very small weeklies whose paper requirements were less than a ton a year. Others were large users whose requirements ran to thousands of tons per year. The universal complaint was that not enough newsprint was available. Some papers explained that they were threatened with complete suspension of operations, and would have to go out of business. Others indicated that they could not continue to absorb rising costs (including the cost of newsprint) unless they could expand the volume of their advertising or their circulation. Either would require more paper than is presently available.

The first consideration in analyzing the position of the small paper in the present shortage is the fact that the newsprint drought is worldwide. According to Sir Walter Layton, chairman of Britain's rationing committee, of the Newsprint Supply Company, world production of newsprint has fallen off 1,356,000 tons since 1937-38. This curtailment has been outside of North America; actually, Canadian and other production on this continent has risen 894,000 tons, so that production in 1946 was somewhere around five and a quarter million tons. The rest of the world had nearly 2,000,000 tons less newsprint in 1946 than it had in the last year before the war. North America is now consuming 65 percent of the world's newsprint as against a prewar 45 percent. In the United States alone, the annual per capita consumption has gone from about 15 pounds in 1900 to about 62 pounds in 1945. If other kinds of paper are included, United States consumption is 300 pounds per person per year. And the rise has been a steady one, which has not yet ended.

The long-range prospects indicate that the shortage of newsprint will be with us for sometime to come. Sir Walter Layton evaluates the prospects (Newsprint: A Problem for Democracy, p. 7):

It is difficult to forecast the duration of the present newsprint famine, but there are several influences that will tend to delay the return to prewar conditions in the newsprint market.

One is the long period needed to expand supplies.

Another is the growing demand for cellulose (i. e., chemical wood pulp) for uses other than paper, including production of rayon and other artificial textile fibers, plastics, building and packing materials.

A third is the large potential demand from countries which are now opening up and in which up to the present there has been a very small consumption of newsprint. In India, for example, the annual consumption is only of the order of 30,000 tons a year. In that country, in China and elsewhere, the spread of literacy will, in time, make a very great demand on the world's production of timber suitable for paper making.

Lastly, the European demand-particularly that of Germany and France, in both of which countries consumption of paper is far below normal-will quickly absorb any recovery in Europe's timber and pulp production.

According to a Department of Commerce study (The World's Paper and Wood Pulp Industry Before and After V-E Day), made in January 1945, the Big Three of world politics are pretty much the Big Three of world newsprint resources. Coniferous woods, which have the long, strong fibers most desirable for pulpwood, are concentrated in the earth's North Temperate Zone. The United States has the resources of its own northern States and Alaska. The British Empire has the forests of Canada on which to draw. The Soviet Union has "vast areas of coniferous forests as yet untouched by the ax (although) * * their use in the immediate future is likely to be confined to meeting internal needs."

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BACKGROUND OF PRESENT SITUATION

Paper consumption rises with industrialization, newsprint consumption with literacy. The areas in which industrialization and literacy will both expand the farthest in the postwar era are the Middle, Near and Far East, and Latin America. All of these comprise nations where the big power use of newsprint to influence the press and public opinion will imperil the peace by intensifying political rivalries. Newsprint must not become an instrument of power politics, yet with a continuing shortage in prospect, there is a danger that it will. Nothing less than United Nations action by the Economic and Social Council will prevent it absolutely. Brigadier General Carlos Romulo has already proposed that the UN consider the problem.

One indication of the gravity of the problem for American newspaper publishers is that 1 ton of newsprint is required to produce about 4,600 copies of a standard size 30-page newspaper. This estimate of the American Newspaper Publishers' Association should be placed against the daily newspaper circulation of more than 45,000,000 copies. Thousands of weeklies and small publications must be accommodated along with the mass circulation magazines which have persuaded many mills to switch over to slick paper from newsprint.

Table II indicates the sharp rise in American newsprint consumption, the drop in United States production and the more than compensating increase in imports from Canada. The decline in newsprint production within the United States is further indicated by the diminishing proportion which it forms of total paper and paperboard production. In 1904 newsprint accounted for 30 percent of the total, in 1923 for 20 percent and in 1943 less than 5 percent. In 1926 38 United States companies with a plant capacity of 1,739,000 tons were making newsprint. By 1946 only 6 of these concerns still made newsprint, and their combined capacity was only 680,000 tons.

The ratio of imports from Canada to domestic production has been reversing itself. In 1913 the United States produced four times the amount of newsprint made in Canada. By 1945 it was almost the other way around. Imports from Canada now fill more than 75 percent of the needs of United States newsprint consumers. There is no duty on newsprint coming into the United States. (Table II follows.) TABLE II.-Newsprint paper-United States production, imports from Canada, and quantity available for consumption in specified years,

[In tons of 2,000 pounds]

1913-46 1

Three times in the past 30 years, the Federal Trade Commission has made studies of the newsprint industry. In 1917 a study of industry sources of supply, costs of production, prices, and the activities of trade associations was requested by the United States Senate. As a result of the FTC's investigation, an indictment of certain practices in violation of the Sherman Antitrust Act was handed down, and some token fines were assessed against several companies. The FTC then filed a decree banning certain practices, including the collusive setting of prices and the division of markets through the use of the trade association in the industry. The manufacturers consented to refrain from discouraging competition as to price and quality of newsprint among themselves and among other producers either through the trade association or independently.

In 1929 and 1930 the Senate again requested the FTC to study the newsprint industry's alleged monopolistic practices. The Commission found that there was no monopoly in the United States, except possibly in the Pacific Coast States (Crown Zellerbach Corporation), and reported that

No evidence was found of any practices of the domestic manufacturers and distributors of newsprint paper showing unlawful discriminations against the publishers of small daily and weekly newspapers or that constitute violations of the antitrust laws.

But it did report that the Newsprint Institute of Canada, a very powerful trade association

if formed and existing in the United States would be in violation of the anti-trust laws, including the anti-trust provisions of the Wilson Tariff Act * *

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In 1939, as a result of numerous complaints over a price increase, the Attorney General asked the FTC to determine the way the 1917 decree was being carried out, and whether there were other violations of the anti-trust laws not covered by the decree. Its report to the Attorney General, which is being published for the first time for the use of this committee was especially concerned with the price policies of the newsprint industries, and the "arbitrary" base-point zoning system which is used to set up prices. Shortly thereafter the Department of Justice filed an anti-trust suit against Crown Zellerbach Corporation, et al., for collusive price and contract agreements on the Pacific coast and in the Northwest.

These Federal Trade Commission studies have been mentioned here because they indicate a continuing effort to maintain competition in newsprint industry, as a result of which small papers might bid in an open market for their paper. By and large it has failed. The three major characteristics of the industry are:

1. A HIGH DEGREE OF CONCENTRATION

According to the report of this Senate Small Business Committee on Economic Concentration and World War II, the paper industry ranks about fifteenth among the most concentrated industry groups in the United States. Newsprint production and consumption are both concentrated in a small number of giant corporations. The following tables show that in 1928, three corporations controlled about half the output in the United States; three corporations controlled half the Canadian output, and since two of the six were joined, that meant five companies controlling half of North America's newsprint (FTC, Newsprint Paper Industry, pp. 17, 20).

TABLE III.-Production of newsprint paper by 3 large companies compared with total production in the United States, 1928

TABLE IV.-Production of newsprint paper by 3 large companies compared with total production of Canada, 1928-29

On the consumer side, too, there has been a trend toward concentration of newsprint supplies, paralleling the decline of competition among papers. Thus the 1930 report of the FTC listed 52 chains, controlling 266 dailies and 101 weekly newspapers, which consumed almost one-and-a-half million tons of newsprint or about 40 percent of the annual consumption of the United States. Five chainsHearst, Patterson-McCormick, Scripps-Howard, New York Times, and Chattanooga Times, and two papers then owned by the Pulitzer family-consumed a million and a quarter tons annually, or about 30 percent of the total. The Hearst press alone consumed 15 percent of the total.

Industry discussion in 1946 spoke of 200 papers which consumed 85 percent of the total supply available to the remaining seventeen to eighteen thousand smaller dailies, weeklies, and semiweeklies.

2. DIMINISHING SUPPLIES FOR OPEN NEWSPRINT MARKET

Newsprint is sold in rolls or in sheets for use on rotary or flat-bed presses. Only the smallest papers still use sheets. Small papers who buy in less-than-carload lots usually buy their newsprint from jobbers in the spot or open market. Or they could, in the past, occasionally buy part of a carload directly from a mill. More and more of the newsprint produced in the United States and Canada is contracted for far in advance and is not even available for bidding by small papers. Thus in 1928, 13 percent of the newsprint produced went into the open market, according to the FTC Report of 1930. Ten years later, the sales policy of manufacturers was to sell only 7 percent of the newsprint produced in the open market. And the FTC reports in its 1939 study that the "larger newsprint manufac

turers sell from 95 to 100 percent of their total output through contracts to definite customers." The International Paper Co., for example, sold 97%1⁄2 percent of its total newsprint on direct contract.

The forms of such contracts have further served to close the open newsprint market. They usually run for from 5 to 10 years. In some cases, they provide that the publisher is guaranteed all the paper he needs. In others, he has first call on the total output of the mill. In their drive to secure their sources of newsprint supply, the largest publishers have increasingly acquired direct ownership of mills, wholly or partly. Interests in United States or Canadian mills are reported now held by the New York Times, the Hearst chain, the McCormick-Patterson chain, the Milwaukee Journal and others. What proportion of the newsprint producing facilities are now completely in the hands of newspapers, we do not know but the proportion is rising. It is further complicated by the activities of magazine publishers who are similarly moving in on the production of slick paper. Time, Inc., the Curtis Publishing Co., McGraw-Hill, and the Chilton Publishing Co. all have book paper mill interests.

3. NONCOMPETITIVE PRICE DETERMINATION

The price of newsprint is nowhere near as significant a cost factor for small papers as it is for large ones. Thus in 1929, the Federal Trade Commission reported (1930 study, p. 71) that its survey showed the average percent of total costs which went for newsprint to vary with circulation as follows:

A similar picture is shown by a study of 1945 costs by Wm. M. Layman for a group of publishers' associations. His data show that newsprint and inks consumed the following proportions of the income of the several circulation groups.

Percent to total income

7. 1

8. 2

11. 9

14. 8

These figures are given here to indicate that the small paper, since it uses such an infinitesimal fraction of what the giants do, would probably be able to pay higher newsprint prices than large papers. But it does not get much of a chance to bid on prices. There is never any difficulty in learning the going price of contracted newsprint. Contracts between publishers and mills "interlock" the price with that being charged by the International Paper Co., the acknowledged price leader. Thus, a 5-year contract may provide the current price ($85 per ton) for this year, with revision every year to parallel the price being charged by International. An additional restriction on competitive prices is the base port and zone system,