Mr. HEALEY. I think that is all, Mr. Holliday; thank you very much. Mr. HOLLIDAY. Thank you very much. Mr. HEALEY. The next gentleman is Mr. Wilmer R. Schuh, president, National Association of Petroleum Retailers. Will you give the stenographer your name and occupation and residence? STATEMENT OF WILMER R. SCHUH, PRESIDENT, NATIONAL ASSOCIATION OF PETROLEUM RETAILERS, MILWAUKEE, WIS. Mr. SCHUн. Mr. Chairman and members of the committee, my name is Wilmer R. Schuh. I have owned and operated a service station in Milwaukee, Wis., since 1931. I am an active retailer, president of the National Association of Petroleum Retailers, an organization composed strictly of retailers, and past president of the Retail Gasoline Dealers' Association of Wisconsin, a member of the National Committee on the Voluntary Code, and I was a member of the planning and coordination committee for the Petroleum Code during the N. R. A. days. How I appear in opposition to House bill 2318. On the surface, to the small service-station owner, this bill seems to be a measure having some merit, and if it were possible to divorce the refiners, transporters, and producers from marketing and still retain our present benefits, we would undoubtedly go on record as favoring this measure. ever, that is like having your cake and eating it, too. There are certain benefits that accrue to us under the present system of petroleum distribution. They can hastily be outlined as (1) a source of supply of consistent quality, (2) usually a well-rounded advertising program, (3) a well-planned and effective merchandising program, (4) a certain degree of stability, and (5) vital protection to those of us handling branded products. In addition to those, the consumer derives a great deal of benefit in the form of lower prices under the present system of distribution. We do not come before this committee with the intention of telling you that the petroleum industry, or even the marketing branch, is without troubles. Certain abuses have crept into this industry which ought to be curbed. Some of them are the giving and loaning of equipment; the extravagant building of service stations; the unfair system of commercial discounts in deliveries; the marginal protection contract; back-door sales, and many others indulged in by refiners to market their own products, as well as jobbers, some of whom are proposing this measure. Some of them have cited the Meat Packers case as an example, and if you are going to enact House bill 2318, then, on behalf of our membership, I petition you to amend this act and divorce the wholesaling from retailing. And I have prepared an amendment that I now submit to the secretary of the committee. Amend section 2 by adding the following: (i) The term "wholesaling" means the sale of refined petroleum products to those who resell the same to consumers thereof. (j) The term "retailing" means the sale of refined petroleum products direct to consumers thereof. Add section 3 (a): It shall be lawful for any person directly to be engaged in commerce in the retailing of refined petroleum products while such person or affiliate of such person is also engaged in the wholesaling thereof. Under the National Industrial Recovery Act, the petroleum industry operated under a code and succeeded quite well in putting its house in order. At the present time, there is pending before the Federal Trade Commission a proposed voluntary code, and should that be approved, the industry would again be able to straighten out many of its ills. Although this bill has the appearance of having the unanimous backing of all independent marketers, that is not so. There are many who are not in favor of this measure. All of them, probably, would agree that a company should not subsidize its marketing from profits made in another branch of the industry and they would further agree that if a method could be found to correct that evil without disrupting the entire industry that method should be followed. What the petroleum industry needs today more than anything else is some sympathetic assistance from the Federal and State Governments instead of the flood of grand jury investigations and persecutions with which it is being harassed. The enactment of House bill No. 2318 would be just another step in what appears to be a vicious. attempt to completely demoralize this industry. I would like to call to the committee's attention that there are some 360,000 service-station owners who are vitally interested in the making of a living, and they can prosper only when the petroleum industry prospers, and if the industry should be demoralized still further their income would suffer still further. The so-called Madison trial has been held up to you as an example of just prosecution. I suggest, before you draw any conclusion, that you get both sides of the story. Strange as it may seem, the small retailer and the legitimate jobber are the ones who have suffered most because of what happened at Madison. Today distress gasoline has so demoralized the tank-car market that the published prices are a little more than a point from which to start bargaining. Distress gasoline has the same effect on the service station that distress farm products have on the farmer. In the long run the only ones who benefit from distress merchandise are the price cutters-the chiselers, about whom President Roosevelt spoke in his first fireside chat. The enactment of House bill 2318 will demoralize the markets. for premium oils. It will bring on a flood of truck transports to further crowd the highways with vehicles hauling an exceedingly dangerous product at its best. It will help to take away from the railroads some of the much-needed revenue they now receive for hauling petroleum products. It would take away from small integrated refiners transportation facilities which are essentiaal to their profitable operation. No one can come before this committee and honestly state that a monopoly exists in the marketing branch. The small refiners and unbranded marketers are consistently gaining volume. A record of almost any trading area will divulge many marketers, both wholesalers and retailers, who have entered the business within the last 6 or 8 years, and a check-up on their income would show that they are doing exceedingly well-in fact, too well to suit many of the branded dealers. The chief complaint seems to be that certain integrated companies are making excess profits by reason of owning or controlling transportation facilities. If this assumption be true, I believe that the committee will agree that the remedy lies not in a measure of this type but in the proper proceedings before the Interstate Commerce Commission. This measure has the appearance of being a strait jacket; and although it might cure some of the abuses, a strait jacket is certainly not a comfortable garment to work in. Perhaps I can make myself clear by giving this comparison. If a child bites its nails, we put tape on the nails; we do not put that child into a strait jacket to cure it of the habit. Petroleum retailers as a class are not rugged individualists. We believe in fair competition; we are not satisfied with the present marketing set-up. We believe there should be certain rules of the game, preferably under a code of fair competition, which would prevent most of the abuses which are causing complaints. Today we are operating under a system of keen, unrelenting competition, and it is no small wonder that, under such a system, someone is being hurt. Perhaps a method may be worked out whereby cooperative effort in the petroleum industry can set itself in order. Certainly something must be done. But just as we are certain that something must be done, we are also sure that House bill 2318 is not the vehicle, and, on behalf of the National Association of Petroleum Retailers, I strongly urge that your committee report unfavorably House bill 2318. Mr. HEALEY. Are there any questions of this witness? Mr. HANCOCK. How do your members do business; do they own their stations and handle branded products under contract? Mr. SCHUн. We have three types. The first is the type such as myself, who leases a piece of property from a private individual and operates a business on that, handling whatever products I so desire. Mr. HANCOCK. Branded or unbranded? You own the station and are free to do business with anybody? Mr. SCHUн. I have no contract with anybody; I am free to do business with anybody I desire. Then you have the type that leases from an oil company and handles their brand of merchandise. Then you have the third type that owns the property, lock, stock, and barrel, similar to my case, only he owns the property intsead of leasing from anybody. Now, a split-up of that membership would be quite difficult to ascertain, but I do know that there are around 20,000 service stations in the United States that are owned by integrated refiners; that, is that they own them lock, stock, and barrel. Mr. HANCOCK. 20,000 out of 360,000? Mr. SCHUн. That is right. Mr. HEALEY. How many members do you represent? Mr. SCHUн. We have 62,000 in our organization. Mr. HEALEY. 62,000 in your organization? Mr. SCHUн. From coast to coast. Mr. HEALEY. And you are speaking for them as their president, rather than as an individual? Mr. SCHUH. That is right. Mr. HEALEY. And you say they are dissatified with the present conditions in the marketing of petroleum products? Mr. SCHUн. Very much so. Mr. HEALEY. Why are they dissatisfied? Mr. SCHUн. Well, probably our greatest abuse is the jobbers and refiners selling to our customers in small deliveries at the same price that we pay, so that we cannot go out and get that business. Due to the keen competition, the jobber or refiner will put a pump in his back yard and haul to them and we just cannot go after that busi ness. Mr. HEALEY. Well, even some of the large companies go after that business? Mr. SCHUн. Oh, there is no exception to it; they all do it. Mr. SCHUн. That is right. Mr. HEALEY. And you think that ought to be left to the men who represent the independent dealers-the small independent fellows? Mr. SCHUн. In this case there is no justification, unless he buys a large amount, something similar to that that we dealers buy, say, on a monthly or annual basis. We do not say we ought to have that business, but when they dump it in 10-, 15-, and 25-gallon lots, we think that is going too far. Mr. HEALEY. And you would like to see that practice eliminated so that you people could exist? Mr. SCHUH. We would like to see that practice eliminated. But I do not think there is any legislation that can do it; I think we need some common sense. [Laughter.] Mr. HEALEY. Common sense as distinguished from legislation? [Laughter.] Mr. SCHUн. Well, I have been quite a student of legislation, and I have learned, a long time ago, that you cannot cure a lot of these ills by passing laws. I think the New Deal is an example of it. [Laughter.] I may explain that I am a Democrat. I would like to say this, that you hear a lot of complaint here about people being put out of business. Now, I made a challenge last year for anybody to prove to me where an efficient marketer was put out of business. And they cannot do it. Right in my own home town-and I will recite the same case I recited at the hearings last year-a fellow went into business the same time I did. I did not have much money at that time and he did not have as much. He ordered 300 gallons of gasoline and a barrel of oil and I sat in his station and saw him send the oil back because he could not pay for it. Today he is the third in the city of Milwaukee. And the only two companies that are ahead of him are the Standard Oil Co. of Indiana, and the SoconyVacuum, and there are the Texaco, the Skelly, Economy, Shell, Sinclair, Phillips, and the Barnsdall who I do business with and, by ability, this fellow has come, since 1931, in third position. Mr. HEALEY. That is very interesting. Mr. SCHUн. And the average jobber is making too much profit, if you ask us. [Laughter.] And I will prove that to the committee very conclusively, because I have figures to back up that statement. We, as dealers, have been waging a fight for the last year to get competitive prices so that we can meet the price cutter and keep our business, and there is a constant drive on us by our suppliers to knock their prices down. Mr. HEALEY. Are there any further questions of this witness? Mr. SCHUн. If you would be interested in those figures, I would like to give them to you, because they are quite astounding. Mr. HEALEY. We will be interested in any data you have that you think will be helpful to this inquiry. Mr. SCHUH. The average jobber in the Middle West does an annual business of 300,000 gallons. His average profit during the past 4 or 5 years has been 2.5 cents per gallon, which gives him a gross profit of $7,500 a year. I will give you an idea of what type of plant that would be. He would employ two-thirds of a man for delivery. In other words, his man would not be busy all of the time delivering, but two-thirds of his one tank truck would be busy delivering. This is a small operation, but it is an average; these figures are taken from figures that came out of three States. The average dealer does a business of 60,000 gallons a year and his prevailing margin has been in the neighborhood of 3.5 cents, which returns a gross profit on gasoline handled of $2,100. In other words, he is only making a cent more than the jobber. Now if you take their expenses of doing business, the service stations run about $2,550 a year on the average, which is more than his the dealer's gross profit on gasoline. In other words, he makes the balance up on the sale of other items-on oil, and so on, and lubrication. The average jobber's expenses are $3,300. Now, our stations make a little over $600 or $700, on an average, on nongasoline products. The average jobber makes somewhere. around $1,500 on nongasoline products, such as lubricating oil, fuel oils, and so forth, leaving him a gross of $9,000, compared to $3,300 for the service station. How the jobber can stand up under that set-up, I do not know, and it is the wide spread between the tank car and tank wagon, added to the retailer's margin of profit, that has been causing all of us our trouble and the many complaints. We say that is too wide and the public ought to get the benefit of a lower price. Mr. HEALEY. Do you purchase your gasoline from the large companies or from a jobber? Mr. SCHUH. I purchase my gasoline from the only company who has disintegrated itself, the Barnsdall Oil Co. and the Barnsdall Refining Co. And when they did that, most of their jobbers ran away and left them high and dry. I applauded them when they did it, because I thought it was going to help us; but, as a result of the Barnsdall Oil Co. being a refining company and the Standard and every other oil company advertising, I am the best example of what distintegration will do. And if they do not start spending money advertising, I am going to change suppliers. [Laughter.] Mr. HANCOCK. In finding that average for retailers you must have included the very smallest, like the farmer who has a single pump in his front yard-that is pretty small, 60,000 gallons per annum, you say, average for the retailers. Mr. SCHUн. That is high for the State of Wisconsin. Mr. HANCOCK. That must include all of these little country places you see where the gasoline business is not the sole business of the family. |