It will thus be seen that the total Government investment in these plants has been $518.3 millions, of which approximately $166 millions, or 32 percent of the total is in the end process copolymer plants, while another $53.2 millions, or 10 percent are in the other end product or butyl plants.

The heaviest investment is in the 8 butadiene plants which account for $204.5 millions, or only a trifle short of 40 percent of the total investment. As we have pointed out, it will be difficult, if not impossible, to dispose of the 2 alcohol butadiene plants which have a total investment of approximately $77 millions, or about 15 percent of the total. It is understood that production costs in these plants are appreciably above the market value of the product.

There are two further sets of facts which should be noted about these plants: (1) The first is that the copolymer plants and the butadiene plants are generally located in very close proximity to each other. This is desirable because the former draw over threequarters of their feedstock from the latter. The two butyl plants are also located in cities where there are butadiene plants.

(2) A second basic fact is that with rare exceptions the big oil companies operate the butadiene and butyl plants and the big rubber companies the copolymer plants. The following tables bear out these generalizations:

The degree to which the big rubber and oil companies are operating the copolymer and butadiene plants is shown by table III.

TABLE III.-Operation of copolymer plants

It will be seen that 71 percent of the synthetic rubber capacity (copolymer) is being operated by the Big Four and a Half. Then come three companies, Copolymer, Kentucky, and Midland, with a total capacity of 182,000 tons or 21 percent of the total copolymer

capacity. The first is composed of 8 smaller tire factories, the second of 10 nontire rubber factories while Pacific Rubber Co. has a 35-percent interest in the Los Angeles plant operated by Midland. Finally, Phillips operates the copolymer plant at Borger, Tex., in close relationship with its butadiene plant at that location.

TABLE III-B.-Operation of petroleum butadiene and butyl plants by oil companies

It should perhaps be added that Dow Chemical operates the styrene plant at Los Angeles, and Union Carbide and Koppers the two alcohol butadiene plants which at present are relatively uneconomic. Operating structure for emergency not necessarily desirable in long run

We wish to make it clear that there is nothing sinister in the fact that big rubber and oil companies are in the main operating these plants. Under the stress of war conditions, the Government had to get synthetic rubber into production with great rapidity. It was not only natural but inevitable that it should turn to the big companies with their existing organizations and their technical knowledge to manage the plants which were being rushed into production.

But it does not follow that what was good in dire emergency should be frozen into the long-time structure of the industry. We believe that it is not in the long-run interest of consumers and citizens to intensify the concentration of economic power. The greater the degree of competition, the lower prices are likely to be and the greater the chance for small rubber fabricators to obtain the necessary raw material. Moreover, it is not good for the social health of the country for economic power to be concentrated in a few hands. The economic prerequisite for a healthy democracy is a broad diffusion of property and control.

Dominant position of Big Four and a Half

Here it should be noted that the Big Four or the Big Four and a Half are already in a position to dominate the rubber industry to a very significant degree, particularly in tire manufacturing, which as the RFC report points out (hearings, p. 252) absorbs "a vastly disproportionate amount of our total consumption." Thus a Federal Trade Commission study published in 1949 showed that in 1947, of the rubber companies producing tires and tubes the percentages of net capital assets held by the Big Four and a Half were as follows:

Source: Report of the Federal Trade Commission on the Concentration of Productive Facilities, 1947, -1 pp. 66, 69.

The position of dominance in the rubber-tire industry thus revealed is not far different from the situation earlier disclosed in the Report on Economic Concentration and World War II by the Smaller War Plants Corporation to the special Senate Small Business Committee (S. Doc. No. 206, 79th Cong., 2d sess., pp. 172-182), The net sales of the Big Four in 1943 were shown to be 92.7 percent of the total sales of the 15 listed tire companies. The total assets of the Big Four for 1943 were 92.3 percent of the total assets of the 17 listed tire companies (p. 178).3

In a later report, the Federal Trade Commission in 1950 revealed that in terms of "value of product produced," the four largest companies in 1947 had 76.6 percent of the industry's total in tires and inner tubes (35 companies), 80.7 percent in rubber footwear (20 companies) and 83.8 percent in reclaimed rubber (14 companies) (report of FTC on the Divergence Between Plant and Company Concentration, 1947, p. 149).

The control of the Big Four or Big Four and a Half over the initial processing of rubber also gives them great power over the independent fabricators who manufacture a wide variety of rubber products.

It will thus be seen that the Big Four are the giants who more or less dominate the industry. It should also be realized that the ties between United States Rubber on the one hand and du Pont and General Motors on the other are rather close.

Furthermore in 1947, as was briefly noted above, the Government sued the Big Four and a Half and a number of smaller companies as well, charging that these companies had entered into agreements to fix prices, discounts, bonuses, classifications of customers, allocation of sales to Government agencies, etc., and that they operated through the Rubber Manufacturers Association. On October 21, 1948, the companies and individuals involved pleaded nolo contendere in the Federal court of New York and were fined. The plea of nolo contendere can be taken as an admission for practical purposes that the charge is correct. At the very least, it is a refusal to contest the correctness of the charge. We therefore are justified in contending that (1) the Big Four or Big Four and a Half occupy a relatively dominant position in the industry, and (2), these companies have in the past worked closely together in matters of price, etc.

The report also concludes that "In terms of production, the rubber-products industry is the third most htly concentrated manufacturing industry in the United States, ranking just behind automobiles and tobacco (p. 172).

4. THE IMPORTANCE OF ADEQUATE TIME FOR DISPOSAL

The Senate bill (S. 2047), as reported, provides that the special Commission set up to dispose of the plants must submit to Congressby June 1, 1954, definite recommendations covering the sale of the properties to specific bidders. If either House of Congress does not specifically disapprove of these terms of sale within 30 days, the Commission is then authorized to go ahead with the sales.

Since it is highly unlikely that the present act can go into effect before August 1 of this year and further time will be required to set up the Commission and get its work under way, this means that less than 10 months' time is permitted for all bidding and negotiations, including consideration and action by Congress, in connection with the sale of these highly valuable properties.

In our opinion this is much too short a time to secure the maximum competition in bidding and to give the Government's selling representatives fair leeway in negotiating the best terms of sale.

Probable timetable for disposal under S. 2047

Working backward from this date of June 1, 1954, we find that the bill provides for the following prior periods with their given target dates:

1. A period of not more than 30 days, during which the Commission can frame its recommendations to Congress (sec. 9A). This would bring the date at which this period would begin to May 1, 1954.

2. But prior to this there would be a period of "negotiation" which is not to exceed 6 months (sec. 7f). During this time the Commission "shall negotiate with those submitting proposals for the purpose of entering into definitive contracts.' This negotiating period may also be extended by the President for 30 days more, subject of course to the June 1, 1954, final deadline for the submission of specific recommendations to Congress.

During this period of negotiation however the Commission cannot consider proposals from comparies which did not enter formal bids. It must deal only with firms which made bids.

Dating back 6 months from May 1, 1954, brings us to November 1, 1953, as the most probable final date on which bids are to be received. 3. The period during which bids can be received is to range between 45 and 90 days (sec. 7A). If we take the lower figure, this would make September 16, 1953, the opening date on which bids may be received. 4. The opening date for bids is to be preceded by a period during which the Commission will advertise the sale of the properties. No definite duration is fixed by the bill for this advertising period. In executive session, however, it was unofficially stated that this would probably be approximately 21 days (minutes, executive session, Banking and Currency Committee, July 8, p. 467).

Using this figure would mean that the advertising period would start approximately August 26, 1953. While these dates may be shifted about somewhat because of variations in the actual amounts of time used in the different stages, they represent probably the closest approximations which can be made at present to the successive target dates which are set under the bill. If we then take these target dates in their time sequence they would be approximately as follows:

Probable approxi

mate date

1. Opening date for advertisements..

2. Opening date for bids..

3. Final date for bids...

4. End of period of negotiation..

June

1, 1954

5. Date of submission of definite sale proposals to Congress. 6. Date of final approval unless Congress specifically disapproves. July 1, 1954 Attention is particularly invited to the brief period which is allowed before all bids are closed. If the Commission takes full advantage of the 6-month period of negotiation, all bids must be in by November 1, 1953, or in about 3 months from the time this bill is designed to become law.

If the Commission chooses to shorten the period of negotiation, it may lengthen the period during which bids may be submitted. It is highly unlikely, however, that this could be extended beyond the first of this year.

The most reasonable conclusion therefore that can be drawn from the implicit timetable contained within the bill is that all bids will have to be submitted within 3 to 5 months after passage of the present bill.

Disposal timetable under S. 2047 favors big companies and leaves independents at great disadvantage

It is obvious that this relatively short period of time will play into the hands of the big companies which now operate these plants and will work adversely against the small firms which may be interested in acquiring them.

In the first place, the operating companies know every detail of the present plants, their technical strengths and weaknesses, the unit costs of production and probable profit margins.

The nonoperating independents, on the other hand, will be at a distinct disadvantage in this respect. It was developed in the testimony (hearings, pp. 208-209) that this operating data had not as yet been made available to other prospective purchasers. Nor have they been permitted to inspect the properties. It will require apprecable time for the nonoperating independents to go over these 29 plants thoroughly and to get and master the necessary information. But until this is done, they would be at a distinct disadvantage and would be in no position to make an offer.

Location of many of these facilities also favors the big operating companies, for their most efficient operation is reported to depend upon adjacent facilities owned by the present operators which were Dever part of the Government program (hearings, p. 245).

The big operating companies will moreover be in a far better position than the independents so far as financing is concerned. The bill provides that ultimately at least 25 percent of the purchase price must be paid in cash and the remainder not to exceed 75 percent, may be in the form of a first mortgage. The big companies with their ample cash balances and strong bank credit will have no difficulty in making the necessary downpayments. The independents may have a great deal of trouble in doing so, especially in such a brief time.

Behind and beyond all this is the fact that the smaller firms will naturally be reluctant to invite a contest with the giants by trying to buy one of the plants away from them. The oil and the rubber tire industries are dominated by huge titans. Each of these titans has