this competition.

^Ir. Smith. These are people that own the station from which they
are selling?

Mr. Brittox. These are lessees controlled by the company.

Mr. Smith. I am talking, first of all, about the ones who own their
own station and they buy gasoline from the distributors.

Mr. Brittox. Yes; well, they will receive some consideration for,
I will say for taxes and things like that, but nothing to offset the other
discrimination.

Mr. Smith. As between operators, though, will they pay the same?

!Mr. Brittox. Oh, yes, basic tank wagon ; the same ; yes.

Mr. Smith. And does the oil company tell them what their retail
price should be?

Mr. Brittox. They have a suggested price ; yes.

Mr. Smith. And what if they don't follow the suggested price ?

Mr. Brittox. Mr. Snow might like to answer that. We have a case
right now.

Do you want to answer that one, William?

Mr. Sxow. Yes. Yes. There are many ways of enforcing it; two
levers. Of course, the lease is for 6 months, or it may be for 6 months
or a year so there is always the implied threat of lease termination at
the end of the 1-year term.

Mr. Smith. I am not talking about leases now. I am talking about
the operator who owns the station.

Mr. Sxow. All right. As to the dealer who owns the station, yes;
very much there are means of enforcing it. It is a very, very deep
question, very interesting one. Actually the man who owns his own
station and who enters into a supply agreement with an oil company
where he will be paid something in the nature of rent, or it is a pay-
ment in lieu of rent sort of thing, in lieu of the loss which the com-
pany would take if it owned the station, that sort of rationale, is tied
almost as completely in almost every type of arrangement that is
used as the dealer who leases his station from the company. The lease
and lease-back arrangement is used.

In other words, I own a station. I lease it to X oil company for 15
years for a penny a gallon. Then they lease it back to me for a dollar
a year on l-vear leases which will not be renewed if — which don't



liiLve to be renewed. I have to stay in their good graces in order to get,
in order to stay as a tenant in the station tliat I own, that I liave
leased from them.

Other devices are to include in the lease and lease-back arrange-
ment an option to purchase, which allows the oil company to purchase
the dealer's station, to take it awav from him if circumstances don't —
if they choose to do so.

Mr. Smith. One way or another, though, they do maintain a retail
price?

Mr. Snow. Yes. And where there isn't any lease and lease-back ar-
rangement, the contract — one large company operates without one,
very large company, fifth largest company, I guess, without lease and
lease-back, but operates with an option to lease the station. Anytime
the dealer's prices aren't satisfactory, they may exercise the option to
lease the station for a long time like 5 years, with 2- to 5-year renewals.
So the dealer who owns his own station is laced into this type of con-
trol in very much the same way as the dealer who leases his station.

Now, there are some exceptions which I should note: The dealer
who pioneers a different type of location such as a large washrack
type of station, spending a considerable amount of money for land
whicli is, you know, of prime interest, may use the company to get a
loan to build the facility, and he may get as much as 4 cents a gallon
off. But he will have to perform or he will lose his deal.

There is also control, though this type of dealer operation is, of
course, itself a fairly well capitalized business and doesn't have the
=ame inequality of bargaining power, as the smaller man who tries
to get in the business for himself by buying a service station on loca-
tion. In that case, of course, the company controls the price, in the wash
rack stations, at 2 or 3 cents below the normal retail, as a price con-
trol lever on its lessee dealers.

Mr. Smpih. That's all I have, Mr. Chairman.

Mr. DixGELL. Mr. Conte ?

Mr. CoNTE. No questions.

Mr. DiNGELL. Mr. Himgate ?

Mr. HuNGATE. No questions. Thank you.

Mr. DiNGELL. Mr. Horton ?

Mr. HoRTOx. No questions.

Mr. DiNGELL. Mr. Potvin ?

Mr. PoTviN. No questions.

Mr. DiNGELL. Gentleman, we certainly thank you for a very helpful
presentation today.

The committee is particularly pleased to see Mr. Britton, who hap-
pens to be from my part of the country.

Mr. Britton, w^e are certainly happy to have you here.

Mr. Thompson, we are certainly pleased you could be with us.

And Mr. Snow, we are always happy to have you before this com-
mittee.

We thank you for coming, gentlemen.

Mr. Snow. Thank you. We would like to say, Mr. Chairman, I
don't think we have attended any hearing which is so really inspiring
as the quality and kind of people you are bringing and the light that
is being shed on this terribly important question. It is a privilege to
be here and participate.



88

Mr. DiNGELL. Thank you. We hope there will be more coming from
this hearing than just that, too.

Mr. Snow. I am sure there will.

Mr. DiNGELL. Our next witness is Mr. Jerome R. Gulan, legislative
director, National Federation of Independent Business.

i\Ir. Gulan, we are happy to welcome you for such statement as you
choose to give.

TESTIMONY OF JEROME R. GULAN, LEGISLATIVE DIRECTOR,
NATIONAL FEDERATION OF INDEPENDENT BUSINESS

Mr. Gulan. Thank you, Mr. Chairman.

Mr. Chairman, before I go into my statement, might I refer to some-
thing that Mr. Smitli just brought up ?

Just this morning, about 8:30, 1 had a call from an oil dealer in the
State of Illinois, I believe, who is a Mobil oil consignee. He came
screaming to us with a problem saying that he and all the dealers in his
area, in the same category, have just been informed by Mobil that ef-
fective, I think the end of this month, ]Mobil will stop paying 10 cents
a mile truck rental that they had been paying these people. And they
vdll revise the commission rates to try to make up for it. The dealer
has a choice of accepting this arrangement or have his contract can-
celled on a 90-day cancellation notice.

It seems to me that each and every dealer who will accept this will
undergo a net operating loss of about $1,500 a year. But they just were
given no choice whatsoever.

I just thought I would bring that in since Mr. Smith brought up
a related question on this.

Mr. Chairman, I am Jerome R. Gulan, legislative director. Na-
tional Federation of Independent Business. We and your committee
have known and worked with each other for many years, so there is
no need for us to describe the Federation and its operations.

First, we compliment you for your interest m the Robinson-Pat-
man Act. Your interest does not, however, surprise us because your
committee has been ever vigilant about this law since the time the
committee was formed in 1941.

For instance, in preparing for this testimony we read through your
1946 print. "United States versus Economic Concentration and Mo-
nopoly," with foreword by the late Honorable Estes Kefauver.

Further along we read through your 1951 print, "Antitrust Law En-
forcement by the Federal Trade Commission, Department of Justice —
a Preliminary Report," with letter of transmittal written by your then
chairman, the coauthor of the law in question, the Honorable Wright
Patman.

It was extremely interesting to observe that at the time of the latter
of these prints there were serving on your committee none other than
the Senate majority leader, the Honorable Mike Mansfield and your
present chairman, Joe L. Evins.

If these prints and your current endeavor prove nothing else — and
they certainly do prove much else — ^they confirm that attacks on the
Robinson-Patman Act are hardy perennials.

The most recent of these attacks, namely, the Neal and Stigler re-
ports therefore come as no shock or surprise to those of us who have



89

long held that the Robinson-Patman Act's continuance and enforce-
ment are vital to the survival of small business as a viable competi-
tive force in the econom}-.

These reports contend that the act is anticompetitive and promotes
pricing rigidities. Anticompetitive to whom? To those corporate
giants Nvho find themselves unable to set up discriminatory pricing,
eliminate their smaller competitors and then dominate the
marketplace ?

This is precisely what the Robinson-Patman Act prevents, and if
that is adjudged to be anti-competitive, then we in the Federation say
long live the Act and anticompetitiveness.

Gentlemen, the provisions contained within the Robinson-Patman
Act are often the sole force prohibiting the larger corporations from
forcing their smaller competitors out. We must not lose sight of the
fact that the R-P Act was enacted to meet a specific, well demon-
strated need.

In 1936, wliile considering the legislation, the report of the House
Judiciary Committee stated :

Your Committee is of the opinion that the evidence is overwhelming that price
discrimination practices exist to such an extent that the survival of independent
merchants, manufacturers, and other businessmen is seriously imperiled and
that remedial legislation is necessary.

Mr. Chairman, that statement is as true today as it vv'as in 1936.

We in the Federation firmly believe that this law is as essential to
antitrust enforcement, without which there cannot be a free, com-
petitive economy and opportunities for all, today as it was when the
measure was enacted in 1936.

For instance, several years ago, in one of our economic surveys,
we asked our members if, on the basis of their actual operating ex-
perience, they were being affected by unfair pricing or policies origi-
nating with manufacturers or other suppliers. Some 40 percent of our
members responded in this survey. Of this number 38 percent indi-
cated they were being so affected, and about half of those indicated
the effect as price discrimination in favor of one or more of their
competitors.

Xow, as we have discussed with you the type response we are re-
ceiving to our survey, we have made comparisons with available sta-
tistics, and we find that in composition our response is a fair reflection
of the composition of all U. S. small business.

On this basis, it is quite in order to observe that response to this
question suggests that out of their actual operating experience one
of every five small businesses do have a stake in a strong, effective
Robinson-Patman Act.

Gentlemen, we submit that this is a substantial segment of the small
business community that is involved.

Rather than weakening or doing away with this law, the need, in
our estimation, is for more vigorous enforcement coupled with
strengthening of certain of its features.

For instance, the authors of the Robinson-Patman Act wisely rec-
ognized that in order to achieve full potential it had to be possible
for private parties to supplement Federal enforcement.

To this end they wrote into the law provisions for private suit for



90

treble damages. Insofar as section 2 is concerned, such actions remain
possible, and private parties are taking- advantage.

On the other hand, just about 10 years ago the U.S. Supreme Court
held that section o is not a part of the antitrust laws, and for that
reason, foreclosed private parties from use of this section.

In this connection, we have just concluded the Mandate poll of our
membership of S. 1494, which would make it possible for a business-
man to go into court an.d sue for treble damages those who violate
section 3 through sales at unreasonably low prices.

A cut into early returns on this poll indicates that 56 percent of
respondents support the revision, 31 percent oppose it, and 13 percent
have no opinion.

It seems to us that this almost 2 to 1 favorable position is another
indication of the importance attached to this law by the sma-ll busi-
ness community.

That there is need for other strengthening action is made clear in
your record of testimonies presented to the House Small Business
Committee in past years bj* a gentleman known here as "Mr. Small
Business"— our vice president, Mr. George J. Burger.

Some people may have little faitli in competition and little sym-
pathy for independent small business firms, but such views are not
in keeping with our public policy. When President Eisenhower in
1958 signed the Small Business Act into law he approved as a part of
the law a declaration of our public policy in the following words :

The essence of the American economic system of private enterprise is free
competition. Only through full and free competition can free markets, free
entry into business, and opportunities for the expression of and growth of ixr-
sonal initiative and individual judgment be assured. The preservation and expan-
sion of such competition is basic not only to the economic well-being but to the
security of this Nation. Such security and well-being cannot be realized unle.-^s
the actual and potential capacity of sm.all business is encouraged and developed.
It is the declared policy of the Congress that the Government should aid, counsel.
assist and protect, in.sofar as is possible, the interests of small business concerns
in order to preserve free competitive enterprise . . .'

Finally, representing our 2T(\000 individual independent and pro-
fessional enterprises throughout the country, we stand firmly for the
Eobinson-Patman Act.

Mr. DiNGELL. Mr. Gulan, we thank you for a very helpful statement.

Mr. Hungate.

Mr. HuxGATE. I have no questions, thank you.

]\fr. CoxTE. No questions.

Mr. DiNGELL. Mr. Horton.

Mr. HoRTON. I have no questions. I just want to thank the gentle-
man for appearing before this committee and giving us the benefits
of his views.

Mr. Hungate. Mr. Chairman, may I ask a question.

You heard the sort of lease and release back provisions discussed
before. I take it you are familiar with that.

Mr. GuLAK. Yes. Not as familiar as I would like to be, sir, but
yes, I am.

Mr. Hungate. Well, now. assuming that major company has these
lease arrangements in one form or another throughout an area, what

2 15U.S.C. 31 (1958).



91

is the advantage to tliat company in granting- a particular price
rechiction to certain of its stations and not to others ?

Mr. GuLAN. Mr. Hungate, I don't think thej- wonld grant a price
reduction to certain of its leased station operators in one area with-
out granting to others. What they tend to do, I believe, would be to
grant it to a lease station operator as opposed to an independently
owned station operator, or they would grant it to a wholly owned
company station as opposed to either a leased station or an independ-
ently owned station. But I don't think they tend to grant discrimi-
natory reductions to the same class of operator in the same area.

Mr. HuxGATE. They would in that way tend, yes, tends to increase
their share of the market in a wholly owned company subsidiary sta-
tion or in a leased station against someone else.

^Ir. GuLAN. Eight.

Mr. Hungate. Thank you.

Mr. DiNGELL. Mr. Potvin?

Mr. PoTviN. I have no questions.

Mr. DiNGELL. Mr. Gulan, we certainly thank you for your very
helpful testimony and are grateful that you took the time to be
present.

Mr. Gulan. Thank you, Mr. Chairman.

Mr. DiNGELL. Mr. Potvin.

Mr. PoTM^x. Mr. Chairman, I would like at this time if I may to
offer for inclusion in the record letters from the National Farmers
Union, the National Association of Tobacco Distributors, the National
Food Brokers Association, the Counsel for the National Office of Ma-
chine Dealers Association, the Eetail Jewelers of America, the Na-
tional Oil Jobbers Council, the National American Wliolesale Lumber
Association, the Associated Bakers of America, the National Candy
Wholesalers Association, and finally the Farm Equipment Whole-
salers Association.

Mr. DiNGELL. Without objection, the documents referred to will be
inserted in the record at this point.

(The documents referred to follow :)

National Farmers Union,
Washington, D.C., October 2, 1069.
Hon. John D. Dingell,

Chairman, Subcormnittee on Activities of Regional Agencies Relating to Small
Business, House Office Building, Washington, B.C.

Dear Congressman Dingell: I would appreciate being permitted to appear
before your Committee on Thursday, October 9, instead of Tuesday, October 7
as previously scheduled.

Thank you very much.
Sincerely,

Angus McDonald, Director of Research.



Synopsis of Proposed Statement p,y Joseph Kolodny, Managing Director,
National Association of Tobacco Distributors

The survival of the Wholesale Tobacco Industry is unquestionably attributable
to the Robinson Patman Act and its enforcement agency, the Federal Trade Com-
mission. Our industry would find itself utterly distraught and completely dis-
integrated were the existence of the Robinson Patman Act to be placed in jeo-
pardy. It Till :



92

Abolition of the Federal Trade Commission would destroy the last remaining
defense of independent business, such as the Wholesale Tobacco Industry and
its 1,500,000 retail outlets, epitomizing the veritable heartbeat of American small
business. The Federal Trade Commission, depite its occasional shortcomings, has
been, since 1936, the sole effective enforcement agency for the Robinson Patman
Act.



National Food Brokeks Association,

Washington, B.C., October 3, 1969.
Hon. John D. Dingell,

Chairman, Subcmnmittee on Small Business, House of Representatives of the
TJiiited States, House Office Building, Washington, B.C.

Dear Mr. Dingell : We appreciate your recent letter inviting us to express
our views on the great need to continue the Robinsou-Patman Act. With the
competitive conditions that now exist in the food industry, it would be disas-
trous for a large segment of our customers if there was a weakening of the
Robinson-Patman Act which permitted price discrimination in any form.

We hope you and your subcommittee will develop the factual evidence to show-
that what some of the critics of the Act are advocating would be disastrous to
a large segment of the business communities of the Nation.

We have been in meetings and traveling most of the time since we received
your letter. Therefore, we are asking for the privilege of filing additional state-
ments with you in the very near future.
Sincerely yours,

Watson Rogers, President.

New York, N.Y., September 29, 1699.

Hon. John D. Dingell,

Chairman, Suhconimittee on Small Business and the Robinson-Patman Act,
Select Committee on Small Business, House of Representatives, Washing-
ton, B.C.

Dear Congressman : As general counsel to the National Office Machine Dealers
Association, an organization speaking for over 10,000 small businessmen, I thank
you for the opportunity of furnishing a statement on the Robinson-Patman Act,
as requested in your letter of September 15, 1969.

At the outset, I would like to say that the main critics of the Robinson-Patman
Act are those who are not concerned with the continuing elimination of small
business, nor with the frightening and ever-increasing trend toward concen-
tration in manufacturing and retail distribution.

In earlier hearings before Committees of Congress, economists have clearly
demonstrated the probability that, if present trends are not checked, the manu-
facture of all major products will be in the near future concentrated in a limited
number of corporations.

However, little attention has been given to the alarming increase in the entry
of giant manufacturing corporations in retailing and to the continued spread
of large national retail selling organizations, which are acquiring a con-
stantly increasing share of the retail market. Furthermore, conglomerates and
other large corporations have established or acquired numerous chains or retail
selling outlets in the office machine industry. Office machine manufacturers have
established more retail branches to compete with their own dealers for both
sales and services and have eliminated large numbers of dealers.

Manufacturers have consistently and increasingly pursued a policy of selling
to large retailers, such as Sears Roebuck, Wards, Alexander's, Korvette's, and
many, many others, the same merchandise sold to their dealers at substantially
lower, discriminatory prices. Often these large retailers have sold the same prod-
ucts below dealer cost. The violations of the Robinson-Patman Act have been
many, open and flagrant. Predatory selling practices, based upon illegal dis-
criminatory prices, are being used to lessen and ultimately destroy comi^etition
in portable tyi>ewriters, adding machines and other products.

The rationale of the Robinson-Patman Act is sound, and the need for its
existence and enforcement is greater than ever. Low discriminatory pricing prac-
tics are employed to drive out manufacturing competitors and to eliminate retail
competition.



93

From the poiut of view of small businessmen, the Robinson-Patman Act, as
well as the Sherman and Clayton Acts, are for all practical purposes a myth-
Enforcement of rights created by the Antitrust laws by means of private legal
actions is not possible because of the costs and burdens of protracted legal pro-
cedures. The disparity of economic power is so great that a private litigant is
overwhelmed and smothered by his unequal adversary who is prepared to spend
unlimited funds in order to continue to pursue profitable but illegal practices.

The enforcement of the Robinson-Patman Act and of other Antitrust laws
by the Federal Trade Commission and the Antitrust Division of the Department
of Justice is sporadic and nominal. Congress has never provided these enforce-
ment agencies with adequate funds to accomplish but a small portion of the
task entrusted to them.

Large business enterprises know they can adopt and pursue illegal courses of
action, reap the profits thereon, and at the very most face proceedings, if insti-
tuted at all, many years in the future which will only call upon them to cease
and desist.

Complaints by the National Oflice Machine Dealers Association, by other
associations and by aggrieved individuals are necessarily ignored or not pursued
by our enforcement agencies because of their meager appropriations, limited
personnel and the ability of the large violators to tie up so much of their man-
power and resources in litigation. Antitrust counsel representing small business
know, from bitter past experience, that their chances of securing action are
extremely unlikely. These comments are not a reflection on the ability or
integrity of the Federal Trade Commission or the Oflice of the Attorney Greneral,
but rather a sad and realistic view of their impotence, caused by a lack of con-
cern by Congress for the enforcement of the Antitrust laws. Without appropria-
tion of funds by Congress sufiicient to pursue and meaningfully penalize violators,
our Antitrust laws and their enforcement will remain a myth.

I regret the brevity of this statement, but your request for a reply by October
1, 1969 gave us little time to do more.

Our Association thanks you and your Committee for your continued efforts to
insure the existence of small business.
Very truly yours,

Alexander Hammond.

Retail Jewelers of America, Inc.,
Washington, D.C., September 30, 1969.
Hon. John D. Dingell,

Chairman, Subcommittee on Small Business and the Robinson-Patman Act,
Select Committee on Small Business House Office Building, House of Repre-
sentatives, Washington, B.C.

Dear Mr. Dingell : The Retail Jewelers of America, Inc., will not request
time to testify before your Subcommitte hearings concerning the Robinson-Pat-
man Act, its rationale, implementation and enforcement, nor will RJA file a
statement.

This association, representing over 6.000 retail jewelry stores, agrees in prin-
ciple with the Robinson-Patman Act and urges its enforcement to the greatest
extent possible.
Sincerely,

Perry R. Ellsworth, Executive Secretary.



National Oil Jobbers Council,
Washington, B.C., September 30, 1969.
Hon. John D. Dingell,

Chairman, Subcommittee on Small Business and the Robinson-Patman Act,
House of Representatives, Washington, B.C.
Dear Congressman Dingell : In response to your letter of September ].">, 1969,
the National Oil Jobbers Council is honored by the opportunity to respond with
comments on your proposed hearings concerning the value of the Robinson-Pat-
man Act to the small businessman.

The petroleum destribution industry today is dominated by 18 or 20 large
suppliers who distribute through an estimated 12,000 petroleum jobbers in the