COOPERATIVES

THURSDAY, SEPTEMBER 25, 1947

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE No. 2 OF THE

SELECT COMMITTEE ON SMALL BUSINESS,

Los Angeles, Calif.

Subcommittee No. 2 met at 9 a. m., in the United States Post Office and Courthouse Building, Hon. Walter C. Ploeser, chairman. presiding.

Present: Representatives Ploeser (chairman), Riehlman, and Patman.

Also present: Representatives Grant, of Indiana, McDonough, of California, and Phillips, of California; Messrs. H. W. Rowell, executive director; Allen W. Maddren, assistant director; Willis J. Ballinger, special economic counsel to the committee on the cooperative hearings.

Chairman PLOESER. The committee will come to order.
Proceed.

TESTIMONY OF MILTON M. GAIR, REDLANDS, CALIF.

Mr. GAIR. Mr. Chairman, I happen to be a retailer in Redlands, one of the centers of the navel-orange section of California.

The only reason I am here, gentlemen, is that as a retailer, I want to take advantage of the chance publicly to say, "Thank you to the management idea that created our system of grower-owned cooperatives." Redlands happens to be the main office of the Mutual Orange Distributors, one of our largest cooperatives in Redlands.

I have known their heads personally for years. Also, it is one of the main sources of shipment of Sunkist oranges, "Sunkist" being the brand name under which California Fruit Growers Exchange ship their products.

It is my studied opinion, gentlemen, that if it had not been for the sustained power of national and section advertising under the growerowned labels of "Pure Gold" and "Sunkist," and the methods provided. by the management of Pure Gold and of Sunkist for the orderly distribution of citrus fruit at a fair profit all over the country, good years and bad, to and from orange growers to customers, the industry would not be in as good shape as it is today.

Also, and this is an important point to me, it has resulted in fair prices to the consumer, good years and bad, also with the assurance to the housewife that she can uniformly buy the brand of her choice, a known brand of her choice, at a store of her choice, at the time of her choice, which would have been impossible years ago.

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So that is why I am here to have the chance merely to give you my opinions as one who lives in Redlands and to have a chance to salute this free-enterprise ingredient and the cooperative system of marketing.

Chairman PLOESER. Do your remarks apply to all cooperatives? Mr. GAIR. The grower-owned.

Chairman PLOESER. Grower-owned cooperatives?

Mr. GAIR. Grower-owned; yes.

Chairman PLOESER. I said all cooperatives. You know there are consumer cooperatives, there are producer cooperatives, and marketing cooperatives.

Mr. GAIR. I will reserve it on the consumer cooperative. It is in an entirely different projection.

Chairman PLOESER. Do you care to make
Mr. GAIR. Yes; since you asked me.

any statement on that?

I believe we should not discourage or legislate the consumer cooperatives out of business, if it is going to make the businessmen more humane and more efficient. It should be more efficient than the establishments of the retailers.

It is going to survive. However, I should like to say that the consumer cooperatives should not be given a free ride. It should pay the same taxes, the same overhead as its competitor, the independent form of distribution.

Mr. BALLINGER. Do you think that consumer coperatives should pay taxes?

Mr. GAIR. Yes.

Mr. BALLINGER. But the farm cooperatives should not?

Mr. GAIR. Yes; I believe we all should pay our civic overhead in the form of taxes.

Mr. BALLINGER. Proceed.

Mr. GAIR. Here is another idea, a very important point to me, particularly today when we hear talk in the newspapers and by the newspapers about the fear of communism. To me one of the biggest bulwarks against communism is the widest distribution possible of business property, farm, business, and retail ownership.

I think it is obvious if we have say 10,000 men, each owning his own store or farm, keeping his own profits that are given him, working out his own peace and philosophy according to what God gave him, is one kind of free enterprise.

The other kind perhaps would be thousands of stores or ranches owned by the corporations located thousands of miles away, under absentee ownership, management and policy being dictated from the main office thousands of miles away, and continuously piling up retail profits.

That, too, is another kind.

I submit that we should sustain the former kind. Our objective should be the widest distribution possible of business and farm ownership.

That is one reason I salute the grower-owned coperative. It has enabled the average fellow to own his own grove, with the best possibility of survival, and with the continued growth, for example, of the buying group, so that the chain-store system in the Nation is held in check.

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To be specific, I refer to the Atlantic Commission, the A & P. The Atlantic Commission is the buying group for the A & P. It has the so-called buying power for thousands of stores.

I say it would have been economic suicide for the growers, my customers, to bargain with that organization, against the mass buying power of it, even collectively.

I want to publicly salute the grower-owned cooperative, because it has enabled the grower to sell publicly in defense against the chainstore system, his own brand or his own product.

He can own his own store or his own business, and I submit can diligently protect the customers' and the growers' interest.

My customers think that the growth of the grower-owned cooperative has lowered the spread over a period of years, good years and bad years, between the farmer-producer price and the consumer price, and the most thought-provoking part of it is it has returned more to the farmer and over a long pull it has been anti-inflationary for the consumer. It has reduced the price to the consumer, and increased the producer income.

I think practically every graph will prove that.

Chairman PLOESER. Have you any figures to submit?

Mr. GAIR. No; I am not qualified to do that.

I think the last Federal agricultural income graph of 1938 will prove that, Mr. Chairman. I will submit it for factual information. Chairman PLOESER. We are 9 years away from 1938.

Mr. GAIR. I submit also, Mr. Chairman, we cannot project as a uniform condition the situation that has existed since Pearl Harbor and since all laws of supply and demand have been upset.

We cannot accept that as normal.

Mr. PATMAN. Mr. Chairman, I have known Mr. Gair for about 15 years and I know him to be one of the best merchants on the Pacific coast, having the interest of the small-business men always uppermost in his mind.

Mr. GAIR. I am appearing here, Mr. Chairman and gentlemen, to say that we are sincere, that we heartily endorse Sunkist and Pure Gold and the public relations established by them, to salute the principle of the grower-owned cooperative, as being a free enterprise and an ingredient to a healthy economic situation.

May I call particularly to your attention

Chairman PLOESER. You are not asking that this be made a part of the record, as part of our evidence?

Mr. GAIR. Here is the voluntary statement by Ernie Pyle, who, I understand, never gave an endorsement except in one instance. This is taken from his book Brave Men, and states:

After the war Buck wanted to go back west to the land he loved. He wanted to get a little place and feed a few head of cattle and be independent-you "kinda" like a place of your own.

May I conclude by saying that the widest distribution possible of business and farm ownership will give the men the will to fight more so than when one man owns thousands of stores and farm land.

Chairman PLOESER. We thank you.

TESTIMONY OF STUART A. COULTER, GLENDORA, CALIF.

(Whereupon, the witness was duly sworn.)

Mr. BALLINGER. You have some remarks you wish to make to the committee?

Mr. COULTER. Yes.

Mr. BALLINGER. Proceed.

* Mr. COULTER. I wish to make a few remarks as a small-business man engaged in the retail hardware business in the city of Glendora, situated 30 miles east of Los Angeles, and basically a community comprised of citrus interests.

To the small retail merchant there is nothing as desirable as a steady income in a community and as Glendora has developed, that development is directly traceable to and comparable with the development of the producer cooperative.

In Glendora there are now five cooperative packing houses, four orange and one lemon.

Because of these basic industries to a community such as Glendora, the packing house is a basic industry as well as an agricultural pursuit and as such produces an income that can be fairly well relied on.

Of course, I might point out, Mr. Chairman, that at times even the cooperatives are not able to give a satisfactory return to their growers, which, in turn, is very readily reflected in our sales of merchandise, because as the citrus industry goes in our community, so goes business. Mr. BALLINGER. What is your business?

Mr. COULTER. Retail hardware and lumber.

Mr. BALLINGER. Any cooperatives in your business?

Mr. COULTER. Not that I know of, sir.

Mr. BALLINGER. Would you like to see one?

Mr. COULTER, Yes.

Mr. BALLINGER. Do they have a better way of doing business than the way you do it?

Mr. COULTER. I do not think so.

Chairman PLOESER. You have been talking about the producer cooperatives?

Mr. COULTER. Yes.

Chairman PLOESER. Does your feeling in the matter apply also to consumer cooperatives?

Mr. COULTER. I do not think so. I refer to the producer cooperative with which I am more familiar.

The consumer cooperative is a type of cooperative I am not familiar with and which is not very large in this area, consequently, I would like to confine my remarks solely and only to the producer cooperative. Chairman PLOESER. Fine.

We thank you.

TESTIMONY OF JOHN L. DONOVAN, THE LOS ANGELES CENTRAL LABOR COUNCIL

(Whereupon, the witness was duly sworn.)

Mr. BALLINGER. You are a representative of the American Federa tion of Labor?

Mr. DONOVAN. I am a representative of the Los Angeles Central Labor Council.

Mr. BALLINGER. You have a prepared statement?

Mr. DONOVAN. I have a prepared statement which I wish to read. Mr. BALLINGER. Proceed.

Mr. DONOVAN. The Los Angeles Central Labor Council desires to state, in presenting this information to the committee, that it speaks in behalf of the 500,000 American Federation of Labor members in Los Angeles County and their families.

The conviction of the council is that the best interests of the people of the United States will be served if this committee recommends to the Congress that encouragement of the cooperative movement be renewed and expanded.

From the official announcement and the course of this hearing, and from releases and newspaper accounts, we have observed that two matters are before the committee. The first purpose is an investigation into an exemption from certain income taxation with respect to marketing cooperatives.

Chairman PLOESER. Would you mind an interruption?

Let me state that the first purpose of the committee is to develop a pattern of the competitive forces in our economy as they affect small business.

The fact that cooperatives is one phase of our enterprise, one type of enterprise, and the fact that the tax situation develops, is incidental to the primary purpose of our study. It is not its full purpose. Mr. DONOVAN. To the extent, Mr. Chairman, that that is a qualification of the interest of the committee, I stand corrected.

If I may proceed.

Chairman PLOESER. Proceed.

Mr. DONOVAN. Respecting this primary consideration, we are unable, after examining the 1946 report of the committee of the last Congress and the excellent remarks of Congressman Patman in the Congressional Record, to see any sound reason for rescinding the exemption available to farm marketing cooperatives under the present law.

The income of members of such voluntary associations should be taxable upon the same basis as the income of members of a partnership.

Unless it can be demonstrated that partnerships or individually owned enterprises are at a serious disadvantage by reason of special treatment, there seems to be no grounds for placing special burdens upon farm marketing cooperatives. The mere fact that such voluntary associations display competitive efficiency is no reason for introducing impediments to their operations.

A basic consideration is that the farmers marketing their products through cooperatives are, in the vast majority of cases, very small businessmen themselves.

The second matter before the committee seems to be a general inquiry into consumer cooperatives.

În addressing this aspect of the committee's interest, we rely upon releases and newspaper accounts during the past several weeks and upon the direction of the questions during yesterday's session.

The position of the Los Angeles Central Labor Council is that the program of consumer cooperation is sound, American, free, competitive enterprise.