Economic Committee, 

V. 8. Senate. 
Deab Senator O'Mahonet: I am forwarding herewith memorandum on the 
Standard Container Acts of 1916 and 1928 and the Standard Barrel Act as 
requested by you at hearings before the Committee on May 11. The memo- 
randum outlines the provisions of these acts and discusses briefly, as you re- 
quested, conditions which brought about their enactment and the changes in 
container practice which they have effected. The latter I have obtained from 
persons in the Department and the National Bureau of Standards familiar with 
the history and enforcement of these acts. 

I am also enclosing copies of pending bills referred to In the memorandum, 
and copies of two Consumers' Guide articles on the subject of container sizes.' 



* Referred to above are the following exhibits which are on file with the committee : 
1. Bills H. R. 4402 and 5530, 76th Cong., Ist sess., fixing standard types of con- 
tainers for fruits and vegetables. 
2 Fanners' Bulletin #1821. U. S. Department of Agriculture, April 1039, dealing 
with containers for fruits and vegetables. 

3. Consumers' Guide, Aprii 25, 1938, vol. V, No. 2, re container -slze.s. 

4. Six pliotograplis from Bureau of Agricultural Economics of sizes and types of 

small fruit and vegetable baskets, in use before passage of Standard Container 
Act in 1916. 
6 Excerpt from Consumers' Guide for May 15, 1939, re standardizing at.tndaros. 



3488 CONCENTRATION OF ECONOMIC POWER 

Existing standard containeB acts appear to have removed many confusing and 
deceptive types of container^ from the usual channels of trade. They do not 
apply, however, to cans, glass containers, paper or wooden boxes and containers, 
sacks and bags, crates, cellophane packages of various types, and, when used in 
intrastate transactions. Climax baskets, till baskets, and berry boxes. Most of 
the foods and farm products which consumers buy, other than bulk purchases, 
come to them in containers of these unstandardized types. The resulting variety 
and contusion were exhibited to your Committee by the witnesses appearing on 
May 10 and 11. 

Respectfully yours, 

D. B. MoNTGOMEEY, Consumers' Counsel. 

Enclosures. 

United States Depabtment of AoBicrrLTCBE, 

Aqbicultubal Adjustment Administkation, 

Waahington, D. C, May 29, 19S9. 

To the Temporary National Economic Committee: 
Standaed Containeb Acts op 1916 and 1928 and the Standabd Baeeel Act 

Memorandum submitted by D. E. Montgomery, Consumers' Counsel, A. A. A., 
in response to the request of the Chairman at the hearings on May 11, 1939. 

I. THE standard CONTAINEB ACTS 

Provisions of the Acts. — ^There are two acts establishing standard sizes for 
containers. The first is the Standard Container Act of 1916, which is an 
interstate commerce law and affects all transactions in interstate commerce. 
The second, the Standard Container Act of 192S, is a weights and measures 
law and affects all intrastate as well as interstate transactions. This latter 
act thus supersedes any State laws or ordinances which are in conflict with it. 

The Act of 1916 (39 Stat., p. 673), which was approved on August 31, 1916. 
and became effective on November 1, 1917, establishes standard sizes (capacity) 
and dimensions of Climax (grape) baskets and standard sizes (capacity) of 
berry-boxes and till (small fruit and vegetable) baskets. The attached photo- 
graphs show these standard sizes. The Act forbids the manufacture for sliip- 
ment, the sale for shipment, or the shipment in interstate commerce of any 
Climax, berry, or till baskets except those which meet the standards established. 

The Act of 1928 (45 Stat., p. 685) , which was approved on May 21, 192S, and 
went into effect on November 1, 1929, establishes standard sizes (capacity) 
for hampers, round stave baskets (including "straight-side" or "tub" baskets), 
and splint or market baskets. These standard baskets are shown in the photo- 
graphs attached. The act does not specify the dimensions for each of these 
{standard size (capacity) baskets but instead requires all manufacturers of 
hampers, round stave baskets, and splint or market baskets to have their 
basket specifications approved by the enforcing agency, the Bureau of Agri- 
cultural Economics. The act forbids the manufacture, sale, and shipment of 
nonstandard size and nonapproved hampers, round stave and splint baskets, 
and authorizes seizure by the Secretary of Agriculture of any baskets of 
nonstandard size. It makes inoperative all State weight-per-bushel laws 
insofar as fruits and vegetables packed in baskets standardized by the law 
are concerned. 

The Act of 1916 differs from the Act of 1928 in two important respects. 
First, it applies to interstate transactions only, whereas, the Act of 1928 covers 
all transactions. As a result, standard sizes are not established for berry 
boxes and til' and Climax baskets which are used in intrastate transactions. 
Second, the Act of 1916 does not require manufacturers to have their standard- 
size containers approved by the Bureau of Agricultural Economics as does the 
Act of 1928. This is a question of some importance in the case of berry boxes 
and till baskets, because the Act of 1916 merely indicates the standard capacity 
but not the dimensions. As a result, there are many different shaped berry 
boxes and till ba.^ket.s of the same capacity. This omi.ssion is not important 
in ihe case of Climax baskets, because the act specifies both the standard sizes 
and the dimensions. 

Containers Not Covered By the Acts. — While the two acts require standard 
sizes for many of the important containers now in use. there is no Federal law 
standardizing sizes of other types of containers for foods and farm products. 



CONCENTRATION OF ECONOMIC POWER 3439 

These nnstandardized containers, roost of which are containers In which com- 
modities are sold to consumers, are : 

1. Cans. 

2. Glass containers. 

3. Paper and wooden boxes and cartons. 

4. Sacks and bags. 

5. Crates. 

6. Cellophane-wrapped containers of various tyjM'S 

7. Climax and till baskets, and berry boxes, used In Intrastate transactiong. 
Two bills designed to extend the principle of standardization to some of theae 

types of containers and to consolidate existing container legislation have been 
Introduced In the present Congress. These are H. R. 4402 and H. R. rSfiSO, both 
by Congressman Somers.* Standard sizes for metal cbntaincrs for canned fruits 
and vegetables and canned milk are established by H. R. 4402. H. U. nnSO 
repeals the Standard Container Acts of 1916 and 1928 and the Standard Rarrel 
Act. It reenacts the standards established by those laws, extends the principle 
of standardization to all other types of fruit and vegetable containers such as 
drums, cartons, crates, boxes, and sacks, and provides that all such containers 
shall be made in accordance with specifications promulgated or approved by the 
Secretary of Agriculture. The bill also provides that containers for fruits and 
vegetables packed and sold by net weight or numerical count may be of dimen- 
sions and capacities other than the standards established provided they are not 
deceptive in appearance. The bill covers only fruit and vegetable containers, 
and not containers In which dry Items, such as tea and soap, are packed. 

Reasons for, and Sponsors of, the Acts. — The conditions which gave rise to 
the Standard Container Acts may be best illustrated by the attached photo- 
graphs which show (1) the number of sizes and t3T)es of these kinds of con- 
tainers In use prior to the establishment of standards, and (2J the limited 
number of standard sizes of these types now in use. The Standard Container 
Acts were sponsored by the manufacturers of packages and baskets, commis- 
sion merchants, and farmers. In each case there was a desire to reduce the 
large number of containers which made trade In fruits and vegetables a com- 
plicated process. 

The Act of 1916 was a combination of three bills having as their purpose 
the standardizing of berry boxes and of one other bill designed to fix standards 
for Climax baskets. The bill proposing standards for Climax baskets was 
Initiated in the Interest of basket manufacturers. There appears to have been 
no opposition to the measure at the hearings held on the bill. During the course 
of the hearings the following organizations appeared In support of the bill : 

1. Michigan As.socIatlon of Grape Shippers. 

2. Fruit Growers' Union (Michigan). 

3. National Basket & Package Association. 

4. National League of Commission Merchants. 

5. Congressman Hamilton representing the grape^growlng section of Chau- 
tauqua. New York. 

Soon after the enactment of the 1916 law, a movement was started to extend 
the same principle to the larger sizes of containers (hampers, round stave 
baskets, and splint baskets), the impetus apparently being furnished by the 
manufacturers, the National League of Commission Merchants, and the Ameri- 
can Farm Bureau Federation. However, before its enactment in 1928, the 
mea.<!ure seems to have had practically unanimous support, as indicated by the 
following list of organizations taken from the hearings on H. R. 5677 ((>!>tli 
Congress) : 

1. American Farm Bureau Federation. 

2. International Apple Shippers" Association. 

3. American Fruit & Vegetable Shlpi)ors' Association. 

4. National Association of Basket and Fruit Package Manufacturers. 

5. Western Fruit Jobbers of America. 

6. National Fruit Committee. 

7. National League of Commission Merchants. 

8. American Hotel Association. 

9. National Association of State Marketing Officials. 

10. Conference for Simplification of Food Containers, held January 17. 1923, 
under auspices of Department of Commerce. 

1 Copies of both bills are on file with the committee. 



3490 CONCENTRATION OF ECONOMIC POWER 

11. Standard Container Manufacturers, Jacksonville, Florida. 

12. Mississippi, Louisiana, and Alabama Hamper Manufacturers' Club. 

13. Atlantic County, N. J., Board of Agriculture. 

14. Burlington County, Board of Agriculture (New Jersey). 

15. Maryland Farm Bureau Federation. 

16. Maryland Chamber of Commerce. 

17. New Jersey State Horticultural Society, 

Method and Costs of Enforcement. — ^The enforcement of the Standard Con- 
tainer Acts always has been in the Department of Agriculture. The method 
of enforcement has been to cooperate with manufacturers, servicing their opera- 
tions in such a way as to insure, so far as possible, the production of standard 
containers. For many years this was done through the voluntary submission 
of samples by manufacturers to the Bureau of Agricultural Economics in 
Washington. At the present time, however, enforcement is accomplished by 
tests made at the factory by the Bureau's representatives. The latter method 
is considered more effective because it insures that (1) samples tested are 
from stocks on hand waiting sale and not specially made samples, and (2) 
the products of every manufacturer will be tested periodically. These tests 
in the field also expedite the making of adjustments when found necessary. 

It Is not possible to estimate the cost of enforcing the Standard Container 
Acts up to and including the present fiscal year because the appropriations 
for enforcing these acts have been combined with the appropriation for the 
enforcement of the Produce Agency Act. The costs for these two activities 
have never been completely segregated or separated. For the year ending 
104O. however, the budget estimate for Standard Container work is $22,000. 

Results. — The results of these standardization laws, in terms of current prac- 
tice as compared with thfe practice before their enactment, is illustrated 
best by attached photographs which show marked reduction in the number of 
sizes of containers in common use. Because of these acts the number of sizes 
of berry boxes in common use has been reduced from 44 to 3; till or small 
fruit and vegetable baskets from 40 to 5; Climax or grape baskets from 31 
to 4; splint or market baskets from more than 25 to 6; round-stave baskets 
from more than 20 to 9 ; and hampers from more than 75 to 9. 

There has been no attempt to have these laws repealed despite the fact 
that the products of the basket-manufacturing industries are limited to cer- 
tain standard sizes by these acts, whereas packages such as crates, boxes, 
and sacks are not subject to any size restrictions whatsoever. During recent 
years these competitive and unregulated containers have made serious inroads 
on the production and use of regulated baskets. As a result basket manu- 
facturers feel that the existing laws are discriminatory in nature and place 
them in an unfair and disadvantageous competitive position. To correct the 
situation, however, they do not want to repeal the existing law but prefer 
to have the standardization principle extended to competing types of contain- 
ers. This view is also shared by a large proportion of the fruit and vegetable 
growers and distribiitors and by some of the manufacturers of competing 
unregulated containers. 

n. THE STANDARD BARREL ACTF 

Provisions of the Act. — The Standard Barrel Act (38 Stat. 1186) was approved 
on March 4, 1915, and became effective on July 1, 1916. This act establishes 
and fixes the dimensions of a standard barrel for fruits and vegetables and 
other dry commodities, and of a standard barrel for cranberries. It forbids the 
sale, offering, or exposing for sale of any barrels containing fruits, vegetables, 
or any other dry commodities when such barrels are not of the standard size 
or permitted subdivisions thereof. Since it Is a weights and measures law, it 
applies to all intrastate and interstate transactions and supersedes any State 
laws or city ordinances in conflict with it Regulations which have been 
promulgated under this act prescribe the capacities and the dimensions of 
subdivisions of the two standard barrels and the tolerances permitted for all 
sizes. 

Reasons for and Sponsors of the Act. — Three conditions primarily were 
responsible for the Standard Barrel Act. First, the multiplicity of State 
standards for barrel sizes made it difficult for farmers to ship their products in 
interstate commerce. Second, the lack of a standard-size barrel for all products 
made it difficult for commission merchants to contract for shipments without 
seeing the container. And third, the lack of standard-size barrels gave rise 
to special size barrels used with the object of deceiving purchasers. 



CONCENTRATION OF ECONOMIC POWER 349 1 

The Standard Barrel Act was sponsored by growers and commcrclnl merchanta. 
According to the testimony of Mr. A. W. French in the hearings held at the 
time that the bill was before the House of Representatives, the National League 
of Commission Merchants in the United States was largely responHible for the 
introduction of the bill. Other organizations which appeared in support of the 
bill at the hearings were the Western New York Fruit Growers Association, 
the Eastern Shore (Virginia) Produce Exchange, the International Apple 
Shippers Association, the Cape Cod (Massachusetts) Cranberry Growers As- 
sociation, the Western Fruit Jobbers Association of America, and tlie American 
Cranberry Exchange. State weights and measures oflBcials from a number of 
States including Tennessee, Iowa, New Jersey, Vermont, and New York also 
appeared in favor of the bill. 

Method and Costs of Enforcement. — The Standard Barrel Act does not desig- 
nate any specific enforcing agency and no funds for its enforcement have ever 
been appropriated. The act merely provides that tolerances shall be established 
by rules and regulations made by the Director of the Bureau of Standards. 
As a result of this provision the Bureau of Standards has set up rules aod 
regulations and has administered the enforcement of the act. 

Results. — The result of this legislation has been the adoption of one standard 
barrel for fruits and vegetables and other dry commodities and another standard 
barrel for cranberries in place of the multiple State standilrds for barrels which 
prevailed prior to 1916. While the law does not si;)eciflc^lly give the Bureau 
of Standards authority to enforce its provisions, the Bureau reports that there 
has been little difficulty in the elimination of barrels which do not conform to the 
standard. Most of the violations of the law occuring^at the present are in 
minor deviations resulting from technical difficulties in manufacture rather than 
from deliberate attempts to viplate the law. 

Respectfully submitted. 

D. B. MONTGOMEKT, 

Consumers' Counsel. 
Enclosures. 



INDEX 



Pare 

"Accepted Dental Remedies," American Dental Association 3397 

Advertising : 

Consumer attitude 3454 

Consumers Union, refusal by other publications 333&-;-i3l0 

Dentifrices 3397-3412 

Guarantee by Good Housekeeping Magazine 3:J80-3381 

As source of information 321)5-3303 

Testimony, summary by D. E. Montgomery 3453-3454 

Alloys used in cast iron furnaces 3123-3425 

American Association of University Women, testimony of Mrs. Paul S. 

Roller, Chairman, Consumers' Section, College Park, Maryland 3309-3328 

American Dental Association, Council on Dental Therapeutics, accepted 

tooth paste 3397-3398 

American Home Economics Association 3378 

American Medical Association, Bureau of Investigation, report on Vick 

Cold Control Plan 3383-3384 

American Society for Testing Materials 3428, 3378, 3433 

American Standards Association 3340-3433 

Applesauce 3320-3327 

Approval services, standards of recommended practice proposed by Asso- 
ciation of Consulting Chemists and Chemical Engineers 3378-3381 

Aspirin 3446 

Association of Boiler Manuracturers : 3420 

Association of Consulting Chemists and Chemical Engineers, standards of 
recommended practice proposed for approval and certification sys- 
tems 3378-3379 

Athuitic & Pacific Tea Company, connection with National Consumers' Tai 

Commission 3392 

Automotive Test Laboratories of America 3379 

Automobile tires 3339 

Ayres, Dr. Ruth, testimony 3345-3375 

Barrel Act, Standard 3490-3491 

Blankets 3323-3325 

Boilers 3418-3430 

Boiler Manufactui'crs, Association of 3420 

Boiler and Radiator Institute, test code for residential boilers 3430 

Brands : 

Milwaukee survey 3312 

As guide to quality of canned goods 3312-3319 

As guide to size and price 3345-3355 

Braun and Co 3388-3389 

Bread, standard size of loaves 3325-3326 

Bristol-Myers Co 3380 

Building materials 3438-3439, 3481-3483 

Bulk goods vs. packaged goods 3352-3354 

Bureau of Home Economics, tests of towels 3320-3323 

Bureau of Investigation, American Medical Association, report on Vick 

Cold Control Plan 3383-3384 

Bureau of Standards (see Narional Bureau of Standards). 

Business, government interference with 3418,3431 

Business Week monograph on consumer movement 3284 

B.yoir, Carl, and Associates — 3392 

Campbell, Persia, -testimony. -^ -- 3376-3390 

standardization — 3325-3328, 3484 

Tomato juice 3346-3349 

I 



IT INDEX 

Pago 

Canned goods 3313-3319, 3352, 3443-8444 

Carl Byoir and Associates- 3392 

Carrying charges on installment contracts 3355-3361 

Central consumer agency in Federal Government 3473-3475 

Certification : 

And approval systems 337^3381 

Plan of N:itional Bureau of Standards 3484-3485 

Coffee 3300-3301 

Cold Control Plan of Vick Chemical Co 3381-3384 

Commercial standards 343^3440, 3449, 3483, 3486-3487 

Commodities: 

Applesauce 3326-3327 

Aspirin 3446 

Automobile tires i 3339 

Batteries, flashlight 3448 

Blankets . 3323-3325 

Boilers 3418-3423, 3430 

Bread _ _ __ 3325—3326 

BuUding materiaFs 3438^~34~3~9~ 3481-3483 

Canned goods-^ 3313-3319, 3443-3444, 3352 

Cleaners, vacuum 3295-3298, 3331-3332 

Cleaning compounds 3446-3447 

4 Coffee 3300-3301, 3449-3450 

Cookies 3303-3304,3320 

Cosmetics 3333-3337 

Creosol compounds : 3444 

Dentrifrices 3397-3412 

Dishwashing compound 3446-3448 

Dresses 8290-3293 

Electric refrigerators 3301-3303 

Flashlight batteries 3448 

Flour 8444 

Furnaces 3415-3418, 3421-3426, 3429-3431, 3486 

Furniture 3310 

German silver j. 3310 

Grape juice 3381 

Hats, Panama 3310 

Heating and plumbing equipment : 3414 

Insecticides 3348-3349 

Ivory ^ i 3310 

Juices : 

Grape 3381 

Tomato :. 3346-3349 

Linen 3311 

Linoleum-^ 3299-3300 

Lipsticks 3333-3337 

Lubricating oil ^ 3445 

Mahogany, Philippine— ' 3310 

Materials, building , ^ 3438-3439, 3481-3483 

Meats ^ 8306-3307, 3449 

Milk [_ 3330-3331 

Mineral oil II 3449 

OU: 

Lubricating 3445 

Mineral 3449 

Panama hats. 3310 

Peaches, canned 3313 

Philippine Mahogany 3310 

Plumbing and heating equipment 3414 

Rayon 3312 

Refrigerators, electric 3301-3303 

Sheets 3294-3295 

Shirts 3295-3296,3450-3451 

Shoes 3337-3339 

Silver 33IO 

Soap 3332-3333 



INDEX I" 

Commodities— Continued. <j349^'«ril X^i 

Tires automobile ^ ::::142(kW27 

Toilets .Ty(V-Tl-19 

Snaste''' v:::::::::::::::::::::'i.m i^^Hi.. ;h32 

roottipaste - :W2(>-3:iUB 



Towels 



3340 



Trisodium phosphate ^owC^9ofi"^'«l-^^32 

Vacuum cleaners 329&-3298. 3.«1 A^^ 

Vegetables, dried ii.m 3480-3487 

Wall paper r "^ • 

Consumer : 3427 

Buying methods «fi^'^73-3475 

Central agency in Federal Government "3286 

Competition, interest in 3355-3300 

Credit waa 

Difficulty of spending wisely -—- Tir'TlZTJ 

"Educational" material supplied to schools by ^^^'^^^'^^^^^^Jl^ggl.gS^ 

cies ' 3403-3405 

Fair trade, lining up support- '_'_'_"" 3310-3312 

Goods, mislabeling — - " cook 

Leaders confer with President Roosevelt — "'"3283-3287 

Movement . g28Q 

Need for information ;"" 

^"■^^.P^ept'^groups, statement by Robert Lynd_ ISt^^Ofl 

Sponsored by commercial agencies— q4^ 

Summary of testimony by D. E. Montgomery qo7« S 

Testimony of Persia Campbell ^ 

Public interest and consumer Interest contrasted ^fia_^4T3 

Relations program, Institute of Distribution ""I."... 3474 

ConsSrtEfucaSo'n'Found'a^TonTsVeFo^^^^^ 

tion) 3385-3388 

Consumer Foundation, Inc 33^g 

Consumers Bureau of Standards 

Consumers' Counsel D. E. Montgomery • ^ ^ . q2S3-3''87 

Introductory statement on purpose of bearings- ^^450 

Summary of testimony -„gr 3457-3458 

Consumers' National Federation -_^ ' _ 3335 

Consumers' Tax Commission, National '_""_'_'_ 33'>9-3343 

Consumers Union ------- --y------ ::::j33G5^3ee. 3487-3490 

Container Acts of 1916 and WSb, btanaaru -— - 3304,3340-3353 

Containers^ J' !"— -— ZI 3303^304, 3326 

Cookies _-.—————————————"■ — "" — ———————— — — — — -— — - — ~ 

Cooperative movement, consumers': ^ ^ _ 3287 

Later investigation ITII'I— I-I'I I" - 3^85 

Membership 1""!''!— 11 — ' '—'- 3333-3337 

cS'oU7nTarTL;7aFeuUc7of 

Credit, consumer 3;}(j5 

SSweirP«S^Cc.::".Sfeme-ot rnl^simer m-iVem;n-t::::::-3285, 845^4^0 

Deceptive containers ^—-- "_ " 3397-3412' 

Dentifrices "" 3305 

Department of the Consumer g^^Q 

Department store testing laboratory, proposed 3318^3310 3328 

?DL"S'Sltr\tS>-^^^^^^^^^ 

Discriminatory tax legislation : - --- 3440-3448 

Dish-washing compound -— - I. Hill" 3200-32^ 

Dresses — 



IV INDEX 

Page 
Druggists, Retail, National Association of, lobbying for Miller-Tydings 

Act 33G7-3375, 34G0-3467 

Drug trade press, comments on fair trade law 3367-3374, 3460-3467 

Dunn, Charles Wesley, Associated Grocery Manufacturers, consumer agency 

suggested 3395 

Electric refrigerators 3301-3303 

Electrical Testing Laboratories, vacuum cleaner tests 3331-3332 

Ephraim, Jerome W., testimony ,._, 3396-3412 

Fair trade laws: 

Lining up business support 3465-3467 

Lining up consumer support __ 3463-3465 

Pressure on Congress and President 3460-3463 

Pressure on manufacturers to secure application of 3372-3374, 3465-3467 

Federal government, central consumer agency 3473-3473 

Federal specifications (See "Specifications") 

Federal Specifications Executive Committee :. 3433 

Federal Trade Commission: 

Canned goods, information from chain store investigaton. 3315-3318 

Cases aganst : 

Automotive Test Laboratories of America 3379 

Bristol-Myers Company : 3380 

.Consumers Bureau of Standards 3379 

5)ana Tooth Paste 3380 

Ross Roy SeWice, Inc ^ 3379 

Welch's Grape Juice Co 3381 

Consumers may file complaint with ^ 3327 

Good Housekeeping Magazine, actions against products guaranteed 

as advertised , 3;}80-3381 

Fiber identification 3291-3293, 3310-3312 

Finishes on textiles 3311 

Flashlight batteries 3448 

Forum on common cold. Women's National Institute 3383 

Foster, Dr. William Trufant, incorporates Consumers' Foundation 3386-3388 

Foundation for Consumer Education 3388-3390 

Furnaces 3415-3418, 3421-^426, 3429-3431, 3486 

Furniture 3310 

General Federation of Women's Clubs : 

Inquiry about National Consumers' Tax Commission 3394 

Testimony of Mrs. Paul S. Roller, Chairman, Consumers' Section of 

Prince Georges County, College Park, Maryland 3309-3328 

German silver 3310 

Goods, packaged vs bulk 3352-3354 

Good Housekeeping Magazine 3380-3381 

Government : 

Interference with business 3418,3431 

Purchasing procedure 3401, 3435 

Standards proposed, furnaces 3417, 3430-3431 

Tests, publicity on . 3435 

Grades : 

Canned goods 3313-3319 

Meat 3306-3307,3449 

Milk, differences between grades A and B 3330-3331 

Tomato juice 3346 

Tooth paste 3404, 3410 

Grape juice 3381 

Great Atlantic & Pacific Tea Company, connection with National Con- 
sumers' Tax Commission 3392 

Guarantee of advertising. Good Housekeeping Magazine 3380-3381 

Hamilton Covmty, Ohio, testimony of Milton R. Maddux, .purchasing 

agent 3440u-3452 

Hats , 3310 

Heating equipment 3414-3432 

High Cost of Living, United Conference on 3303-3307 

Home Economics Association, American 3378 

Home Makers' Educational Service, Vick Cold Control Plan, Ma- 
terial on 3381-3384 



INDEX V 

Home-Owned News, Foundation for Ck)n8umer Education articles 3388-3390 

Illinois, University of, method of rating furnace capacity 3417 

Insecticides S448_'U49 

Installment buying a355-3:iO<5 

Institute of Distribution, consumer relations program 8385-3388, 34<)H- 3473 

Interest rates 3355-4i3tJ(; 

Ipana tooth paste, Federal Trade Commission case 3380 

Ivory 3310 

Kelvinator Corporation, agreement with Ross Roy Service, Inc 3379 

"Kept" consumer organizations, statement by Robert Lynd 3304>-3395, 3390 

Labeling : 

Deceptive 3310-3312 

Descriptive 331^-331 9, 3328 

Dresses 3290-5291 

Quality-guaranteeing label plan of National Bureau of Standards— 34:w, 348r) 

Lavatories _ 342<i-3427 

League of Women Buyers and Taxpayers 3471-3472 

Linen ^ 3311 

Linoleum 3299t-3300 

Lipsticks , 333;i-3337 

Lobbying for Miller-Tydings Act, National Association of Retail Drug- 
gists 3367-3375, 3460-,3467 

Lubricating oil 3445 

Lynd, Robert, "kept" consumer organization, statement on 3394^-3395 

McKesson and Robbins, attitude on Mlller-Tydings Act and Patman Act- 3375 
Maddux, R. Milton, Purchasing Agent, Hamilton County, Ohio, testi- 
mony 3440-13452 

Mahogany, Philippine ^ 3310 

Maine Legislative Document No. 683, cosmetic costs 3333-3334 

Marketing difficulties, tooth paste 3396-3412 

Martino, Robert, National Bureau of Standards 3432-^3440 

Massachusetts Committee on Consumer Credit 3355-3363 

Masters, Dexter, testimony : 3329-3343 

Meats, Government grades 3306-3307, 3449 

Milk, differences between grades A and B 3330-3331 

Miller-Tydings Act 3367-3375, 3460-3467 

Milwaivkee Journal, survey of brand preference-— 3312 

Mislabeling of consumer goods 3310-3312 

Montgomery, D. E. : 

Introductory statement on purpose of hearings 3283-3287 

Summary of testimony ., 3452-3456 

Mumma, George E., Sears Roebuck and Company, testimony 3425, 3486 

National Association of Purchasing Agents ^ ^ 3378 

National Association of Retail Druggists, lobbying for Miller-Tydings 

Act — 3367-3375, 3460-3467 

National Bureau of Standards: 

Approval Services, endorses proposal for standards of recommended 

practice— I- : -, 3378 

Building materials research ^. 3481-3483 

Can sizes. Simplified Practice Recommendation^ __: . 3484 

Certification plan 3484-34'^5 

Commercial standards 3434-3440, 3449, 3483, 3486-3487 

Consumer performance standards 3485-34S6 

Director, statement by— _! - 3475-3487 

Federal specifications _ _ 3478 

Functions , 3476 

Governmental agencies, testing and Inspection for . 3477-3478 

Labeling plan, quality guaranteeing 3438, 3485 

Martino, Robert, Chief Consumer Contacts and Labeling, testi- 
mony - 3432-3440 

Research associate plan ,_^ 3476-3477 

Simplified practice actitvities 3483-3484 

Specifications, Federal _ _— 3478 

Standards, consumer performance 3485-3486 

Supplementary /Statement by the Director 3475-3487 

Testing and insi)ectIon for governmental agencies 3477-3478 



VI INDEX 

National Bureau of Standards— Continued. Pag« 

Testing in relation to over-the-counter buying 3478 

Textiles 3479-3481 

Weights and measures 3479 

National Canners' Association,- attitude on can sizes • 3327-3328 

National Consumers' Tax Commission 3391-3394 

North Carolina clinics on colds '- 3383-3384 

Organizations, consumer 3376-3396 

Packaged goods vs bulk goods 3352-3354 

Packaging : 

Cookies - — 3303-3304 

Deceptive. — 3349-3350 

Increased use of containers 3353-3354 

Panama hats ■ 3310 

Parent Teacher Association of California, effort to secure support for 

program of Foundation for Consumer Education 3389-3390 

Peaches, canned • 3313 

Philippine mahogany 3310 

Plumbing and heating equipment, cost 3414 

Pollak Foundation for Economic Research, Director, William T. Foster 

incorporates Consumers' Foundation 3386-3388 

Ifresident Roosevelt: 

Consumer leaders conference with 3285 

Consumers' National Federation petition to 3457-3458 

Pressure for resale price maintenance legislation 3460-3463 

Prices : 

And brands, and sizes, confusion of 3345-3355 

Effect of Miller-Tydings Act 3371 

Price maintenance legisMtion , 3367-3375, 3460-3467 

Price not a standard for quality 3329-3343 

Publicity on government tests 3435 

"Public Relations— with the Consumer Speaking" ^ 3385-3388 

Purchasing Agents, National Association of 3378 

Quality-guaranteeing label plan. National Bureau of Standards 3485 

Rates. (See "Interest rates.") 

Rayon 3312 

Recommendations of witnesses 3454 

Repossessions on installment sales ._ 3363 

Representation of the consumer interest 3474 

Resale price maintenance laws 3367-3375, 3460-3467 

Retail Druggists, National Association of, lobbying for Miller-Tydings 

Act 3367-3375, 3460-3467 

Roller, Mrs. Paul S., testimony— 3309-3328 

Roosevelt, President: 

Consumer leaders conference with 3285 

Consumers' National Federation petition to . 3457-3458 

Pressure for resale price maintenance legislation 3460-3463 

Ross Roy Service, Inc 3379 

Sales Tax 3306 

Sammons, Wheeler, report on consumer relations prepared for Institute 

of Distribution 3385-3388 

Schools, consumer "educational" material supplied by commercial 

agencies- : 3381-3384 

Seals of approval 3340 

Sheets 3294-3295 

Shirts 3450-3451, 3295-3296 

Shoes 3337-3339 

Silver 3310 

Simplified practice, National Bureau of Standards 3483-3484 

Sizes, brands, aqd prices, confusion of 3345-3355 

Size of cans : 

Slack-filled containers ^ '.. 3351 

Standards desired 3325-3328 

Tomato Juice ^ , 3346-3349 

Soap . '_.::, 3332-3333 

Specifications: 

Aspirin ^_______ 3446 



INDEX vn 

Specifications — Continued. Pm« 

Canned goods 3443 3444 

Cleaning compound 34-KV 3447 

Coffee 3300-3301. 3449-3450 

Creosol : 3444 

Definition 3442 

Dish-washing compound 3440-3448, 3451 

Flashlight batteries 3448 

Flour 3444 

Hamilton County, Ohio, use of 3441-3452 

Insecticides 3448-3449 

Lubricating oil 3445 

Meats 3449 

Mineral oil 3449 

National Bureau of Standards activities 3478 

Preparation of 3433. 3478 

Shirts 3450-3451 

Testing for conformity 3441 

Standard Barrel Act 3300, 3400-3401 

Standard Container Acts of 1916 and 1928 3365-336(5, 3487-3490 

Standard sizes, need for 3325-3328 

Standards : 

American Society for Testing Materials 3428 

Approval services, American Standards Association, proposal for 

standards of recommended practice for 3340 

Boilers 3418.3430 

Building materials 3438-3430 

Canned goods, grades for 3313-33)0 

Can sizes 3327 

Commercial 3434-3440, 3449, 3483, 3486-3487 

Consumer agency, research by 3474 

Containers 3304,3351-3352 

Federal specifications (see "Specifications") 

Furnaces 3415-3417, 3430-3431. 3480 

Meat 3306-3307. 3449 

Milk 3.330-3331 

Mineral oil 3449 

National Bureau of Standards activities 3475-3487 

Relation to over-the-counter buying 3478 

Savings through buying by 3432 

Specifications, Federal (see "Specifications") 

Summary of testimony— 3452-3454 

Toilets 3426-3427 

Tooth Paste 3410 

United States Pharmacopoeia, minelral oil 3449 

Wallpaper 3439 

Tax legislation, discriminatory 3469 

Tax Policy League of New York 3393-3394 

Tea 3349-3351,3354 

Testing : 

In relation to over-the-counter buying. National Bureau of Standards- 3478 

Laboratory, proposed for department stores, Cincinnati 3450 

Testing Materials, American Society for 3378 

Textile finishes 3311 

Textiles : 

National Bureau of Standards activities 3479-3481 

Purchase by specification 34.51 

Tires, automobile 3339 

Toilets 3426^427 

Tomato juice 3.346-3349 

Tooth paste 3380. 3396^3412. 34,32 

Towels 3319-3323 

Under-consumption, Consumers' National Federation proposal to Inves- 
tigate causes 3457-3458 



Vm INDEX 

United Conference Against the High Cost of Living : Page 

Nature of organization 3303-3307 

Testimony, Mrs. Alice Belester, Chairman 3287-3309 

United States Pharmacopoeia standards for mineral oil 3449 

Vacuum cleaners — 3295-3298, 3331-3332 

Vegetables, dried, standardized containers, lack of 3349 

A^ick Cold Control Plan 3381-3384 

Walker, L. R., Sears, Roebuck and Co., testimony..^ 3413-3432 

Wallpaper, standards 3439, 3486-3487 

Weights and measures, National Bureau of Standards activities 3479 

Weights of packaged commodities 3354 

Welch's Grape Juice Co., Federal Trade Commission case 3381 

Women Buyers and Taxpayers, League of 3471-3472 

Women's National Institute 3381-3384 

Your Money's Worth 3284 

o 



a4<» 



BOSTON 



PUBUCL>BPABV 



3 9999 



06351 



933 2