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The lack of permanence of the code, I may say, however, and the breakdown of prices developed within the industry rather grave apprehensions as to the future. It is now recognized by the majority of the operators that governmental enforcement must be strengthened and rendered permanent. The impermanence, so to speak, of the code prevents effective stabilization as to prices and production.

In contrast with 1932, therefore, operators and districts representing more than 50 percent of the tonnage of the industry, are now supporting the Guffey bill, and through their representatives are appearing here asking the Congress of the United States not to permit the coal industry to slip back into that economic morass from which it has temporarily emerged, and to go ahead and give them an opportunity to work out the destiny of the industry and protect their business investment by the enactment of legislation which will in effect compel cooperation.

Mr. Mahan, who testified just preceding me, is one of the leading and perhaps one of the most representative coal operators in the bituminous-coal industry. His interests are very large. He has had years of experience. He has testified here that at the present time the coal code is in jeopardy; that it is becoming unworkable; that the price structure has broken down. In his testimony Mr. Mahan disputes the testimony of those coal-operator witnesses who appeared before this committee and said they did not want the enactment of the Guffey bill, and asked merely that Congress leave them alone, except perhaps with respect to the practices and provisions of the N. R. A. and the coal code.

When those gentlemen appeared before this committee and said that all is well within the industry and the coal code, they ignored what is known to be the absolute facts by all who are familiar with the current conditions in the industry; that the coal code, without additional legislation by Congress, cannot be enforced and made to act beneficially to the coal industry. Why?

Mr. Mahan has testified that as long as 90 days ago there came about a general disregard of the price provisions of the code, and a more or less general attempt to evade the provisions of the code in the making of contracts, in the selling of coal and in the delivery of tonnage.

In December the United Mine Workers of America publicly, through a letter, called the attention of the N. R. A. to the situation. It called attention to the widespread chiseling operations; it called attention to the falsification of existing contracts, contracts that were made prior to the promulgation of the code and the enactment of the law, which through manipulation had been extended to dates in advance of the actual expiration of such contracts at prices less than approved code prices. It called attention to the fact that the amount of tonnage under contract in the industry was constantly on the increase. I refer to tonnage under contract at prices lower than code prices. It called attention to the fact, that rather than those contracts expiring as would normally be the case, because the delivery had been made before the limitation date of the contract, the contracts were increasing and the amount of tonnage was on the increase under such contracts, which is evidence of wrongful practice on the part of the operators and others in dealing with those contracts.

In addition to that, contracts are being made on a substantial basis for the delivery of coal subsequent to the date of June 16, when the N. R. A. will expire, at a sharp drop in prices after that date and the code prices until that date, making an average price for the tonnage over a year substantially lower than approved code prices.

The Recovery Administration took cognizance of that protest and called a public hearing of the coal industry on the price question in the Commerce Building. All the evidence adduced at that public hearing was in substantiation of the charges made by the United Mine Workers of America.

The United Mine Workers of America are interested substantially in the matter because of this reason: In the negotiation of the wage structure for the Appalachian region in 1933, it was arrived at as a result of an agreement between the coal operators, the United Mine Workers of America, and the Government. The representatives of the coal operators demanded, as the quid pro quo of the agreement with the United Mine Workers of America on wages, that the Government permit the operators to charge a price and maintain a price for their tonnage that would enable them to pay the wage scale and have a return on their investment. And the Government, through the National Recovery Administration, approved by Messrs. Johnson and Richberg, and affirmed by the White House, ratified that agreement, approved it, and joined in it, and the Mine Workers were given to understand that they secured an agreement on the wage structure only because the operators were going to be permitted to charge a price that would cover the cost and pay a return, and that the Government was going to force the chiselers and those who failed to comply in the industry to adhere to approved code prices.

Well, when it came to pass a short time ago that these wide-spread evasions in price were taking place in the industry, the mine workers called the attention of the administration to that tripartite agreement, because they felt the wage structure was in jeopardy, and if these price violations were permitted to continue unopposed on the part of the Government, it would bring about violations of the wage agreement and perhaps a crumbling of the wage structure in the industry. Furthermore, the mine workers did not desire and did not propose to be forced into a position where they were obliged to conduct a guerilla warfare in the industry in order to force adherence to the wage scale and compliance with the provisions of the coal code. If the mine workers are to be forced into a position where that has to be done, they prefer to do it on a national scale rather than enter into a bushwacking campaign and a guerilla warfare with operators like those in Harlan County and a few individuals elsewhere, and be compelled to bear the whole brunt for the maintenance of the stability of the coal industry.

The National Recovery Administration held a hearing, the hearing to which I have referred, and called a meeting of the National Coal Industries Board. The National Coal Industries Board recommended to the National Recovery Administration certain amendments in the coal code, devised by the coal operators, designed to stabilize the situation to which I have referred and prevent this price cutting and insure compliance with the provisions of the code.

There was a good deal of controversy among the operators themselves as to the form of those amendments, as to their character, and as to their workability. Eventually some amendments were approved by the coal industry, and a board of arbitrators was set up composed of five members, to whom were to he referred certain questions affecting the correlation of prices and other matters within the industry. That board has been meeting at headquarters at the Shoreham Hotel recently, and the evidence adduced before that board at a recent hearing justifies every assertion made here by Mr. Mahan and affirmed by myself that there is no stability in the current price structure of the coal industry; that the entire price structure is in jeopardy; that commercial chaos threatens the industry, and that it affects the stability of the wage relationships in the industry, an astonishing and a menacing situation as compared with the situation which certain witnesses before this committee would have the committee believe new exists in the coal industry.

I have in my hand a report of the proceedings of the National Coal Board of Arbitration at a hearing held in Washington, D. C., March 1, 1935, in suite 701-E, Shoreham Hotel, beginning at 10 a. m. Beginning on page 58 of that record is a report of the proceedings before the board on the subject of a resolution introduced by certain subdivisions in the coal industry further designed to effectuate stabilization and stop the collapse of the price structure. In connection with the consideration of that resolution there were various substantial operators, representatives of divisions and subdivisions in the industry who testified. Among them was Mr. Charles O'Neill, who represented the eastern Pennsylvania subdivision; Mr. Brown, in behalf of the southern subdivision no. 2; Mr. Terrio, for the marketing committee of the Ohio Code Authority; Mr. Richards, of the southern subdivision no. 1 of division no. 1; Mr. Crafts, chairman of the eastern subdivision marketing committee; Mr. Zeller, of the northern West Virginia Code Authority; Mr. Barrington, also of the northern West Virginia Code Authority. All these gentlemen testified, according to this record, to the effect that a serious crisis now confronts the industry; that it is not questionable, but is an actual fact that the bulk of the tonnage of the industry is being sold below the accredited code prices, and at prices that will ultimately bring ruin to the industry.

Mr. Barrington stated that the industry was being ruined by the "gyppers," and the "gyppers" should be either put out of business or in jail; and he thought it might be helpful to the industry if either of those things could be done to them.

Senator NEELY. Do you believe that either of those consummations suggested by Mr. Barrington can be accomplished under the code or under existing law?

Mr. LEWIS. I know that Mr. Barrington is due to be disappointed, because under the existing coal code they can neither be put into jail nor out of business. In fact, they flourish under conditions that are peculiarly profitable to them and reap a financial benefit from violating the code and being faithless in their compliance with the code and to observe its provisions.

Senator NEELY. And the operators who endeavor to obey the law and observe the provisions of the code are at the mercy of the so-called "chiselers "?

Mr. LEWIS. Senator, that is an accurate statement.

Mr. Barrington says, on page 73:

Various tonnage is being sold at substantially lower than code prices.

When Mr. O'Neill queried Mr. Barrington as to what he meant by "substantially lower than code prices," he said he meant 15 cents a ton or more below the approved code prices. Fifteen cents a ton means the difference between profit and loss to the industry. It means the difference between being able to pay a living wage and secure a return on the investment, and receivership and dissolution of the assets of the company.

I would like to offer in evidence, without burdening the committee by reading it, this record, by reference, if you please, from page 58 to page 82.

Senator NEELY. That may be done.

(The record referred to is incorporated herein by reference, and is filed with the committee.)

Mr. LEWIS. Mr. Mahan referred to a letter sent out by Appalachian Coals, Inc., bearing further on that subject. I have that letter here, dated at Cincinnati, March 2, 1935. It is an informative bulletin sent to members of Appalachian Coals, Inc. On page 2 of that letter, under the subhead of "marketing," appears the following:

Division members appeared for Southern subdivision no. 2, at hearings on eight formal complaints before the National Coal Board of Arbitration in Washington this week. Written and oral briefs were heard by the Board from the opposing subdivisions in each docket, and the Board's decision is expected within 10 days from the dates of the hearings.

Western Pennsylvania subdivision again declined to participate as respondents to complaints against them, but efforts are still continuing to have them brought in to division 1 proceedings.

You will note that Western Pennsylvania still refuses to participate in hearings before the National Board of Operators set up under this amendment to the coal code, and the Senators will understand that the failure of a large producing district like Western Pennsylvania to so participate will render innocuous and useless decisions of the Board affecting other subdivisions.

Continuing to read from the letter:

Chiseling has reached such an acute state, all but one subdivision of division 1 agreed that drastic measures must be taken to protect contract tonnages for those producers who are observing code prices. A resolution authorizing code authorities to permit special competitive prices to be named to protect such producers on renewals of contracts was presented to the National Coal Board of Arbitration for prompt decision. The Board, however, declined to advance this on the calendar for hearing and ruled that it must come before them as a published rule and then it will be given special consideration, due to its major importance.

I ask the Senators to observe the meaning of that proposition. That means that so many contracts have been made in the industry at less than approved code prices that it has been necessary for the industry to undertake to revise downward the contracts that were in existence based on approved code prices. In other words, the sales realization of the entire industry has been reduced below approved code prices and the industry, as a matter of fairness to its consumers who unfortunately have contracted at code prices, is now being compelled to set up machinery to reduce the prices in those contracts in the midst of the contract period. That is the ideal situation that gentlemen come before this committee and ask to be perpetuated, the marketing situation that I have just revealed.

Well, some one may ask, what is the interest of the mine workers in this proposition? The mine workers for years and years have learned that if the operators cannot sell their coal for a price that will give them a return, they cannot pay a wage scale, and wages comprise at least 65 percent of the total cost of producing coal. Wages is the only item of cost in which there is any flexibility. If an operator has to reduce his cost, he thinks only in terms of reducing the wage cost or the labor price. It is the only flexible item. He cannot reduce his power cost; he cannot reduce his timber cost; he cannot reduce his machinery and supply cost; he cannot reduce his taxes or his royalties. The only thing he can reduce is his labor cost, and eventually he goes out to the pit head with his tacks and tack hammer and nails up a notice on the bulletin board that the wages are reduced, because that is the only way he can reduce costs within that reduced realization of the industry.

For many, many long years the mine workers have known what that meant, and the depths of the depression which existed in the industry, the degree of human misery which existed in the industry, prior to the enactment of the National Industrial Recovery Act, have left such terrifying scars upon the minds and the hearts of the men in the coal industry that, Senators, they are fearful of a return to that situation, and they ask the Congress of the United States to stop this coal industry in its mad downward course, because it means life or death to the mining population of this country.

If these coal operators who own the mines or manage the mines are so unintelligent that they cannot of themselves function as a group, if the only law that appeals to them is the law of the jungle, and the tooth and the fang, and dog eat dog in the coal industry, then the miners and their families, who are the residuary sufferers from that situation, ask protection at the only place where they can get protection, and that is from a beneficent Government through its Congress.

The coal operators have never been able to function collectively. The composite viewpoint of the coal industry is unknown, because the operators have never been able to crystallize it. There are just as many opinions in the coal industry as there are coal operators. And the coal operator, or the camp follower in the industry, or the attack:é who poses as an expert, when they take their leadpencils and figure out that something cannot be done because it will cost perhaps & cent a ton or a dime a ton more, disregard the human element and the right of men and women to live in the industry.

Individually, the men who own the coal mines and manage the coal mines in this country are just as fine citizens and intelligent men as exist in any cross section of our population, or in any industry or profession of our Nation, but they are unintelligent and incapable of being able to function in any collective sense. They cannot protect themselves against each other. The experience of the bituminous coal code has revealed that fact and demonstrated that fact beyond peradventure of doubt.

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So when we come down to the proposition that we are facing right now, a situation where there is a state of complete collapse in the price structure of the code, we find the consumers are laughing, as they have always been laughing. When I refer to the consumers, I mean the large consumers, like the steel companies, the railroads, the public utilities, and other large consumers who have always bought their

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