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missary price at Fort Eustis is 12 cents and the minimum prices of the State milk commission remains at 2442 cents.
Competition from commissaries is supposed to be confined to Government employees. However, the Government employees often buy milk at the low commissary price and resell to neighbors who are not employed by the Government.
The volume of business by the commissaries runs to about 20 percent of the volume of the entire area and seriously disturbs the controlled price by the State milk commission.
Alabama.-Selling policies of post exchanges and commissary at Maxwell Field are detrimental. Commissary sells dairy products to military personnel living on the post or in the city at practically contract price. Post exchanges usually sell on very small markup. Most disturbing factor about this practice lies in the fact that a large number of military families live in the city.
Pennsylvania.–Our area suffers loss of at least 1,000 quarts milk per day sales made by Valley Forge Army Hospital Commissary. Our minimum State milk control price is 23 cents a quart. Valley Forge Commissary milk is 16 cents a quart. Officers, enlisted men, other workers living off base, buy milk, dairy products for themselves and friends at commissary. This causes milk industry bad public relations as well as lost sales to these people.
South Dakota.—Government commissary at Ellsworth Air Base detrimental to all private business in Rapid City. Commissary price 16 cents per quart, price on routes and in stores 22 cents per quart.
Rhode Island.-Sales by commissaries in Rhode Island have affected the dairy business considerably; friends of servicemen also benefit by commissary cut price of 5 cents per quart. This gives the public the erroneous picture that the dairy business is very profitable.
Kentucky-Fort Campbell commissary retail milk prices 5 cents per quart below local grocery and dairy delivery prices. Half gallons 31 cents against our 41-cent price. Quarts 16
cents to our 21 cents. Value total considerable but amounts not available. We feel our prices are already low for good grade "A" products.
North Carolina.-Fort Bragg commissary retailing fluid milk 7 cents to 9 cents under prevailing price purchased from outside sources. Sales average 5,000 quarts daily.
North Carolina.-Under present system of competitive bidding for military contracts, the price for milk and milk products has been driven down to a ridiculously low price. Army camps in the Carolinas are buying milk for as low as 3 cents per half pint and 11 cents per quart and the post exchanges and commissaries are selling milk close to contract prices. These low prices are eventually, passed on to dairy farmers who receive less than manufactured prices for grade "A" milk. Suggest that military should pay at most 10 percent below prevailing wholesale prices in the region where the Army posts are located. This would help dairy rmers and processors in all States where Armed Forces are maintained.
Tennessee.--Stewart Air Force Base, Smyrna, Tenn., and Fort Campbell, Clarksville, Tenn., are retailing quarts 5 cents less and half gallons 972 cents less on sweet milk and 1/2 cents less on quarts buttermilk to personnel on or off post. Our retail business affected in these areas considerably.
South Carolina.—This company has for some time experienced cut price retail milk selling policies at several Army and Air Force post exchanges particularly at Camp Jackson, Columbia, S. C., and the Air Force Base at Greenville, S. C., where civilians freely purchase milk from such exchanges at prices of 10 cents or more per quart below established retail home-delivered prices.
California.—There have been many specific instances where Government activity has operated to the detriment of independent business. These activities are located near populated areas and personnel could be adequately served by existing business. Some of the Government locations are as follows: Hamilton Field, Presidio of San Francisco, Alameda Naval Air Station, Moffett Field, Mare Island, Hunter Point. The major problem has been the selling of products from post exchanges to people who live away from the installation. The prices have been well below the prevailing price and have resulted in lost business to distributors operating in these areas.
Texas.--The selling policies of Carswell post exchange are detrimental to the retail milk business; prices are considerably below wholesale prices and have been the cause of having to eliminate several retail routes in the vicinity of this base.
South Carolina.—The naval commissary at Charleston is currently selling about 8,000 quarts of milk at 12 cents per quart as against 24 cents in the city. Ap
proximately 10,000 families receive this service. At Parris Island commissary, sales of 2,000 quarts daily at 13 cents per quart; 500 families privileged to purchase at Parris Island Controls of these sales have recently become lax. One customer is reported to have bought 70 quarts in 1 day.
New York.—Commissary sales at West Point and Stewart Field, N. Y., in a little over 4 years have grown from nothing to over 85,000 quarts of milk per month. Within 1 year's time we lost 4 retail routes, 2 of them being located at West Point and 1 at Stewart Field, in which half of the business was on the post and the other half in a small surrounding development nearby. One additional route, serving the adjacent area to these two locations, had to be discontinued also because of the sales made from the commissaries.
Our wholesale business to stores in the Highland Falls area was greatly affected and we understand that this milk is being carried as far as 20 to 25 miles from the post and is sold to anyone holding a commissary card, which, we understand, is for the commissioned officers, enlisted personnel, and civilian employees.
This program of sales from the commissaries unfortunately had its inception shortly after we had completed our new plant at Newburgh, N. Y., which we feel is the finest plant in New York State. This plant was built to replace our existing facilities in the Newburgh-Mid-Hudson area.
District of Columbia. — Federal commissaries and post exchanges in the greater metropolitan area are selling homogenized vitamin D milk at 14 cents a quart in paper at Fort McNair, and at Walter Reed the same grade of milk is being sold out at 17 cents. This price at Fort McNair is 9 cents less than the delivered price to home on homogenized vitamin D milk. You can see that this difference is raising a great deal of difficulty when it comes to continuing volume on delivery trucks. We have had many customers discontinue home delivery and buy it at the post exchanges. Oftentimes one person will buy 3 or 4 cases of milk and then let their neighbors have some for their use.
In view of the fact that we have to pay taxes and compete with other private concerns in our business, it hardly seems fair that this policy of selling milk so far below the prevailing price should be allowed to continue.
Illinois.-Selling policies of post exchange and commissary stores at Fort Sheridan and Great Lakes are definitely detrimental to private business. Examples:
Retail delivered price to civilians 83 cents a gallon, 50 cents a half gallon, 2572 cents a quart.
Retail stores to civilians 75 cents a gallon, 42 cents a half gallon, 23 cents a quart.
Commissary store price to Navy personnel 60 cents a gallon, 30 cents a half gallon.
We have always served retail trade on the Navy base at lower than retail civilian prices. These prices at present are 75 cents per gallon, 45 cents per half gallon, and 23 cents per quart. With commissary store selling for 30 cents a half gallon, you can see this is detrimental. They also sell for much less in other grocery items which is detrimental to private business.
Maryland.—The selling prices of milk and cream at the commissaries in our sales territory, specifically Fort Holabird Army Chemical Center, Fort George C. Meade, and the Naval Academy are detrimental to and compete with our retail and wholesale milk business. These sales commissaries are now selling milk products to their customers from 672 cents to 8 cents per quart below our retail price. Cream products are sold from 6 cents to 12 cents per half pint below our retail price.
California.—Experience in various California markets shows sales by dairy products commissary stores and similar outlets at lower prices than civilian stores. Military installations buy at prices lower than those established by the State milk control bureau for civilian outlets. Regularly military outlets sell at prices which do not include full normal costs of doing business. These prices are made available to various classes of military personnel and many civilians not connected with military participate. As a specific instance, the Navy commissary store, Naval Air Station, Alameda, Calif., purchases milk'at 1372 cents a quart and retails at 15 cents a quart. Civilian grocers same area must pay 18 cents a quart and are required by the State bureau of milk control to sell for 20%2 cents a quart. Similarly, ice cream purchased by the commissary for 28 cents a quart retails for 29 cents a quart. Comparable civilian wholesale costs are 40 cents a quart and retail 50 cents to 55 cents a quart. These practices attract business to military installations which would normally go to civilian stores. Suggest Government purchasing agencies respect minimum prices set by State laws in applicable areas.
Texas.—Post Exchange of Carswell Air Force Base retails milk under wholesale prices. This has damaged retail grocers in the vicinity and also our home delivery routes. United States Public Health Service Hospital here owns cows and produces milk for patients at large loss to taxpayers.
Wisconsin.- Almost unlimited loans by co-op bank, St. Paul, Minn., to dairy co-op in fluid milk business plus the absence of Federal income taxes such as other dairy corporations and companies pay provide a very unbalanced economic condition in favor of co-ops that are so favored as compared with Federal income taxpaying private enterprises. This can be classified as indirect competition but the economic impact is no less severe.
Kansas.-Fort Riley commissary buying milk as low as 12 cents and ice cream around 19 cents per quart. Our problem is Government-financed marketing co-ops. We cannot find where our competing co-ops have paid producer dividend resulting in low prices for industry loss of sale to co-ops and naturally taxes for Government.
ADDITIONAL EXTRACTS OF COMMUNICATIONS Rhode Island.—Naval commissary store, Quonset Point Naval Air Station Quonset, R. I. sells approximately 1,600 dairy quarts of milk at a price 6 cents per quart under minimum price allowed by Rhode Island Milk Control Board for a comparable package of home-delivered milk. Since this policy has been in effect at the commissary store about 10 months we have lost approximately 500 dairy quarts of home-delivered business. With an average price of approximately 25 cents per quart home delivered this means an estimated yearly loss of $45,625 of sales.
Rhode Island.—We are losing sales of about 200 quarts daily to Quonset Point Commissary. Our buying and selling prices are controlled by Rhode Island Milk Control Board. Customers feel we are gouging them because commissary undersells by 6 cents per quart.
California.—The dairy industry has been plagued for several years by the competition caused by the Castle Air Base at Merced, Calif., on which they operate and maintain a post exchange store. They maintain prices, in this store, on dairy products, as well as other merchandise, at practically the cost or a fraction of a cent per unit over the cost, which is considerably below the prices maintained by the stores on the State-controlled minimum schedule.
About 2 years ago, this store was closed for remodeling for a period of several weeks. During this period they enlarged the store to nearly twice its former capacity with little or no additional personnel on the base. During this time, the sales in Merced among the dealers increased approximately 27 percent. When this store reopened the sales among the merchants in town dropped. The store sells a complete line of items-clothing, groceries, jewelry, stationery, etc. The same procedure is followed on all merchandise.
We understand that the salaries of the Army personnel employed in the store are not charged to the operating expenses of the store. We find that many of the Army personnel living off the base and in the town of Merced go in with neighbors and friends and select additional merchandise above their own requirements and let their neighbors and friends have it at their cost.
Louisiana.–Barksdale Air Force Base Commissary located near Shreveport, La., is selling milk products to active and retired military personnel in the Shreveport-Bossier City, La., area at prices from 8 to 17 cents per unit less than store selling prices. Approximately 200 cases are sold daily.
SUPPLEMENTAL STATEMENT OF JAMES E. JACKSON, EXECUTIVE DIRECTOR,
GEORGIA DAIRY ASSOCIATION, ATLANTA, GA. In answer to the question propounded by one or more members of the committee as to specific evidence of milk finding its way from authorized sources to unauthorized sources and the question as to why the names of such authorized persons who pass this merchandise to unauthorized persons, or their automobile tag number, or some other method of proof was not established.
It is a well-settled axiom of law that "he who places in the hands of another an instrument of fraud is guilty of fraud himself.” If the commissaries and post exchanges were not handling merchandise on a cost basis there would be no inducement for military personnel or for civilian members of the posts buying
this merchandise in quantities in excess of their own needs and selling it to persons who are not authorized to receive this concession.
It does not appear reasonable for the Government to expect private citizens to set up a system of policing Government commissaries or post exchange stores. If the Government, with its vast resources to do so, is not willing to establish a system that would prevent this type of unfair competition it will be better, and in the interest of all its people, to discontinue this type of business altogether and to pay military personnel on the same basis that civilians are paid in private employment so that the temptation would be removed to carry on black-market operations as that is what you can say they are doing. I am sure the dairy industry of Georgia nor the dairy industry of the Nation takes the position that all military personnel are parties to these unfair tactics. It may even be that practically all of it is carried on by authorized civilian employees which makes the matter much worse as we see it. Your earnest consideration of some means by which the Government itself will police its own industries and not insist that private industries police governmental operations will be appreciated. Private industries are in no position and have no desire to set up a spy system on our Government. In my opinion the necessity for such would doubtless create a lack of confidence in the operation of our Government which no true American wants or even to entertain a thought.
Mr. WARD. Mr. Johnson.
Mr. JOHNSON. Mr. Chairman, I think the members of the committee have a copy of the filed brief before them, and I wish to paraphrase in explanation some of the items in that brief.
Mr. OSMERS. All right, sir. Would you take about 5 or 10 minutes to do it, sir?
Mr. JOHNSON. Well, if I were to time myself—I like to get down into fractions, say 84 minutes, or something like that.
Mr. OSMERS. Eight and a half minutes?
STATEMENT OF JERRY P. JOHNSON, REPRESENTING THE
AMERICAN WAREHOUSEMEN'S ASSOCIATION
Mr. Johnson. My name is Jerry P. Johnson. I have been a warehouseman for over 30 years, and am a past president of the National Association of Refrigerated' Warehouses, a division of the American Warehousemen's Association. I have been authorized to speak for that association as personal representative of its president, Mr. A. B. Efroymson of Cleveland, Ohio, and the association's board of directors.
Attached to the statement each member of the committee has before him is a copy of this authorization.
The American Warehousemen's Association appreciates this opportunity to express its views on Government competition with the warehousing industry and in favor of H. R. 8832. The association represents nearly 1,000 privately operated refrigerated and merchandise warehouses throughout the United States. These member warehouses represent the majority of all the privately operated storage space in the country. AWA strongly urges the passage of the AntiGovernment Competition Act as embodied in H. R. 8832, and fully supports the policy that “The Government shall get out and stay out of business-type competition with its people wherever consistent with the national health and safety" as declared in the bill. This statement, however, will be restricted to a discussion of Government competition with the warehousing industry.
Chairman Hoffman requested inforination on the following specific points:
(1) Extent of Government competition;
(4) Total value of Government investment. These points are discussed in order in our official statement, and we have tried to give you real facts and figures to guide you in making decisions about this vital bill.
With respect to the extent of Government competition: The warehouse industry operates an estimated 165 million square feet of storage space employs approximately 47,000 people and pays annually an estimated $30% million in Federal taxes, plus substantial State and local taxes. These warehouses are currently operating at 70 to 75 percent of capacity.
Government competition with these privately owned tax-paying warehouses is extensive. The Government is the largest warehouse operator in the world. In fact, the total of Government warehouse space is far greater than the total of all commercial space-over three times that total, in fact.
Mr. CONDON. I hate to interrupt Mr. Johnson, but is that a quorum call, Mr. Chairman?
Mr. OSMERS. I believe it was three bells. I thought we could have a few more minutes, possibly.
Military storage space: The Army, Navy, and Air Force operate warehouses in over 100 locations in this country. According to a Hoover Commission report, the Military Establishment in 1948 operated nearly 530 million square feet of storage space and required the services of 103,000 persons to man and administer these facilities and their functions.
Approximately 8,000 carloads of Department of Defense merchandise is stored with merchandise warehousemen at present, which requires only a fraction over 1 percent of the privately operated warehouse space.
Warehousemen in Philadelphia, New York, and Chicago within recent years organized, at Governemtn request and at considerable expense, defense warehousemen's associations for the pooling of facilities for storage of defense merchandise. Two of the threeNew York and Chicago --were disbanded because no goods were received, allegedly because expected commodities went to Government storage instead.
General Services Administration: General Services Administration's Federal supply service owns or leases for its own operation a total of over 5 million square feet of storage space. It is alleged that much of this has never been occupied with stored goods and some 2 million square feet of this space is not currently needed.
The General Services Administration, Emergency Procurement Service, is responsible for the storage stockpile of strategic and critical materials and currently occupies some 24 million square feet in Government-owned and operated facilities. It was the stated intention of EPS officials, to eventually move all strategic and critical materials into Government-owned space. This plan has been at least temporarily shelved because of the action of the present Congress in providing in the independent offices appropriations bill that, of money appropriated for General Services Administration,