OLEOMARGARINE TAX REPEAL TUESDAY, MAY 18, 1948 UNITED STATES SENATE, The committee met, pursuant to recess, at 10 a. m., in room 312, Senate Office Building, Senator Eugene D. Millikin (chairman) presiding. Present: Senators Millikin, Butler, Hawkes, Martin, George, Barkley, Connally, Byrd, Johnson, and Lucas. Also present: Senators Thye, Dworshak, and Fulbright. Let the record show the presence of Senator Thye, of Minnesota. We are very glad to have you participate, if you wish, Senator. Senator THYE. Thank you, Mr. Chairman. The CHAIRMAN. The first witness is John Brandt, president of the Land O'Lakes Creameries, Inc. Will you be seated, please, and identify yourself to the reporter. STATEMENT OF JOHN BRANDT, PRESIDENT, LAND O'LAKES CREAMERIES, INC., LITCHFIELD, MINN. Mr. BRANDT. My name is John Brandt, president of the National Cooperative Milk Producers Federation, and president of the Land O'Lakes Creameries, Inc., of Minneapolis. I live in Litchfield, Minn. In presenting our case on this subject of repeal of the tax on oleomargarine, I thing we could divide this question into two categories: one of fair practice, and the other of its economic results. I would first like to deal with the subject of fair practice. The repeal of the oleomargarine tax as it was passed by the lower House certainly would deal a blow to the right of the dairy industry to a long-standing trade-mark, which is the color yellow. Butter has been known by the color yellow ever since anybody has ever known anything about butter, and it is, as we claim, the common-law trademark for butter. Butter is manufactured entirely from a dairy product, from milk, with nothing added to it, and is therefore a product wholesome so far as the consumer is concerned. The question of its relative merits and food value and consumer preference could easily be decided if you were to place the consumer's choice of oleomargarine or butter at the same price. There is not any question but what the consumer would choose butter in preference to oleomargarine, and therefore from that standpoint alone I think the general public would consider oleomargarine an inferior product to butter. 161. However, butter and oleomargarine look and taste so very much alike that it is often difficult for the consumer to differentiate between oleomargarine and butter. That has been the result of years of research in perfecting the manufacture of a substitute for butter, and certainly the manufacturing, merchandising, and advertising methods have been an attempt completely to duplicate and imitate butter. There can be no question but what the use of all of the advertising, the advertising methods, and the methods of manufacture are a direct attempt to imitate and confuse the general public that they are getting a product the same as butter. All we need to do is to look at the advertising in the various magazines and the package, the color that is used, the texture and every form that we can conceive of in the manufacture and sale of oleomargarine, and we do find that it is a matter of imitation or attempt to substitute this product for butter. The oleomargarine people, in the desire to use the color yellow, certainly give every evidence that they want the consuming public to believe that it is butter, or that it is the same thing so far as a spread for bread is concerned. We, in the dairy business, claim that we have a common-law right and a trade practice established for many years in the use of the color in the manufacture of butter, and we now find that in the attempt to repeal the 10-cent tax on oleomargarine colored margarine, rather-that we are going to lose one of our rights. and protection of our rights, and also the protection of the consumer against fraud and substitution. -on The consuming public is now consuming yellow-colored oleomargarine in the belief that they are eating butter. I recently made a trip down through the Southern States, and I did not have to go that far. I could go to what we might call Northern States. And on this trip that I traveled around for about 3 weeks' time, I ate in all kinds of different places, and while I did not make a physical or chemical analysis of what I was eating at the various places, I did find that in even my inexpert knowledge of the difference between oleomargarine and butter I am sure that I ate oleomargarine at least 50 percent of the time that it was served as butter. The funny part of it was that when you become critical and ask the waiter whether or not you were being served butter, or want another pat of the butter, that you are being served, something always happened, either they admitted that it was oleomargarine or they removed it entirely or showed you a sign that they were serving oleomargarine. But up until that point you did not know anything about whether you were using it or not. The CHAIRMAN. I believe the committee would be interested in having a memorandum supporting your contention that yellow is a common-law trade color for butter which cannot be usurped by any other product, and also a memorandum on whether if the taxes were removed there nevertheless could be regulations to protect the consumer in his choice between the two products. Mr. BRANDT. You would like that as an oral memorandum or one that is submitted in writing to you? The CHAIRMAN. I would suggest that it be submitted in writing, and I suggest that it be rather carefully prepared, and that it be submitted within the next few days. Mr. BRANDT. I will be glad to do that. That is the question of the common-law trade-mark of the use of the color yellow. The CHAIRMAN. That is right; whether effective regulations to protect the consumer in his choice between the two products could be had without any tax incidence. Mr. BRANDT. Offhand, in just an offhand statement, then, I would be glad to submit it in writing from the standpoint of the commonlaw trade-mark. Certainly everybody has known butter for many years, and known it by the color yellow. At least 75 percent of the year, the natural color of butter is yellow, and from that standpoint it has been the natural color for butter for years and years. The CHAIRMAN. I am speaking of whether in the sense of whether strictly and legally speaking you have that what you call a commonlaw trade-mark on the color. Mr. BRANDT. Yes; of course. Legally speaking you may not have it as a registered color, but as a common-law color certainly its long use and its long practice as identification of butter would possibly give you the right to it if you were to bring it before a Federal Trade Commission hearing on that question. The CHAIRMAN. I repeat, if it is a legal right on which you are basing your claim, I believe the committee would like to have a memorandum on it. (The memorandum will be found on p. 283.) Mr. BRANDT. We will be glad to do that. The CHAIRMAN. And I suggest that the oleomargarine people submit a memorandum to the contrary, if they feel to the contrary. (The memorandum will be found on p. 283.) Mr. BRANDT. The first laws that were passed regulating The CHAIRMAN. And that all of those memoranda be in before the end of the week. Mr. BRANDT. The first laws that were passed regulating the use of the color yellow in butter were passed at the demand of the consumer. I think we can go back into history and present plenty of evidence to the effect that the reasons why we originally passed laws governing the sale of oleomargarine was because of the fact that the consuming public was being fooled into buying a product in imitation of butter, and it was at their demand, instance, that we had the first laws passed. Oleomargarine manufacturers are permitted to use practices that the butter people could not use in the manufacture of butter. To begin with, if we were to take a product known as cream, and in any way clarify it or cleanse the dirt out of it, or to hydrogenate the oils, it would be considered renovated, or be considered a practice that is illegal, and we could not ship the product in interstate commerce. We could not use a preservative in the manufacture of butter. Oleomargarine people are permitted to do both. They are permitted to take most any kind of a vegetable oil, some of it that comes in imported form, that is not considered too clean when it is taken from the ships and delivered into this country, and that oil is heated and renovated and hydrogenated and all of the processes that would not be permitted so far as the butter people are concerned are permitted in the manufacture of oleomargarine. If we were to renovate our butter in any way, the oils, and clarifying-anything of that sort-and were able to get by the Food and Drug Administration regulations against it, we would have to pay taxes that are equal to the taxes that oleomargarine pays now; and their processes in manufacturing of oleomargarine would not be permitted, so far as butter is concerned. From the economic angle, I would like to say that the question of whether the consumer would receive a food product at a lower price is one that is much in dispute. Personally I do not believe that the consumers would buy oleomargarine for any less money than they are now paying. In fact, I think the consumers would pay more, due to the fact that we have conclusive evidence from investigations that we have made in several cities where the price of oleomargarine-colored oleomargarine today in the State of Indiana, especially-ranges from 2 to 27 cents at different points, depending upon where it is being sold. Therefore, it certainly is evident that the oleomargarine manufacturers do not intend to lower the price of oleomargarine. They intend rather to sell it at a higher price. They are not spending millions of dollars now being spent in this campaign to bring about a general demand for repeal of the laws and expect to sell the product for less money. The consumer will pay more if the tax is repealed than they are paying at the present time, and certainly the advertising and merchandising of the product is all lined up to bring about a price relationship nearer to butter than at the present time. Consumers buying oleomargarine for what it is, uncolored, are not paying any premium or any tax. They are only paying one-quarter of a cent a pound tax, which under no circumstances can be considered a disadvantage to the oleomargarine manufacturer or a heavy burden to the consumer. If, however, they buy it in the color yellow, then they would have to pay the 10-cent tax, but only a small portion of the oleomargarine manufactured today is sold as colored oleomargarine. The consumers can easily color the oleomargarine if they want to. They have now perfected methods whereby with 2 minutes' time they can color their oleomargarine, and have it the color yellow if they so desire; but if they buy oleomargarine for what it is, as uncolored, there is only one-quarter of a cent per pound tax on it, and that could not be considered a hardship to either the consumer or anyone else, so far as the purchase of oleomargarine is concerned. From the standpoint of soil conservation, if you were to travel over America today, wherever you find that we have the best dairy farms, where you can look at a farm and see fine buildings and fine dairy cows, there you will also note that we have the best crop conditions, and the best farm productivity, and that means that prosperity, so far as agriculture is concerned and so far as fertility of the soil is concerned, follows right in the path of the dairy cow. We are spending millions and millions of dollars on soil conservation and our soil-conservation program will not succeed without the advent and continuance of the production of dairy products in America. We fail even in our best efforts to conserve soil if we neglect the dairy cow. The cotton and soybean manufacturers maintain that it will bring greater revenue to them if we have a greater sale of soybeans and cottonseed oil through the manufacture of oleomargarine. But these men and farmers must remember that, so far as the oil is concerned, most of the oil, domestic oils, are now being used to advantage and that the dairy cow is by far a better customer of products of the cotton and soybean raiser than is the human appetite, so far as the use of oleomargarine is concerned. Then we have the question of the price of milk, and the price of milk would not go down, in fact the price of milk would rise because at the present time the production of dairy products is tuned to the average need of fluid milk consumption, and for that reason there are times of the year, especially during the flush season of May, June, and July, and as early as April, when we produce milk far in excess of the amount of fluid milk and cream that could be used in America, and if we dry up the source of sale of butter, which is the basic price stabilizer of the entire dairy industry, we will find that we will only have milk and cream enough for our consumers during the flush production season, and during the season of low production we will have such a scarcity that the prices will be sky high, and the consuming public will be deprived of the most health-giving food in the world, which is milk and cream. So butter is an important item from the standpoint of the price of dairy products, and the price that the consummer will pay all of the year around. We find now in the face of some of the disadvantages that the butter industry suffered during the wartime period when prices were held down to a point where it was not profitable to produce buttter out in our main butter-producing States that there has been a gradual decline in the number of cows on the farms. In the seven States, including Minnesota, North Dakota, South Dakota, Nebraska, Oklahoma, and Kansas, we have 17 percent less cows on the farms today than we had in 1942. The number of cows is gradually declining, and that means that the dairy industry in the face of the disadvantages even under the present protection is gradually declining, which will be bad from the standpoint of the economy of the Nation, its health and its prosperity and soil conservation. Senator BARKLEY. May I ask a question there, if it will not interrupt. To what extent is that decline in cow population induced by the increased price of cattle on the hoof for beef? The reason I ask you that question, I was reading a weekly report from an agricultural organization the other day which claimed that because of the high price of cattle for beef, many people were selling their milk cows because they could get such a high price for them. Mr. BRANDT. That decline started in the wartime period, in the latter years of the wartime period, and it did have its roots, partly, at least, in the more advantageous production of beef. When the OPA set prices on various farm commodities, they did not take into consideration the related prices that would be conducive to production, and they certainly got the price of beef and grain out of line with the price of dairy products, and that brought about the start of the shift. We do find now that out in the dairy States where in some of our dairy areas the shift had not been very noticeable, it is becoming more noticeable in this last year, and part of it is due at least this is what we get from farmers in the picture, to the fact that they feel there is grave danger of the present protection to the dairy industry of the 10-cent tax being repealed which would give them still further disadvantage, and that disadvantage already is becoming part of the dairy farmer's planning for his future dairy operations, so it has become even more noticeable since this period of agitation for the |