Hearings

must draw on the resources of a very considerable part of the industrial United States for a relatively short buying season. It would seem apparent that compelling all suppliers to go on an f. o. b. mill basis would result in raising the price to Wisconsin canners to a very considerable degree of the goods which they purchase, and would also result in a highly confusing situation of their having a great variety of prices on the same products during a relatively short buying season, depending upon where they buy. This, of course, could add only confusion as well as additional cost to the canner. This confusion would be very serious for, to protect himself, the canner must sell a considerable portion of his output on a future contract basis; and to do that intelligently, he must predetermine his cost. It his costs are to be confused and variable, he will be at a great competitive disadvantage with other parts of the United States which are located more centrally with respect to the producers of the raw material as well as to the consumers of his products, such as the so-called Tri-State area near the east coast comprising the States of Maryland, Pennsylvania, and Delaware, and the Indiana and the Ohio producing areas.

(2) The evaporated milk industry

The evaporated milk industry in Wisconsin is as important to the Wisconsin farmer as is the processing of canned vegetables and fruit discussed above. All the problems attendant to the purchase of supplies of the vegetable and fruit canning industry are found in the milk industry. In addition to these purchasing problems, compulsory f. o. b. mill pricing would spell complete chaos in the marketing of milk, because evaporated milk is highly standardized as to quality and resold by the jobbers and retailers on extremely narrow margins, many times not exceeding 2 percent to the jobber and 3 to 4 percent to the retailer. Hence, it is obvious that the jobbers and the retailers between them could not absorb any differential between prices, and that the producer must sell on a price that will enable him to meet the various markets throughout the United States, as in every dairy-producing part of the United States there is some production of evaporated milk which tends to establish the price in the particular market areas. Obviously, if the evaporated milk industry is not permitted to absorb freight so as to achieve a national distribution, Wisconsin could not support the tremendous evaporated milk production which it now enjoys. The inevitable consequence would be that the dairy farmers of Wisconsin would either have to curtail their milk production or ship their milk farther and pay additional freight to other milk markets throughout the country, which would of course lower the net of Wisconsin's farmers' largest single cash crop.

Evaporated milk plants must be located in regions where, due to a high cow population, there is an available supply of milk for manufacturing purposes. As a result, evaporated milk is produced in but 28 States out of the 48. Because Wisconsin is an outstanding State in the production of milk for manufacturing purposes, we find that 28 percent of all the evaporated milk produced in the United States comes from Wisconsin. Further, out of 135 evaporated milk plants in the United States, 37 of them are located in Wisconsin. In 1946 Wisconsin condenseries produced 19,113,000 cases. Against this there was a consumption of evaporated milk in Wisconsin amounting to only about 880,000 cases. Consequently, this large production in excess of consumption in Wisconsin must find an outlet in the Eastern and Southeastern States. This arises because the nearby consumptive demand is supplied by the surplus production above requirements in the States of Minnesota, Iowa, Missouri, Illinois, Kentucky, Indiana, Ohio, and Michigan. Out of the 135 evaporated milk plants in the United States, 50 of them are in these eight states. The evaporated plants in all of these States must also look for markets in other states in order to market their production.

There is another consideration that should not be overlooked on a product as standardized as to quality as canned milk. The A & P Co. now has a considerable canned milk production in Wisconsin. It is believed (Mr. Wooden so testified) that no restriction on delivered pricing would be applicable in intracompany transactions. Consequently, A & P could deliver its milk at whatever prices it chose throughout the United States and, hence, would be placed in a favored position to drive other companies completely out of the market unless they adopt the same degree of integration in their production and sales outlets. Of course, small independent companies cannot possibly afford setting up a whole national system of warehouses or sales outlets.

The distribution and sale of evaporated milk is Nation-wide. Probably there is not a single grocery store in any United States city or hamlet that does not

handle at least one brand of evaporated milk. Evaporated milk has had its greatest growth since World War I. Domestic consumption has quadrupled since that time, and at present is running about 63,000,000 cases per year. This volume was built on the basis of delivered price to distribution points in all States of the Union. It has provided a steady and favorable market for dairymen in the milk-producing areas, and has provided supplies at uniform costs to the consumers in all the states. Everything would indicate that the manufacturing and merchandising practices evolved over the years are absolutely sound, and that the delivered price basis has been definitely favorable to the public interest. (3) Meat packing

Like the situation of canned vegetables and milk production. Wisconsin also processes much more meat than its own marketing area consumes. fact, in order to find a market for its normal processing, it must compete right in the Chicago market dominated by the Big Four packers. Obviously, the Wisconsin packing industry, which consists of three or four middleszed companies and numerous smaller packing companies, must have the right to sell at such market prices as prevail in territory dominated by the Big Four Jackers in Chicago, Hormel in Minnesota, John Morrel in Iowa, and Kingan in Indianapolis. If the Wisconsin packing industry is to be handicapped by estrictions on its right to compete, this would necessarily shrink Wisconsin packing operations down to such scale as the local advantage in freight rates Would permit; namely, to the immediate market around the packing plants in Milwaukee, Madison, Fort Atkinson, Eau Claire, Prairie du Chien, Green Bay, or whatever small town in which they happen to be located. It should be noted that there are more meat-eating people in Cook County, Illinois, than there are in the entire state of Wisconsin, and to bar Wisconsin manufactureres from h's market would tend to curtail the size of the operations conducted by the smaller packers in Wisconsin to the very great benefit of the Big Four in Chicago and the other larger packers elsewhere in the central West. Why anyone should want this result in these days when most people believe that small business should be encouraged rather than injured, is not perceived.

CONCLUSIONS AS TO THE RESULTS OF PROHIBITION OF FREIGHT ABSORPTION ON FOOD PROCESSING AND THE WISCONSIN FARMER

In the foregoing discussion, only the canned vegetable business, the evaporated Ik business, and the meat-processing business have been analyzed as illustraLive of the general injury to the food-processing business of Wisconsin. There are, of course, other illustrations demonstrating the same results, but they would nly cumulate unnecessarily.

Wisconsin is a great agricultural-producing State, and food-processing plants Very naturally found it economical to locate in Wisconsin to process its agriculral products. Restrictions on the marketing of these products would cause ese processors to lose the advantage which they thought they had gained rough locating their conversion plants close to their sources of supply. To that extent they would be gravely injured. In addition, the resulting injury to Wissin farmers is at once apparent. The processing plants may be compelled to ate, and in the process of moving, there would be a tremendous loss of mils of dollars through abandonment of facilities with much hardship in the ifting of employees. However, the farmer cannot move. He is completely mobile. Hence, if he loses his market for the peas he has been selling to the Wisconsin canners, he just cannot continue to grow peas because unpacked peas cannot be commercially shipped. If he loses some of his milk-evaporating marthe must reduce his herd because it is impossible to ship fresh milk very far. If he loses his home Wisconsin market for his cattle and hogs, he will have to shop farther to Chicago and compete there in selling at the mercy of the large Chicago buyers. The probable result will be that he will receive less for his ttle and hogs, will have to reduce the amount of beef cattle and hogs which he for killing, and the present practice of Wisconsin farmers of buying westrn beef cattle for fattening would languish.

CONCLUSION

The foregoing report to your committee has been largely restricted to factual nformation applicable specifically to Wisconsin as affected by compulsory f. o. b. pricing. There are many broad questions which this report does not endeavor to discuss. For instance, most Wisconsin manufacturers believe that the pro

ponents of f. o. b. mill pricing are overemphasizing transportation costs and underemphasizing the great savings to manufacturers through compact, single plants, proximity to sources of supply, and the great advantages to customers through having national distribution and national competition. We have met no one who wants to establish local monopolies or believes that Balkanization of industry would be an advantage. Most Wisconsin manufacturers believe that much of America's industrial greatness has stemmed from the interchange of products on a national basis without restrictions caused by abritrary legal impositions which, to their minds, are as abhorrent as it would be to set up tariff barriers at State boundaries.

Respectfully submitted.

WISCONSIN MANUFACTURERS' ASSOCIATION.

STATEMENT OF THE OHIO CHAMBER OF COMMERCE ON THE PROBABLE EFFECT THAT CHANGES IN THE BASING POINT PRICE SYSTEM WILL HAVE UPON INDUSTRY IN OHIO

Under date of August 24, 1948, the Honorable Homer Capehart addressed a letter to the Ohio Chamber of Commerce announcing that your committee had been directed "by Senate Resolution 241 to study and inquire into the effect of the Federal Trade Commission's policies relative to freight absorption and delivered prices. This subject largely concerns questions arising out of the decision of the Supreme Court in the Cement case.

"Our Committee proposes to study the effect of an f. o. b. plant or mill price in all basic industries-and the prohibition of freight absorption in whole or in part. The time and money available to our committee does not permit a thorough investigation of each community by the committee's staff. We are taking the liberty of asking a number of chambers of commerce to help us in marshaling information for the particular community in which their members are located." The Ohio Chamber of Commerce is a State-wide organization representing more than 5,000 Ohio companies engaged in all kinds and types of business, industry, manufacturing, distribution, and service.

Upon receipt of the above mentioned request from Senator Capehart, the industrial development committee of the Ohio Chamber of Commerce appointed a representative subcommittee with instructions to study the probable effects upon Ohio business if required to operate under the uncertainties as to legality of long-standing pricing policies resulting from the opinion of the Supreme Court in the Cement case. In making the requested study, this subcommittee of the industrial development committee had personal interviews with scores of business executives and addressed a questionnaire to all members of the Ohio Chamber of Commerce.

Members of the Ohio chamber were requested to advise us of their findings and views on:

1. The immediate effect of the elimination of the basing point pricing system upon your business or your industry.

2. Your evaluation of the long-range effect of an f. o. b. mill price on basic commodities used by you.

3. Probable effects of the mill price system if it is extended to other basic or finished goods.

4. Your views as to the desirability of a return to the basing point pricing system through some remedial legislation which may be developed in Congress. 5. Any other facts or reactions you may have.

The response from a broad cross section of business and industry doing busines in Ohio leads to the following general conclusions:

1. The elimination of multiple basing point pricing would place definite limitations upon competitive ability and would tend to create numerous area monopolies. As a consequence thereof, purchasers of semi-finished materials for final fabrication would ultimately be forced through economic necessity to buy from the nearest source of supply and no other.

2. Enforced elimination of basing point or zone pricing would produce conditions definitely harmful to our economy:

(a) Loss of employment and family dislocations in cases where industries may be forced either to abandon present operations or to seek a location nearer to their source of supply.

(b) The shifting of population from an area which loses industry to an area which gains industry would cause additional public service and financial burdens

for either community. Small communities where one or a few industries provide the basic support would be most vulnerable. We have found no available nformation warranting a conclusion that the shifting of industrial location would be uniform or that the loss of an industry in any community would be compensated by the acquisition of a new and different industry.

(e) The physical problem of plant sale or abandonment in one location and of new construction in another (under present conditions of material scarcity and high building costs) would in itself constitute an unnecessary aggravation of a disturbed economy in many communities. It would be an economic waste at any time. Many small-business organizations without substantial financial reserves could ill afford to make the necessary changes. This is true despite the claim that the change to f. o. b. mill pricing is intended to protect small business. (d) It would tend to create a long-term actual loss in industrial capacity and production—including employment and pay rolls.

3. The elimination of the multiple basing-point price system would tend to further centralize industry into already congested areas, and would be in direct opposition to the recommendations of national defense authorities which now age decentralization.

4. Elimination of the basing-point price system would have, and already has shown-in some instances, a tendency to raise prices all the way from the primary producer to the consumer. Wholesale and retail vendors, and finally the ultimate sumer, face chaotic conditions through the elimination of delivered or zone ¡rices.

5. No matter what the short-range viewpoint may be there is a feeling that The ultimate economic effect upon Ohio will be injurious.

The following quotations represent typical comments made by Ohio manufacturers and businessmen. They represent a cross section of Ohio business.

From a food-products firm

“No one can predict or visualize the economic effects on industy and commerce that would result from an f. o. b. shipping point pricing policy, but all of us shudder en when thinking about the impact such a ruling would make on our little enterprise, including possibilities as follows:

"Shrink our Nation-wide market to an area within a 300-mile radius of our plant.

"Necessitate higher prices to offset the increase of overhead expenses caused by a decrease of production.

"Reduce, rather than increase the number employed by established firms. "Destroy interstate commerce insofar as the distribution of finished goods in concerned.

"Wipe out wholesalers, warehouses and distributors in all major trading

areas,

"Reduce the tonnage of interstate carriers to a point that would necessitate higher freight rates.

"Release millions of men and women now employed in mass-production industries and interstate-commerce activities.

"Create a serious problem of unemployment in major manufacturing centers for several years or until workers as well as housing facilities could be redistributed or relocated.

"Result in the liquidation or ultimate bankruptcy of many sizable manufac

turers.

"Bring about a lower, rather than a higher standard of living for a majority of people.

The idea is appealing because it appears at first glance as plausible and pracal. Frankly, nothing would please us more than to be relieved not only of "sportation costs, but also other expenses incident to selling on a delivered sis. As a matter of fact, we sold our products f. o. b. our plant when the siness was started and our merchandise was sold locally or in our home market. We tried to perpetuate the plan, but found it necessary to prepay freight ope with competitive offerings in outside markets. Today our products are shipped to every State in the Nation. e other firms in the same food industry pursue the same policy. pends on business obtained from areas distant from our plants. could subsist on the business available from areas in close proximity to our Pants. Few, if any of the established firms in our industry could survive under anfo b. plant pricing policy, particularly, those of us situated in small towns or agricultural communities.

More than Each of us Not one of