Mr. REED. I say that the average price on the domestic sizes in that section was lower this winter than it was a year ago. Now, there have been increases in the price of coal to industries; that is what this law was designed to do, because the industries were getting their coal at such low prices that the industry was losing money.

Mr. JENKINS. My inquiry was, you have been here several daysyou appreciate that most of the inquiries have come with respect to what is going to be the effect of this law on the domestic consumer, and of course you can only answer from what you know as to what it has been so far in your district, in your territory, as far as the producers are concerned, and you state on page 6, in language which I think is very convincing and decisive, as far as this inquiry is concerned, that the average mine price on domestic sizes, those made for household use, distributed throughout the Middle West, was less than it was a year ago.

Mr. REED. Yes, and it is my opinion that that condition will continue, because the prices to industries will be higher without any question.

Mr. JENKINS. It has to be. There is one other statement that I want to accent, and I think it is very important. There is a deepseated objection to this bill, and has always been, because it is supposed to be a price-fixing bill.

Now, from the figures that you produce on page 6, it surely cannot be placed at the fault of the producers of coal, because you state there so succinctly as to what the cost is, the elements in cost in the production of a ton of coal are clearly outside of the power and the capacity of the producer to control, aren't they? Labor, $1.27, unemployment insurance, compensation insurance, various kinds of other burdens and responsibilities and taxes; and so if your price at the mine would be about $2.15 or $2.30 a ton, practically all of that is a price that has been imposed upon you practically by law; is it not?

Mr. REED. Yes, sir; and that suggests something that I heard in the early part of the week, about the handling of depletion and depreciation. I think that Mr. Dingell asked the question. The law specifically provides how those two items shall be handled. It is the way the Internal Revenue Department lets us handle it in making up our income-tax returns.

Now, as we all know, depreciation on anything is a subject that you can argue forever, but in this it is definitely laid down.

Mr. BOEHNE. Can we assume that you are speaking for the 260 companies that you have given us a list of, as favoring this resolution? Mr. REED. Every name that is on that list has asked that I speak for them. Most of them, or a great many of those are in the New York wage conference, or they would have been here this week.

Mr. BOEHNE. I notice that there are only two listed in district 11, Indiana.

Mr. REED. I notice that.

Mr. BOEHNE. Do you know any reason for it?

Mr. REED. I do not know the reason why the producers in Indiana did not authorize me to represent them, unless it is that from the day we started working under regulations, Illinois and Indiana producers have not been able to agree on many things.

Mr. BOEHNE. I think that that is about true.

Mr. KNUTSON. Mr. Reed, I think that you replied in the affirmative to Mr. Jenkins when he asked you if this is not primarily a pricefixing bill.

Mr. REED. I did not. He did not ask me that question, as I understood him.

Mr. KNUTSON. Then I will ask you the question. This is primarily a price-fixing bill, designed to stabilize the industry?

Mr. REED. I do not think so, as we have looked upon price fixing. Now, I had quite an argument with Miss Sumner, who is in this body from Illinois, on that subject.

I say a price-fixing bill is one that says to a producer or a salesman a price at which he can sell his coal, or the price at which he can sell a commodity. This is not in my opinion price fixing. It is a regulation which compels every producer of coal who employs labor in producing coal to get for his commodity at least what the cost is.

Now, there is not a thing to prevent me or any other producer from selling coal at prices different from these minimum prices. I know with this maximum price provision in there that if I get too far away from it that the division has the authority to step in and say now, you cannot sell coal for above this price.

Mr. KNUTSON. We will carry that a step further, Mr. Reed. Let us assume that the operation of this law was placed in the hands of individuals who wanted to bring about public ownership. Under this law could they fix the price in such a way that you folks would be compelled to throw up your hands?

Mr. REED. I do not think so.

Mr. KNUTSON. What safeguard have you?

Mr. REED. My idea of what is going to happen, or the procedure through which we will go if there is a shortage of coal, and if prices start to skyrocket, with a rather indefinite standard in the law as to the fixing of maximum prices, that we will arrive at what is a proper return on the investment in the coal industry, which brings up another subject on which you can debate for a long while, what is the proper price for coal in this country.

Now I would reason it this way:

Just say that the price is $2, that is the minimum price, and I am selling that coal for $2.50.

Now, that is 50 cents a ton profit. We will say that I have an investment of $6 per ton of annual production, which I think is what we have in the industry.

I might say, well, this is a hazardous undertaking; I am entitled to more than 6 percent on my money when I put it in a coal mine, I should have 10 percent. Well, 10 percent would figure 60 cents.

My feeling is that if we ever under this law get to selling coal at say 50 cents or 60 cents a ton above the minimum price, then the Division is going to start seriously thinking about maximum prices.

Mr. KNUTSON. But Mr. Reed, suppose that those charged with the enforcement of the law decided that your costs should be brought down to the level of gas, or hydroelectric level. According to your own statement, of course you could not do it, your labor costs are too high, there is too big a spread in labor costs.

For instance, I think that you said that the labor cost of producing electricity is a cent a ton, that is comparable to a cent a ton.

Mr. REED. That is hydroelectric power.

Mr. KNUTSON. Suppose that they should with malice aforethought, in order to bring about public ownership and operation, gradually work you down to the same price levels as your natural competitors, you can appreciate that that might happen?

Mr. REED. No, I can not appreciate that that might happen.

Mr. KNUTSON. There are a lot of funny things happening these days, that we do not understand. If the Government has the power to fix the minimum price, it has the power to fix the maximum price, has it not?

Mr. REED. Yes, sir.

Mr. KNUTSON. And suppose that they should work that maximum price down and down, and give it out that they are trying to bring you down to the same level of costs as your natural competitors, what defense have you?

Mr. REED. Well, we would not have any. I know that we could not and I would not undertake to force our labor down to the level which would be necessary to meet the labor costs in these others.

Mr. KNUTSON. Do you not concede that it is dangerous for the Government to attempt to fix prices? We are constantly being asked to fix prices, and I think that we did fix prices on milk, did we not? Mr. REED. I say this, that I think the expression of Government interference into privately operated business up to this day is unpopular. I do not like it.

I became convinced that this industry had to have something of this kind done in December of 1920. At that time the Freylinghuysen bill was before a Senate committee, and I spent 1 solid day trying to stay away from Government regulation, which meant control of production, and high prices, and I said to those gentlemen, if it is the attitude of this Government that this coal industry can not make up this year its losses of the last 6 years, you ought to do something to prevent those losses.

Now, I saw the Government step in during the last war, take over and regulate our industry. It did not regulate the prices of everything that we had to buy, having done that once, I have always figured that they would do it again if the necessity arose, and if we are going to keep these coal mines open we cannot step in in the years when they have an opportunity to make money, and say that you can't make it, and then let them drift for the next 15 years and lose it. Mr. KNUTSON. I concede the logic of that.

Mr. REED. While gas and oil have made serious inroads on the coal industry, and if this coal industry should quit next Monday, I think that there would be quite a turmoil in this country.

Mr. KNUTSON. But if we fix the price of coal, why not fix the price on wheat?

Mr. REED. Maybe they should.

Mr. KNUTSON. Or the price of hogs.

Mr. REED. Maybe they should. This is experimental. That is one of the reasons why I am advocating 2 years, and I will give you the whole story on that if you care to listen to it, as to why the 2 years, rather than 1 year, or some other period.

As I say, I have been rather active in trying to get this kind of regulation for the industry, let us say, last May, of 1939, I was asked by several of my coal associates to join with them in coming here and

asking to have the law extended, and I said I do not think it is time. I think that you are wasting your time, until they get this law into effect.

Last November, after they put this into effect, I was approached, and I said, "All right, I am ready to start, but I will not go any longer than 2 years. There are several things I want to see. I want to see how it is going to be administered, and I want to see how it is going to be policed, and I want to see how quick they unearth violations and I want to see what they do with those violations and I want to see how many industries buy or develop coal mines which would be a loss in the commercial business. I want to see how much business, if any, we lose to fuel oil, and I want to see how this operates through two springs and two summers, as well as two falls and two winters." I am not convined that this type of legislation will correct the evils of any industry. I think 2 years' experience will show us a lot that we cannot see today.

Mr. KNUTSON. Have you any suggestions to make for the improvement of the law?

Mr. REED. I have none whatever. There is one, so far as the marketing of coal that rather disturbs me. I have understood from the men in the Division that the amendments that they speak of are those in connection with the administration of it. In other words, I am not entirely satisfied with the provisions in the law for the punishment of violations-but the one that disturbs me is that it seems to me that if anyone applies for a distributor's license, I do not know how this Division can refuse it to him.

Now, having given him that distributor's license, I think that they can revoke it on account of certain of his actions. The law provides in effect that if you and I own an industry and I set myself up as a distributor, and get the distributor's discount, and then quietly turn it over to you, that is a violation of the law, not the regulation, but the law.

I am fearful unless we amend that part of it, although I am not ready to say yet that my fears have sufficient foundation, that we are going to see this discount thing spread.

Now, in setting up these costs, on which the prices are based, all of us reported the tonnage on which we had allowed discounts with the dollars and cents. That was included in the sales cost.

Now, there are perfectly legitimate distributors, distributors who serve a purpose, say for instance that I want to do business with a mine in Illinois out West of the Missouri River. I cannot hope to do enough business out there to pay to keep a salesman there, but I can employ a distributor who has other coals, several other coals, to sell my coal there much cheaper than I can, and I give him a distributor's discount but let us assume that all of those distributors' discounts and everybody that gets these licenses, and the business that we are selling today direct develops into distributors' discounts, that sales cost which is in this cost, total cost, is going to increase beyond that 2 cents and up goes the price to all of the public.

Mr. COOPER. May I ask one question, to make it a little clearer for my benefit, at least?

I understood you to say, Mr. Reed, that there was not anything to require you to sell coal at the priced fixed. You meant you could sell it above that price but you could not sell it below?

Mr. REED. That is what I meant.

The CHAIRMAN. You mentioned, as I understood you, in response to Mr. Jenkins, that this law was designed to increase prices, and then later I understood you to say that it is not a price-fixing bill.

It seems to me that it would be so near price fixing, there would be no distinction between a bill to raise prices, and a bill to fix prices. Could you clarify that a little?

Mr. REED. My conception of the term "price-fixing," as we have heard it in this country for years, is where you actually say to a man, "Now, this is your price. You must sell this commodity at this price."

Now, if that is what we mean by price-fixing, this bill is not pricefixing under that kind of a definition. Of course, it is very close to it. The CHAIRMAN. There is a slight distinction there.

The WITNESS. Yes.

The CHAIRMAN. But in its effect, is not the minimum price the controlling price, and if the minimum price is the controlling price. and you fix the minimum price, isn't that tantamount to fixing prices? I mean in its operation.

Mr. REED. That is another reason, Mr. Doughton, why I have not looked on this as strictly fixing prices.

Now, let us take the high-cost coal mines, in this country, and we have high-cost and low-cost coal mines. After what we have gone through for the last 10 years, the high-cost mine existed only on account of one of three reasons. Either he had a better quality than his neighbors, he had a better location than his competitors, or he had an affiliation.

Now, he has got to sell all of his coal at more than these minimum prices. We have, I would say, 20 mines in the State of Illinois, that if they were compelled to sell all of their coal at the minimum prices established for them, they would lose 20 or 30 cents a ton on every ton of coal that they produced.

Mr. MCKEOUGH. Mr. Reed, as I understood it, I think that you referred to it somewhere in your statement, this is the only country where coal mining is not nationalized?

Mr. REED. Nationalized or subsidized.

Mr. MCKEOUGH. By the Government?
Mr. REED. Yes.

Mr. MCKEOUGH. And I am told-I do not know how correct this is that in the coal-mining industry as a whole in this country, due to the abnormal competition, approximately 35 percent of the coal is wasted as against 5 to 10 percent in European countries.

Is there anything in your experience to substantiate that?

Mr. REED. Well, there is no question but what we waste a lot of coal, that we would not waste if the industry was in a healthy financial condition.

Mr. MCKEOUGH. Well, maybe this is an unfair question but if it is you do not need to answer it.

In your judgment, do you consider the coal industry a public utility in the sense that we understand public utilities in the common, ordinary understanding in this country?

Mr. REED. No, I do not. It is perhaps as close to it as any industry. It is not a monopoly, and the public utilities are.