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conclusion that our military services are in the retail business to the tune of nearly $700 million per year.
Any such sales volume figures need to be adjusted to customary retail levels in order to reflect the true picture of the extent of exchange competition to private business.
It should be clearly understood that the American Retail Federation does not object to the operation of post exchanges and commissaries as long as they do not develop into department, specialty, and supermarket stores, which in many cases they have become.
All we have been asking is that the military, where adequate shopping facilities exist, avoid unfair and unnecessary competition with local taxpaying businessmen.
At remote and inaccessible posts in the United States where private facilities are nonexistent or inadequate it is understood that proper facilities should be provided.
Although the sales volume of post exchanges has increased since 1948, the Philbin subcommittee of the House Armed Services Committee did make substantial progress in restricting sales in post exchanges and commissary stores. However, that committee did not go far enough. Exchanges still sell expensive watches, jewelry, sporting goods, cameras, tools, and other luxury and semiluxury merchandise, in contravention of the mandate of Congress to stock only items of small personal needs or items of convenience and necessity.
Within the metropolitan area of Washington there are six post exchanges and an equal number of commissaries, all of which are within minutes, by public or private transportation, of splendid private facilities. We can find no justification for the military maintaining these elaborate post exchanges and commissaries under such circumstances.
Another regrettable byproduct in this problem is that considerable suspicion and doubt as to the integrity of the average retailer has been raised because average retail prices, of necessity, must be higher than prices in post exchanges and commissary stores. The retailer has many costs included in his prices which do not have to be assumed by military stores.
Mr. Chairman, we are painfully aware of our limited evidence in this matter. We are in much the same position as you and your colleagues on this committee and the administration. This is a vast area of Government activity that needs thorough investigation for the basic facts which will make possible proper evaluation. It is for this reason that the American Retail Federation supports and endorses the principles enunciated in H. R. 8832, H. R. 9834, and H. R. 9835. These bills, if enacted, would go a long way toward eliminating unfair and unnecessary competition by Government with private businesses.
Mr. OSMERS. Thank you very much.
Going back to the testimony given by the representative of the milk industry, these retail activities seem to narrow down pretty quickly to a question of policing. Would you admit that?
Mr. Ward. Mr. Chairman, in the Defense Act of 1953 it is provided: That no appropriation contained in this Act shall be available in connection with the operation of commissary stores within the continental United States
unless the Secretary of Defense has certified that items normally procured from commissary stores are not otherwise available at a reasonable distance and a reasonable price in satisfactory quality and quantity to the military and civilian employees of the Department of Defense.
But the thing is, we ran up against the very same thing that the milk witness indicated, and these things just aren't being policed. That's all.
Mr. Osmers. I believe that the Secretary of Defense, under that statute that you just read, has closed some commissaries. Is that true?
Mr. WARD. He has closed, I think, six commissaries.
Mr. OSMERS. Were there not 52 commissaries operated in the United States?
Mr. RAY WARD. Two hundred and ten.
Mr. Osmers. Two hundred and ten commissaries, or commissaries and post exchanges?
Mr. RAY WARD. Commissaries,
Mr. OSMERS. Two hundred and ten. I guess the 50 was the $50 million worth of business.
Mr. RAY WARD. The fifty odd were the ones investigated by the General Accounting Office.
Mr. OSMERS. I think maybe the record should show 50 of the commissary operations were investigated by the General Accounting Office to determine the effectiveness of their bookkeeping and their competitive activities.
I know you would be interested in some of the things they found. They found there were some rather sharp practices being carried on by the people operating them in connection with making comparisons with retail prices around.
They would take pepper that they would buy in, say, hundredpound lots and compare it with the 2-ounce can that the average family buys in the store. In other words, they did not follow the market-basket principle which they are supposed to do.
Mr. CONDON. Mr. Ward, I have in my district 1 at Travis Air Force Base, 1 at Mare Island, and I think there is 1 at Camp Stoneman. I have talked to a lot of people out in my district. I have talked to a lot of Navy and Army people. One of the things which they have raised, which I think you have passed over rather lightly, is the morale question.
Mr. WARD. Yes.
Mr. CONDON. I know we are finding it difficult to get people to reenlist. We are finding officers leaving the service, and some of the reasons some of these men give for terminating or failing to reenlist is that one by one the so-called fringe benefits that had been available to military personnel are being taken away and cut down to that extent, so that the service becomes that much less attractive to them.
What do you think of that?
Mr. WARD. Well, Mr. Condon, I believe there is probably some truth in it. I happen to live right next to a colonel over here in Arlington, and we have discussed this problem, too.
Mr. CONDON. I imagine he would have some strong opinion about it.
Mr. WARD. That is right; he does, but I don't place it from what I know about the military personnel as 1 of the top 2 or 3. It is
somewhere over on page 3 or 4, as far as their relationship with the service.
Mr. Condon. For example, at Mare Island I was talking with one of the admirals there. They used to be able to buy frigidaires and household appliances, rather costly ones, through their commissary or PX, and now they can't, and the men are all complaining about that, that they have to now pay more downtown.
Mr. WARD. Mr. Condon, it seems like all of us have a choice to make as to the type of profession we follow. You have chosen to become a Congressman. . I have chosen another course, and so on. We assume we are paid adequately for our services, whether we will agree to that or not, and we all have to buy in the same places.
Mr. CONDON. Would this seem like a logical thing, that if we are going to remove fringe benefits of this sort from military personnel, we ought to at least hit head on the other program and increase their wages?
Mr. WARD. I think that definitely should be considered; yes.
Mr. CHUDOFF. From your statement, it appears to me--you said there were some number of commissaries or post exchanges in the District of Columbia.
Mr. WARD. I said the metropolitan area.
Mr. CHUDOFF. Then you read from the Defense Appropriation Act of 1953, wherein the Secretary of Defense or the Secretary of Army had the right to close PX's, or commissaries, if, in his opinion, the same type of merchandise probably could be bought at a reasonable and fair price in the particular metropolitan area from private establishments.
Mr. WARD. Right.
Mr. CHUDOFF. Now, can it be that the stores in metropolitan Washington are not selling the type of merchandise at a fair and reasonable price, so that the Secretary of Defense, therefore, has not closed the six post exchanges or commissaries?
Mr. WARD. In that he has not taken action, you might assume that would be true.
Mr. CHUDOFF. Wouldn't it be true?
Mr. WARD. But there is a competitive area here. This is a competitive area and, as far as being a competitive area, I don't think that is the case. I think it is a matter of inaction on the part of the Secretary of Defense.
Mr. CHUDOFF. Don't you think as a service to the members of your organization, you should check those things and then file a complaint with the Secretary of Defense, pointing out the Defense Appropriation Act of 1953, saying, for example, you can buy a Norge refrigerator at Hecht's Department Store at so much, and buy the refrigerator at the same price you buy it in the post exchange, if they sell refrigerators in the post exchange?
Mr. WARD. The retail store, Mr. Chudoff, cannot sell at the same price as the post exchange can, for obvious reasons, that the cost of
distribution that is borne by the retailer is not assumed by the military post. . Therefore, the price is going to be lower.
Mr. ChUDOFF. I understand that, but isn't it true they buy merchandise at the post exchange because of the fact that everybody knows that military personnel are not receiving adequate pay for the work that they perform and, in order to keep them happy, we might give them some other benefits, like buying utilities, that is, refrigerators and gas ranges, and things like that, at a cheaper price?
Mr. WARD. I see no reason, sir, as I explained to Mr. Condon, if there is a choice as far as the profession is concerned, why there should be any preferential treatment.
Mr. CONDON. There is no choice about going into the Army if you are over 18.
Mr. WARD. That is right; but as far as your professional Army people and so forth
Mr. CONDON. Would you say the Secretary of Defense is derelict in his duty at the present time in not closing these exchanges down?
Mr. WARD. We have contacted the Secretary of Defense and we have talked with officers on the staff and we have presented our case.
Mr. CONDON. Are you critical of his activities in this respect?
Mr. WARD. He has certainly given us a hearing, but nothing has happened.
Mr. CONDON. Would you care to answer my question?
Are you or is your organization critical of the Secretary of Defense's handling of this directive of Congress?
Mr. WARD. Yes.
Mr. CHUDOFF. Are you able to prove your case, Mr. Ward, with the Secretary of Defense?
Mr. WARD. On the basis of adequate
Mr. CHUDOFF. In other words, he is absolutely, in his capacity as Secretary of Defense, disobeying the law?
Mr. OSMERS. Now, I think there may be, Mr. Chudoff—I am not sure about this, but in some instances in the first place, let's say the Secretary of Defense has closed six of them already. So, we know he is aware of the act. I don't know how much money is in that appropriation act which is used to support these activities. I think in some cases they replenish their funds from sales, like a business would do, and I don't know—I am not sure how much of the money in the 1953 Defense Appropriation Act goes into commissaries, in that sense, and there is one rather trick question in that; and if you would read that again-it has to do with reasonable cost, I think.
Would you read that again, Mr. Ward?
Mr. OSMERS. If it is not too lengthy, I think it would be enlightening Mr. WARD. All right.
No appropriation contained in this act shall be available in connection with the operation of commissary stores of the agencies of the Department of Defense for the cost of purchase (including commercial transportation in the United States to the place of sale but excluding all transportation outside the United States) and maintenance of operating equipment and supplies, and for the actual or estimated cost of utilities as may be furnished by the Government and of
shrinkage, spoilage, and pilferage of merchandise under the control of such commissary stores, except as authorized under regulations promulgated by the Secretaries of the military departments concerned, with the approval of the Secretary of Defense, which regulations shall provide for reimbursement therefor to the appropriations concerned and, notwithstanding any other provision of law, shall provide for the adjustment of the sale prices in such commissary stores to the extent necessary to furnish sufficient gross revenue from sales of commissary stores to make such reimbursement: Provided, That under such regulations as may be issued pursuant to this section all utilities may be furnished without cost to the commissary stores outside the continental United States and in Alaska: Provided further, That no appropriation contained in this Act shall be available in connection with the operation of commissary stores within the continental United States unless the Secretary of Defense has certified that items normally procured from commissary stores are not otherwise available at a reasonable distance and a reasonable price in satisfactory quality and quantity to the military and civilian employees of the Department of Defense.
Mr. CONDON. Has the Secretary of Defense issued that certificate in the case of the existing commissaries, all of them?
Mr. CHUDOFF. He probably would have to, under this act.
Mr. OSMERS. If he is using any of the appropriations from this act, it would appear he would have to do that.
Mr. CONDON. One other question: You say six commissaries have been closed. Now, they are closing Camp Stoneman in my district, and they are going to be closing that commissary when they close the camp because they are deactivating that camp.
I think some 16 or 17 camps have been closed or deactivated in the last year or so. Of the six that were closed, were any of those from camps that went into mothballs?
Mr. WARD. I don't know, but we do know some camps have been closed; that, of those six, they are included in this number you are talking about because some camps have been closed and have been restricted as far as their operations are concerned.
Mr. CONDON. I mean, obviously, if they close Camp Stoneman next month, as it is planned to do, they are going to close the commissary.
Mr. WARD. That is right.
Mr. CHUDOFF. I don't think there is any question in my mind that there is a duty upon the Secretary of Defense to certify these commissaries before they can stay open. They all close automatically unless he issues a certificate and meets the requirements set forth in the Defense Appropriations Act of 1953, providing he is using the funds, and I guess he is. He has to use some of them.
Mr. OSMERS. I should say that is probably so, Mr. Chudoff, that he has certified those that are open, that there are exceptions under section 717.
Mr. CONDON. Mr. Chairman, I might say the other Mr. Ward gave me the answer to my question. Of the six commissaries that were closed, three were in camps that became deactivated and three in camps that are still in existence.
Mr. WARD. In further answer to your question, I have these figures that have been handed to me: Six were closed. Three were closed because they were deactivated bases.
Mr. CONDON. Yes.