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CHART 6

DISTRIBUTION OF PRODUCE THROUGH (A) THE BROOKLYN TERMINAL MARKET (B) THE BRONX TERMINAL MARKET-1956

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CHART 8

DISTRIBUTION OF FRESH FRUITS
AND VEGETABLES SOLD THROUGH
ALL MARKETING CHANNELS IN
NEW YORK-1956 AND 1938

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Mr. ANFUSO. Thank you very much.

I wish to announce that tomorrow we will meet at 10 o'clock sharp and we will try to finish before 1 o'clock in case anyone may desire to go to the game.

I should like to take this opportunity now of thanking Commissioner Anthony Masciarelli for the splendid cooperation which he and the mayor of the city of New York have given to us.

(Whereupon at 4:30 p. m., the committee was adjourned, to reconvene at 10 a. m., Wednesday, October 9, 1957.)

FOOD MARKETING COSTS

WEDNESDAY, OCTOBER 9, 1957

HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON CONSUMERS STUDY
OF THE COMMITTEE ON AGRICULTURE,

New York, N. Y.

The subcommittee met at 10 a. m., pursuant to recess, in room 220, United States Customs House, New York, N. Y., the Honorable Victor L. Anfuso (chairman of the subcommittee) presiding.

Present: Representatives Anfuso, Cooley (chairman of the full committee), Grant, Knutson, Jennings, and McIntire.

Also present: Representative Keogh, and Francis LeMay and Walter W. Wilcox, staff consultants.

Mr. ANFUSO. This committee will come to order, please.

Ladies and gentlemen, we are going to try to finish these hearings, if at all possible, that is, today's hearings, before 1 o'clock.

This morning we are to discuss the subject of "trading stamps," which has been very much in the public eye throughout the country. We note that some States have passed legislation regarding trading stamps. We have received letters and documents from various sources both pro and con.

There are those who think that the trading stamps help to increase the cost of the food product; and there are those who state that it is merely an advertising matter, that the costs do not go up at all, but merely stimulate sales.

This committee intends to get the full story. We have already heard from members of the Department of Agriculture.

We did hear from some other witnesses in Washington, D. C. This morning we are to hear from representative individuals who will speak both pro and con.

The subject is so vast that, obviously, the committee will not make any determination at this time and will continue to hear further witnesses in Washington and receive additional testimony.

At this time I wish to offer for the record a statement of the National Federation of Independent Business.

(The statement is as follows:)

Hon. VICTOR ANFUSO,

NATIONAL FEDERATION OF INDEPENDENT BUSINESS,

Chairman, Consumers Study,

New York, N. Y.

Cincinnati, Ohio, October 4, 1957.

MY DEAR MR. ANFUSO: I greatly appreciated an invitation to appear before the committee holding hearings on trading-stamp plans, and regret very much that other commitments make it impossible.

It is my deep desire, however, to make the following statement, which I hope will be included in the record of any testimony you may compile.

Our office has vigorously opposed trading-stamp plans on the grounds that such plans are harmful to small business; that the cost of the stamps and the promotion of same are passed on to the consumer in one form or another, and that no part of the added cost of living finds its way into the pockets of farmers, whose share of the consumer dollar is at an alltime low.

We presented this argument to the Federal Trade Commission; to the House and Senate Small Business Committees; and other agencies of the Government, including sworn testimony of retailers who said they would be forced out of business if they continued offering stamps, without passing the cost on to the con

sumer.

Service-station operators testified under oath before the FTC investigators to the effect that their suppliers (the major companies) were forcing them to take on stamp plans, on threat of losing their lease. Testimony along this line was sworn to in our office here at 450 Commercial Square in Cincinnati, before two FTC investigators. Those testifying were from this area, from Indiana, and Kentucky.

There have been various estimates made that stamp plans and promotion of same, has passed the billion dollar mark, and surveys made by such reputable sources as Reader's Digest, Time magazine, and Duke University of Law, have shown beyond a question of doubt, that stamp plans cannot be operated on any basis under a cost of 22 percent, and there is no evidence whatsoever that the farmer receives any part of this increase in the cost of living.

The great Safeway chain presented testimony to the Federal Trade Commission in which it was stated by Safeway: "We are in a position to know the facts, and the facts are that stamp plans cannot be operated under 21⁄2 percent, which, due to low margins of profit in our industry, must be passed on to the consumer." The power of stamp plan promotions was so great, however, that after spending millions of dollars fighting stamps, giant Safeway adopted stamp plans in areas where they had a foothold with the public.

In a private meeting, the president of the Kroger Co. labeled the trading stamps a "disease." The president of Colonial Stores stated the costs will ultimately be passed on to the consumer. The president of the Grand Union chain referred to stamps as "squirrel food," and numerous other chain officials have not only voiced such statements, but have agreed unanimously that stamp plan costs must be paid by the customer.

Consider the recent statement of Jewel Tea Co. officials in Chicago, who charge that stamp plans are a "very expensive promotional tool" and if widely adopted in Chicago "could up food costs in that city by $37 million." The president of Jewel reported that a Jewel-controlled chain recently acquired was giving stamps, adding "food costs in that area are higher than in our other stores." Surveys have shown that a 33-percent increase in sales in almost all cases is necessary to offset stamp plan promotions and cost of stamps. It has also been shown that any increase in business where stamps are first offered, that when others take on the stamps, most of the increases are wiped out. Once hooked with the stamps, a merchant is afraid to give them up for fear his competitor will take them on. Thousands of merchants would testify that if they keep the stamps they will go broke and any number will admit that cost of the plans are covered in highly dishonest ways.

It should therefore be very clear that, when a stamp company signs an exclusive contract with a big chain, the service stations, hardware dealers, and other kinds of business nearest to the chain's units must sign up at once or lose their chances to attract the customers of the big chain. This argument is used by stamp company salesmen, and whether true or not, the unwilling independent is brought into the scheme.

Immediately the representatives of competing stamp companies sign up another chain and the process is repeated, with the best known stamp companies getting the biggest chains, and then refusing to sell their stamps to direct competitors of the chain, thereby creating a monopolistic condition, in that secondand third-rate stamp plans are no real competition to the leaders when the independents, in desperation, take them on.

Various claims have been made that millions of dollars in unredeemed stamps have gone into the pockets of stamp companies. State legislators would be willing to testify that they have been bribed to drop their support of antistamp legislation, and surely the millions of dollars spent on signs, circulars, newspaper, radio, and TV advertising, and the millions invested in stamp books and premiums, store buildings, huge earnings of stamp companies, and the large incomes of stamp-company officials had to come out of the pockets of consumers.

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