PARAGRAPH 474-PHOTOGRAPHIC PLATES.

PARAGRAPH 474.

Photographic dry plates or films, not otherwise specially provided for in this section, twenty-five per centum ad valorem. Photographic film negatives, imported in any form, for use in any way in connection with moving-picture exhibits, or for making or reproducing pictures for such exhibits, and movingpicture films not developed or exposed, twenty-five per centum ad valorem. Photographic film positives, imported in any form, for use in any way in connection with moving-picture exhibits, incruding herein all moving, motion, moto-photography or cinematography film pictures, prints, positives or duplicates of every kind and nature, and of whatever substance made, one and one-half cents per linear or running foot.

PHOTOGRAPHIC PLATES.

TESTIMONY OF W. O. GENNERT, 149 BROADWAY, NEW YORK CITY, N. Y., ON THE SUBJECT OF PHOTOGRAPHIC FILMS.

Mr. GENNERT. Mr. Chairman, I desire to call the attention of the committee to section 474 of the present tariff act, which provides for a duty on photographic dry plates or films not otherwise specially provided for in this section at 25 per cent ad valorem.

I will say before going into the subject of films that I appeared before this committee and discussed the question of photographic cameras, and stated that they more properly belonged under manufactured articles in paragraph 474 than classed as optical instruments under paragraph 108.

The principal kind of film to which I desire to call the attention of this committee are photographic films unused or in the raw and ready for use to make pictures thereon, either in the little hand cameras or in the moving-picture cameras.

If you will read further in paragraph 474 you will find reference to photographic film negatives and photographic film positives, the former being taxed at 25 per cent and the latter at 14 cents per linear or running foot. Before taking up the merits of my articles, I would like to explain the difference between the two kinds of films, as it seems to have caused some confusion when the last tariff act was under discussion.

The only film that I am interested in is the raw film unused and ready to receive the picture. In the act that is the only film which is called "film;" but unfortunately in the popular parlance the finished picture is also referred to as a film. A film negative is not a film; it is a finished picture, the word "negative" simply meaning that the image is reversed. A film positive is simply a copy made from the film negative in which the picture is correctly transposed in its positive form and is ready to be used in the camera or thrown on the screen. We do not deal in either the photographic film positives or the photographic film negatives, which are finished pictures, the one being basic and the other being copies made from the basic negative. We are only interested in the raw film, as it is called in the act, not developed or exposed, and which we desire to sell to the photographers in America and to merchants using this film in making moving pictures.

Mr. HULL. Which paragraph is that under?

Mr. GENNERT. Paragraph 474.

PARAGRAPH 474-PHOTOGRAPHIC PLATES.

Mr. HULL. Which clause of that paragraph?

Mr. GENNERT. The unused film. "Photographic dry plates or films not otherwise specially provided for in this section, 25 per cent ad valorem."

The other two grades of pictures are not really films, namely, the film negative and the film positive, which are referred to in a separate section of that paragraph.

I will take up the films first and the plates afterwards. I desire that this committee place upon the free list photographic films not developed or exposed, for the reason that the manufacture and sale of these films in the United States at the present time is in the hands of an absolute monopoly, the Eastman Kodak Co. and its various subsidiary companies, who manufacture and sell, at a modest estimate, 95 per cent of the films used and sold in America. I might add that this same company sells probably from 75 to 85 per cent of all of the films used or sold in Europe. They have control of the German Kodak Co., they have control of the French Kodak Co., and they have control of the Kodak Co. (Ltd.), in England. They have established this absolute monopoly in the United States and partly in Europe through the use of unfair methods and restrictive methods in absolutely compelling the people to use their films. They are in a position, with their tremendous output and their tremendous profit, to make films cheaper than anybody.

For instance, they will go to a retail dealer who has, we will say, a film of ours in his window. Their demonstrator or their salesman will go in and say, "Take that out." If he did not take out the Gennert film he could not buy any more goods from the Eastman Kodak Co. With their tremendous resources and their advertising they have established such a demand for their goods that the average merchant is afraid to incur their wrath.

Mr. HULL. Have you called the attention of the Department of Justice to those facts?

Mr. GENNERT. Yes, sir; the Department of Justice is now engaged upon a thorough investigation of the organization and methods of the Eastman Kodak Co.

Mr. HULL. What is the capital stock of that concern?

Mr. GENNERT. The capital stock of the Eastman Kodak Co. is approximately $6,000,000 (6 per cent) preferred and slightly less than $20,000,000 common. It paid in 1911, 42 per cent dividends on the common stock and had a surplus of over $12,000,000 and a reserve for depreciation of over $6,000,000.

Mr. HULL. How long has it been in existence?

Mr. GENNERT. In its present form approximately since 1902. The dividends started in that year at 24 per cent, and I believe in 1912 they were approximately 40 per cent. So far they have declared a measly dividend of 12 per cent in 1913 on the common stock.

Mr. HULL. Have they been increasing prices on these articles? Mr. GENNERT. Not lately. When the combination was started it increased prices on certain articles. For instance, photographic paper was raised from 75 cents to $1.35, after they had bought up practically all of the competing paper companies. I might say that

PARAGRAPH 474-PHOTOGRAPHIC PLATES.

they advertised in their own trade journals that they sell 95 per cent of the paper used and manufactured in the United States.

Mr. HULL. You say they have secured control of most of the rival concerns in Europe?

Mr. GENNERT. I would not say that; no, sir. But they have control of the companies which bear the name "Kodak." They were incorporated by the Kodak Co., and they have a large company in each of the large European countries.

Mr. HULL. They have established branch businesses in those countries?

Mr. GENNERT. Yes, sir; although I understand the Kodak Co. (Ltd.) was once an independent English company.

Mr. HULL. Do you know whether they have any agreement with the rival concerns of which they have no control in a financial way? Mr. GENNERT: That is rather difficult for me to answer. For instance, they have an agreement with the Moving Picture Patent Co. and its allied concerns, which are known as the Moving Picture Trust, that they would only sell films to persons who were pronounced as good and well behaved by the Moving Picture Trust. What changes have been made in that contract I can not tell, but I can say that the Moving Picture Patent Co. and its allied concerns have been sued by the United States Government, and action is now pending in the eastern district of Pennsylvania. I believe within the next few days the contracts with the Eastman Kodak Co. are going to be produced in court, and undoubtedly the Department of Justice can furnish all of that information.

Mr. HULL. That concern virtually controls the output, controls the territory, and controls the prices?

Mr. GENNERT. Exactly.

Mr. HULL. Not only in this country but in a number of other countries?

Mr. GENNERT. Exactly, although the control is not as strong in Europe as it is here.

For instance, they sell in Europe film in retail quantity at 3 cents a foot, and they sell it in America in wholesale quantities at 3 cents a foot. I can not buy from them. They refuse to sell my firm.

Mr. HULL. Has this concern been coming and asking for a tariff to protect the articles which it handles?

Mr. GENNERT. If I may use information which is not my own, i will state that they endeavored at the time the Payne-Aldrich bill was being prepared, to have the tariff raised to 60 per cent on films. Mr. HULL. On the chief products it handles?

Mr. GENNERT. Yes, sir; on films. I might say the statement has been made that it exported to Europe in one year 11,000 miles of films. Their exports for the 10 months ending October, 1912, are given in the report of the Bureau of Commerce and Labor at slightly over $5,000,000, which would be about 25,000 miles of film.

Mr. HULL. Have you stated all you know about the improper methods that are used with respect to controlling outputs, the means by which it eliminates rival concerns and fixes prices arbitrarily ?

Mr. GENNERT. I have not, sir. I have made merely a general statement. I have a sincere hope that action will be shortly started

PARAGRAPH 474-PHOTOGRAPHIC PLATES.

against the Eastman Kodak Co. by the Department of Justice. And I want it distinctly understood in making that statement that I speak entirely of my own belief and hope and am not directly or indirectly quoting anybody in any way connected with the Department of Justice. I would consider that improper.

Mr. HULL. You do not care to detail any further facts about it? Mr. GENNERT. I do not, sir. I will read one or two letters. I have a large batch of letters here. Our complaints generally come in this form. Usually they will telephone to us or will come in to us and say, "I am sorry, I can not buy your goods, you will have to take them out. If you do not take them back, I can not sell them; Eastman won't let me." But some of them, more courageous or more foolish, just as you may consider it, have written letters. I will read one from a small town in Pennsylvania. Unless you gentlemen insist on it, I will not give any names, because if the information is published at this time, they will simply be cut off.

We have been driven to import films. We can not buy them in America, so naturally we have imported them, and we are compelled to pay an ad valorem duty of 25 per cent, and we can not make money on that.

Mr. DIXON. Your time has expired, Mr. Gennert.

Mr. GENNERT. May I just refer briefly to a question of plates, as to which some statements were made this morning?

Mr. DIXON. Yes; you may proceed.

Mr. GENNERT. I am afraid that those statements will mislead the committee. Mr. Cramer, when he appeared here this morning, stated that he desired the duty on photographic dry plates to be raised from the present duty of 25 per cent to 40 per cent ad valorem, because a certain English house exported plates to New York at 50 cents, and it cost them 53 cents to manufacture plates in America.

One point that I would ask from this committee is that we want a chance to live, and if something is not done to reduce these duties I am going to prophesy that within five years there will not be anybody in the photographic business in America except the Eastman Kodak Co. They are even going after the photograph galleries, and when they get them, that will be the end of the rest of us.

Mr. HALL. Where is the place of business of the Eastman Kodak Co. ?

Mr. GENNERT. In Rochester, N. Y.

BRIEF OF G. C. GENNERT, NEW YORK, N. Y.

NEW YORK, N. Y., January 30, 1913.

To the Chairman and Members of the Ways and Means Committee:

I appear before this committee for the purpose of requesting a sweeping reduction in the tariff on photographic dry plates and films, now taxed at 25 per cent ad valorem under section 474 of Schedule N, Sundries.

My firm, G. Gennert, of New York City, which has been in the general photographic business since 1854, has previously filed a brief with this committee on the subject of photographic cameras, classified by the Board of General Appraisers as "optical instruments" at 45 per cent duty under section 108 of the present tariff law, a section to which cameras do not properly belong. (See Schedule B, Jan. 9, 1913, p. 889.)

PARAGRAPH 474-PHOTOGRAPHIC PLATES.

PHOTOGRAPHIC FILMS, Not developeD OR EXPOSed.

Two classes of photographic films are now imported into this country, both of which are covered by section 474 of the present tariff act.

They are:

(1) Photographic films in the raw; that is to say, films in a condition ready to have a picture taken upon them. Technically speaking, these films are well described in the act (sec. 474) as "not developed or exposed."

(2) Films already exposed and developed and therefore having a picture thereon: these are almost exclusively moving picture films and are again divided into two classes called film negatives and film positives.

Film negatives are films in the raw, exposed in the camera and developed and in a condition that prints or positives may be made therefrom. These pay a duty of 25 per cent ad valorem.

Film positives are positive copies made from a film negative and represent the form in which films are sold to the moving-picture theaters.

Our request for a reduction in duty is restricted to films "not developed or exposed or raw films, as we have called them, which excludes film negatives and film positives carrying a finished picture.

Films in the raw state-that is to say, films not exposed and not developed now paying a duty of 25 per cent ad valorem should be placed upon the free list, and for the following reasons:

(1) Their sale in America is practically monopolized by the Eastman Kodak Co., a corporation of New York, which has secured this monopoly by the use of unfair trade restrictions and agreements, which have practically smothered all competition.

(2) They can be and are produced at less cost in America than abroad. As proof of this assertion, we point out the fact that the Eastman Kodak Co., manufactures at Rochester, N. Y., all the films that it exports to Europe, which amounts to 80 per cent of all films used there, and this, despite the fact that its parent corporation, the Eastman Kodak Co. of New Jersey, owns the control of the extensive works manufacturing photographic supplies at Harrow, England. Its yearly production of film is so vast that no other manufacturer in the world can expect to compete with it on the cost of production.

(3) The question of the difference in the cost of labor abroad and in the United States need not be considered. The basic film is manufactured and coated with film emulsion by machinery at a very low cost. The item of labor is a negligible proportion of the whole cost. As proof of this we repeat that the Eastman Kodak Co. manufactures no films at its Harrow, England, plant, nor does it import any films into the United States, while it exports them in vast quantities.

(4) The Eastman Kodak Co. sells moving-picture films cheaper in Europe in retail quantities than it does in America in wholesale quantities. Thus the Kodak (Ltd.), the English Eastman subsidiary, sells films in retail quantities at 3 cents a foot, against the wholesale price in America of 3 cents a foot, a difference of approximately 15 per cent.

(5) Substantially all the raw material used in the manufacture of films in the United States is produced here and therefore pays no duty.

(6) The films we import are made upon celluloid manufactured in the United States and exported to Europe, where it is coated with sensitive emulsion and then returned to the United States, where the finished article must, under the present tariff law, pay an ad valorem duty of 25 per cent. In addition, the importer must pay the high freight rate of 36 shillings per ton and 1 per cent ad valorem. The same abnormal freight rate applies to the celluloid on its shipment to Europe for coating.

(7) The exports are enormous, while the imports are almost negligible and produce a minimum of revenue.

(8) The present tariff enables the Eastman Kodak Co. to exact an enormous tribute in swollen profits from the American people, as its dividend record shows. This dividend record demonstrates that the American industry needs no protection.

(9) The present duty should be removed in order that competition may be made possible.

In support of the foregoing we state the following facts:

The Eastman Kodak Co. of New Jersey not alone controls the entire photographic business of America, but it has acquired the Kodak (Ltd.) of London, the Eastman S. A. F. of Paris, and the Kodak Gesellschaft m. b. H. of Berlin, and is the leading factor in the photographic business of the world.