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Mr. Ellis. For the information of the committee, I would like to to briefly review the organization of the National Oil Jobbers Council, the people that I represent.
The council is composed of 26 State and regional associations of independent jobbers and distributors of petroleum products. These 26 associations in turn represent some ten to twelve thousand jobbers doing business in 31 States in the United States. In all, we represent approximately 10,000 independent marketers of petroleum products.
The oil jobber is primarily engaged in the wholesale distribution of petroleum products. He delivers gasoline to the independently owned and operated service stations. He is the man that brings the fuel oil to your home. We purchase our supplies in the main from the large integrated oil companies. We compete with the large integrated oil companies, and I might state at this point that the National Conference of Gasoline Retailers, which represents approximately 80,000 independent service station operators throughout the United States, adopt the same position we take with reference to the competition of post exchange operated service stations. While I am not sitting here authorized to speak in their behalf, as a matter of principle, they do oppose that type of competition the same way as we.
We might say that the jobbers that I represent employ upwards of 100,000 employees. My people are engaged in what I believe to be the roughest form of competition in the United States economy today, particularly with an oversupply of gasoline hunting its way for the market place.
My people pay taxes. They are substantial citizens in the communities in which they operate. They are commercial small-business men who deplore competition by the Army services with their business, and I refer specifically to the competition of the PX-operated service, and what is commonly known to the trade as filling stations.
Before I proceed further I would like to make this observation, that I am not exactly a freshman when it comes to the proposition of Government competition, both hearing what the Government has to say about, and particularly the military, as well as being the recipient of thousands of complaints from small-business men in my capacity as staff director and special petroleum counsel for the House of Representatives Small Business Committee in 1948 and 1949.
I would like to further state that we rarely ever come to this Congress, and certainly
we rarely ever come seeking legislation to destroy our competitor. We believe sincerely in the proposition of free competitive enterprise, but we do not like the proposition of having to crawl in the rain with 16-ounce gloves on when our adversary is permitted to use brass knucks.
I have heard some testimony here this morning that points up some refreshing information that the military, as well as the Department of Commerce, is honestly and sincerely trying to do something about this competition. I say that as an old employee of the Small Business Committee. It is very refreshing to see it, but I would also like to state that in many respects—and I repeat, in many respects——the voice is that of Jacob but the hands are still those of Esau,
What I have particular reference to is this: They talked here this morning about a regulation that came out last November. I refer specifically to 4100.15, wherein it states in substance that the military is going to do something about competition with private enterprise. When that directive was issued, it went to the President. I noted it with considerable hope. Following reading about that in the press, I wrote a letter to the military, to Mr. Wilson, who is head of that. department, and I pointed out that there were hundreds of service stations being operated by post exchanges throughout this country selling at cut-rate prices to the detriment of commercial operators who operated their stations in the surrounding territory.
The CHAIRMAN. To whom do they sell?
Mr. Ellis. My commercially operated stations will sell to anyone who will drive in with the money to buy the gasoline.
Mr. RIEHLMAN. To whom do the post exchanges sell?
The CHAIRMAN. I have not been able to get any of that cut-rate gasoline.
Mr. Ellis. The cut-rate gasoline that I am talking about which is sold off of the Army post exchanges is sold supposedly, only to Army personnel, but I have a listing here from the jobbers and information that is coming to me from the field that civilians who have an entry sticker on their car that permits them access to the post, or to a number of posts, are also permitted to buy it.
Mr. RIEHLMAN. Are the civilians employed on the posts?
Mr. Ellis. Civilians emploved on the post. I do not say that that occurs in all instances, Mr. Riehlman. I can only state that I have information from the jobbers that on some of these posts civilians are also permitted to buy the gasoline despite an Army rule, or a post exchange regulation to the contrary. I have no argument about the regulation. But it is one of those things that what is regulated at the top is not also, as a matter of operation, carried out at the bottom.
I wrote to Mr. Wilson. I received a letter which in essence was a mass of words, not by Mr. Wilson, but signed by Mr. Hannah, in regard to this matter. Since I saw that I was getting nowhere that way, I made complaint to the Senate Small Business Committee. Senator Thye wrote a letter to the military in regard to this matter and they received a copy back from a Maj. Edward H. White, Chief, Army and Air Force Exchange Service. A copy of that letter sent by Major White was transmitted to me by Senator Thye for comment. I commented. I would like to point out one statement made by Major White in reply to Senator Thye. He said:
In view of the fact that patronage of the service stations is limited only to those persons authorized by regulations to purchase at exchanges, I do not see that such authorized exchange activity is in competition with independent operators and distributors in that area.
I have never heard a more asinine statement in my life.
I would like for you to look at the exhibit io my statement where I have listed the sales of the various Army and Air Force exchanges. I would like to point out that does not include those operated by the Navy. It is only the Army and the Air Force.
For example, look at the Atlanta region, the No. 1 item, Fort Benning. There is one station there that in 1952 had a gross business of $426,000. In 1953 it had a gross business of $370,000. For a man to state that to take that much station service business out of a community is not competition, then it is beyond my ability to understand what competition means.
The CHAIRMAN. Who was buying this gasoline at Fort Benning? Mr. ELLIS, Military personnel.
The CHAIRMAN. What were they usiing it for, for military operations?
Mr. Ellis. No. This has nothing to do with military operations. This is gasoline sold for personal use; this is not the Government buying it. This is where they sell it to those people for use in their own private automobiles.
The CHAIRMAN. Their own automobiles or Government automobiles ?
Mr. Ellis. Their own private cars; not Government vehicles.
The CHAIRMAN. Do you know where the people buying the gas oline at Fort Benning were traveling?
Mr. Ellis. I do not know-back and forth to their work, maybe.
The CHAIRMAN. Can rou show what thev were using it for, whether they were on dutv, whether they were visiting, and so forth? Do you know what type of activitv thev were burning this gasoline for?
Mr. Ellis. I have no means of getting that. A congressional committee might. I do not have the investigative authority to go and
The CHAIRMAN. Just the fact standing along that they used $375,000 worth of gasoline during that period, that might mean some
thing and it might not, unless we know what they bought the gasoline for.
Mr. Ellis. It means this: These people fill their own private cars and have them serviced at Army post exchanges rather than from a commercially operated service station off the post. These service stations have nothing to do with military usage, unless there is an Army colonel that lives off the post and he drives his car back and forth to work, like I drive my car back and forth to work. He probably purchases his gasoline in the post exchange.
The CHAIRMAN. Every once in a while we see over here a bus or two bringing in service men. Would the gasoline to operate those cars be included in some of these figures that you have given us?
Mr. Ellis. No, sir.
The CHAIRMAN. Why not? They get that gasoline at the post exchange station.
Mr. Ellis. Not to my knowledge. A privately operated bus
The CHAIRMAN. I am not speaking about a private bus. I am talking about an Army bus or a Navy bus.
Mr. Ellis. They do not buy their gasoline. The Army and the Navy buy gasoline for the use of the military, the duty use, separate and apart from this post exchange operation, just like the Army buys beef to feed its soldiers, let us say, in the mess separately from the post exchange selling beef to personnel who buy it for consumption in their homes.
The CHAIRMAN. I could go along with you on the proposition that the post exchange station should not be selling gasoline for use in a private car which is used purely for personal business outside of their duties. As I look at them coming bere, and carting these soldiers around, there is no reason why the Government should not buy gasoline for that.
Mr. Ellis. That is right.
Mr. Judd. Let us get this clear. These Army and Navy buses that go from the Anacostia stations to the Pentagon and back, they do not go into these service stations and fill up: they fill up separately?
Mr. ELLIS. That is correct.
Mr. Judd. When a convoy goes out on the road to move from Belvoir to Ft. Meade, its vehicles do not fill up at these service stations that this man is talking about?
Mr. Ellis. They do not.
Mr. JUDD. I would like to ask the people from the Pentagon about this.
Mr. STEMPLER. They do not.
Mr. JUDD. The service stations are for the private cars of people authorized to come on the post?
Mr. STEMPLER. I think the greatest distinction is that the gasoline he is talking about is not purchased from appropriated funds.
Mr. Ellis. I should like to point out how uch business these post exchange service stations are doing. According to the Ar y and the Air Force's own figures, for 1953, it is in excess of $23 n illion. It. was approximately the same for 195.2.
I can also state to you gentlemen they are now still in the process of soliciting bids for gasoline for those service stations. They are soliciting bids for the erection of additional stations.
The CHAIRMAN. What is the price based on in your exhibit A?
Mr. Ellis. Gross sales. That is the basis on which they are able to buy it.
The point I was going to make just a few minutes ago was this: most of the post exchange service stations are able to purchase gasoline from the major oil companies at prices from 2 to 4 cents per gallon cheaper than commercially operated stations can buy it.
Mr. JUDD. Why is that?
Mr. Ellis. There are several reasons, Mr. Judd. No. 1, the post exchange does not have to pay taxes. They are not subjected to the normal taxes that a businessman is subjected to. They do not have those expenses.
The second proposition in this: under the program they use for erection of these service stations, the cor.panies that get the bids to erect service stations on the posts and supply the post exchanges on a basis whereby the service station will be paid for on a rental basis, it means that the company that builds the station gets the business for from 5 to 10 years, or for however long it takes to pay for the station at a rental, in most instances, of 1 cent a gallon.
No. 2, some of the companies it is on a volume basis. They are able with these cut-rate prices to sell at the post exchange stations considerably more than the average commercially operated station will sell, and by virtue of the volume these companies can make what they call large transport drops of gasoline and effect some savings with that type of delivery. Those are most of the reasons.
Mr. OSMERS. I did not notice in your exhibit any naval installations.
Mr. Ellis. I do not have those, Mr. Osmers, for the reason the only way I was able to get those that I have was that the Senate Smail Business Committee asked the military for them and the Senate Small Business Committee after that supplied them to me for comment and check.
Mr. OSMERS. Does the Navy also operate filling stations of the type to which you refer?
Mr. Ellis. Yes; they do, but I do not have the statistics in the same manner as I have them here.
Mr. Osmers. It seems to me for the record to be complete you should show the Navy also operates in this field.
Mr. JUDD. Mr. Ellis, before you leave that, where you say "tank wagon, less 244 cents a gallon," what do you mean by "tank wagon”? Is that the price an independent filling station would have to pay to get the gasoline?
Mr. Ellis. Yes. In the trade the price at the filling station is referred to as the tank wagon price. The price to the jobber or wholesaler is commonly referred to as a tank car price.
Mr. Judd. So when you say "price basis” that is what the person who comes in and fills up his tank has to pay? He has to pay the tank wagon price, less 244 cents a gallon?
Mr. Ellis. No, sir.
Mr. Ellis. No. That is the buying price of the post exchange shown here.
Mr. Judd. Yes.
Mr. Ellis. Now, the price that the consumer pays is a markup on that. I might give you some examples specifically.
For example, at Maxwell Air Force Base in Montgomery they have two stations. The post-exchange prices there are from 3 to 4 cents