Unnecessary Drought?

A subcommittee of the Senate Judiciary Committee last week charged that U.S. distillers had deliberately planned the U.S. liquor drought in order to boost their profits. The subcommittee, headed by Ne vada's Senator Pat McCarran, and including such men as West Virginia's Harley Kilgore. Utah's Abe Murdock and Michigan's Homer Ferguson, accused the liquor industry of using its self-imposed program of rationing liquor to dealers as a scheme by which many rationed profits for themselves.

The subcommittee said the industry had done this by putting new, inferior whiskey in blends on the market. For these whiskeys (aged whiskey blended with a high degree of cane, grain or fruit spirits) the industry got high prices because there was no "preexisting date" on which OPA could set a ceiling. And it allowed distillers to keep a "greater amount of aged whiskeys which apparently they hope to . . . market after the war at higher prices."

The Whole Truth? To prove that the industry had held out on the thirsty public, the subcommittee cited a big advertisement, called "The Truth About the Whiskey Shortage," which the Distilled Spirits Institute, Inc., ran in hundreds of U.S. newspapers at the end of last year. Signed by 57 members of the liquor industry, the ad said that the U.S. then had only 203,000,000 proof gallons of whiskey on hand. Since that amount would have to last until production was resumed, the ad urged the public not to hoard.

The subcommittee called this statement a "misrepresentation." The Senators pointed to Treasury Department figures for November 1943, which showed 392,063,092 tax gallons of whiskey in bonded warehouses. They charged that the distillers had also failed to mention in their ad: 1) the 30,000,000 proof gallons of neutral spirits in bonded warehouses which would be blended with much of the straight whiskey before sale; 2) the fact that in most blends distilled water is added to cut the proof from too to 86. Also, the industry's estimate of 96,000,000 gallons for leakage, evaporation and soakage was too high. Thus the potential amount of blended whiskey on hand was actually 350,000,000 gallons. The industry, in short, said the subcommittee, was guilty of hoarding liquor, hiding facts.

Golden Opportunity. The report also held that the distillers showed "monopolistic tendencies"; that the industry is virtually controlled by the Big Four--Schenley Distillers Corp., Distillers Corp.-Seagrams, National Distillers Products Corp., and Hiram Walker-Gooderham & Worts. In 1939, the Big Four had 49% of the U.S. whiskey supply in their warehouses; today they have 70%. They got this enormous increase by adding some 127,066,629 proof gallons to their stocks through the purchase of small distillers. (The report did not note that the little companies often willingly took this golden opportunity to get a war-high price for their businesses.) The subcommittee also cited, as evidence of a trend to monopoly, the Big Four-owned distilleries in Cuba and Puerto Rico.

The subcommittee's chief conclusion: that "severe self-imposed rationing . . . if made by tacit agreement between the distillers, is a violation of the spirit, if not the letter, of the Sherman Antitrust Act."

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