requirements pertaining to formula, and so on, are adequate to protect the consumer on those kinds of products. Mr. VAN DEERLIN. Thank you. Mr. STAGGERS. Mr. Curtin. Mr. CURTIN. Thank you, Mr. Chairman. A statement has been made by a previous witness that the answer to this problem is not the type of legislation we are considering here today but, rather, a loss leader type of legislation. Would you care to comment on that? Mr. HAYMAN. Well, sir, I am not an attorney, and I do not know the fine differences insofar as different legislation is concerned that might accomplish the same end. I do not believe that I would have any authoritative statement in that regard. Mr. CURTIN. The statement was also made that there is such type of loss leader legislation in some of the States. Mr. HAYMAN. Yes. Mr. VAN DEERLIN. Do you know whether or not they happen to have any in the State with which you are familiar, with Virginia, or Ohio? Mr. HAYMAN. Well, we did have a Fair Trade Act which was declared unconstitutional about 3 or 4 years ago. And I may say that the predatory pricing has greatly increased since the law was declared unconstitutional. Mr. CURTIN. That is all. Mr. STAGGERS. Again we wish to thank you for appearing, and for your remarks-you and Miss Dinardi. Mr. DINGELL. Mr. Chairman ? Mr. STAGGERS. Mr. Dingell says he has a comment to make. Mr. DINGELL. Did you say that 25 or 30 years ago, sir, there were no predatory prices, prices fixed by the manufacturers that were observed? Mr. HAYMAN. There may have been, sir, in some of the larger cities, but I am a resident of West Virginia, where we have small towns and small villages, and, to my knowledge, at that time we had no such problem in the area in which I am familiar with. Mr. DINGELL. I see. Then your statement is particularly interesting, because at the bottom of page 3 you refer to the time when the small merchants of your State and every other State were using every legitimate means to obtain passage by Congress of the quality stabilization bill. Mr. HAYMAN. That is correct. Mr. DINGELL. It was known as the Capper-Kelly bill. And at that time Congressman Clyde Kelly stated: The action of the committee is proof of the justice of the contention urged through many years that predatory price cutters shall not be permitted to destroy standard quality goods and independent distributors through cutthroat competition. Mr. HAYMAN. Yes, sir. Mr. DINGELL. Now, in those days was there cutthroat competition or was there not cutthroat competition? 99-685-63- -8 Mr. HAYMAN. In some of the larger places I would have to admit that there probably was. Mr. DINGELL. Just in a few of the larger places? Mr. HAYMAN. Well, to my knowledge, I cannot answer that. Mr. DINGELL. There was not in West Virginia, then? Mr. HAYMAN. Not in the area that I knew of. Mr. DINGELL. That is particularly interesting, because just a little higher on the same page you refer to the "pine board" drugstores. Mr. HAYMAN. That is correct. Mr. DINGELL (reading): *** who are only interested in predatory merchandising in large volumes. So apparently, then, there was some predatory pricing in your State of West Virginia. See, I am trying to figure out which part of your statement we are supposed to believe. Now, I am very anxious to believe you, but you are making it very difficult. Mr. HAYMAN. I will have to go back and say that we were interested in fair trade; we did have some "pine board" stores; we had them in Morgantown, Clarksburg, Charleston, and Wheeling, and some others; yes, sir. Mr. DINGELL. Would it be fair to say, then, that you really do not know whether there was such predatory pricing or not, since you made such conflicting statements to the committee here this morning? Mr. HAYMAN. We were interested in preventing this; yes, sir. Mr. DINGELL. Thank you very much. Our chairman speaks very highly of you, Mr. Hayman. Mr. HAYMAN. Thank you, sir. Mr. STAGGERS. Thank you again for appearing before the committee. Our next witness will be Mr. Sam Karoll, director of the National Association of Retail Clothiers & Furnishers. Mr. Karoll, we are glad to have you with us. Would you identify yourself and the gentleman who accompanies you for the record, and you may proceed. STATEMENT OF SAM KAROLL, DIRECTOR, NATIONAL ASSOCIATION OF RETAIL CLOTHIERS & FURNISHERS; ACCOMPANIED BY LOUIS ROTHSCHILD, WASHINGTON, D.C., EXECUTIVE DIRECTOR Mr. KAROLL. Thank you, Mr. Chairman and gentlemen. My name is Sam Karoll. I am vice president of Karoll's, Inc., Chicago, Ill. Karoll's is in the men's wear business and has four retail stores. I also have an interest in and am secretary of Gassman's, Ltd., an apparel store for men, women, and children. I am here on behalf of my own business, as well as the National Association of Retail Clothiers & Furnishers, an organization of over 2,700 men's apparel stores, headed by its president, Harry O'Brien of Medford, Mass., and Louis Rothschild of Washington, D.C., our executive director, whom I asked to sit here with me. This is the first time I have had the honor and privilege of addressing a congressional committee. As a personal note, I would like to say that I am happy to be a citizen of a country where our elected representatives consider every point of view, where my point of view, also representing the thinking of my fellow members of NARCF, will be given due consideration. I came here to voice my opinion on H.R. 3669, the quality stabilization bill. At the outset, I want to tell you I am strongly in favor of this bill. I will give you my opinion of why this bill should be enacted. I want to deal specifically with the three segments of our population (consumer, manufacturer, and retailer) that this bill affects, and why it is beneficial to all. 1. The Congress and the people of this country are in favor of keeping the small and medium size businesses as an integral part of the American scene. The Government has clearly indicated time and again its avowed policy to be interested in the welfare of these smaller businessmen. This is evidenced by the enactment of legislation establishing the Small Business Administration and the various financial assistance plans supervised by this agency. Apparently, Government believes that from a social, economic, and general welfare of our population standpoint, it is in the best interests of our country to encourage these small and medium size businesses to continue to exist and prosper. I know of no measure that could possibly help these groups more than the enactment of the bill presently being considered by this committee. It goes right to the core of the question concerning the very existence and prosperity of these small and medium size businesses. The various components of the vast men's wear industry cannot be considered essentially big business. Retailers and manufacturers alike are comparatively small operations. The interest of the manufacturer in this legislation is indicated by the replies from a number of brand name manufacturers to my inquiry as to their opinion of H.R. 3669. I would appreciate it if these letters could be submitted to the committee and considered a part of the record for further study and consideration. Mr. STAGGERS. If there is no objection, that will be done. (The letters referred to may be found in the subcommittee files.) Mr. KAROLL. The public favors protection of brand names from predatory practices. The historic approach to this problem has been through the so-called fair trade laws, now existing in some form in 29 States. These States contain 71 percent of our Nation's population which indicates there is both a need and a desire on the part of the consumer to accord such protection to reputable merchants and manufacturers. It is general knowledge that fair trade laws are not really effective in all of these States, but in 19 States with over half of our population, the voice of the people the legislatures-have enacted workable and effective fair trade legislation. 2. Stores of our type are service businesses, in addition to being sellers of merchandise. We are concerned about the appearance of a man who buys any product from us. If it is a suit, it may need quite a bit of tailoring this can be quite expensive in manpower costs. We carry extensive size ranges in shorts, regulars, longs, extra longs, and in port lies for stout men, which also are available in short, regular, and long. This is done just so that we have the right model to fit the individual. Contrast this with an operation where practically no tailoring is done and no consideration is given to proper fit. The same would apply to Manhattan shirts-a qualified man would know the type of shirt, should this man wear a full cut shirt or a tapered shirt, the type of collar that would best fit the individual, the color combinations, etc. In selling Stetson hats, should a man have a regular oval, a long oval, a round oval or an extra long oval! In stores selling better merchandise, the salesmen are familiar with fashion, color, fit, etc. This assistance, plus the tailoring involved, gives the wearer and others who see this garment on the wearer an entirely different reflection of the product, as compared to a garment sold by inexperienced help or taken off a rack with very little thought given to fashion, color, fit, and so forth. It takes a man of great experience to sell the item most suitable for the individual. These men are well paid, as their experience is valuable. It requires a continuing effort to satisfy your customer and you will find generally that both the ownership and the employees in our type of business work hard at it every day. The contrast in the service in stores can be very great and the consumer does not get as much satisfaction or service out of a garment which is bought in a store that does not give him the proper service. In the final analysis, his cost per wearing is higher. While I am speaking as a retailer, I feel that the brand manufacturer should have the right to handpick his representatives at the retail level; he wants a distributor with a long-range view, who will endeavor to maintain the public confidence and good will toward his product. The quality stabilization bill will give him this opportunity. 3. The consumer is entitled to the protection of the brand name. Without a brand name, you have no method of comparison for the consumer. By having a Botany 500 suit at a price of $69.95 and an Eagle suit at $85, the consumer is made aware of what prices are fair prices in the clothing field for reputable manufacturers; by having a Manhattan shirt at $5, a Stetson hat at $11.95, these set the standards as they are good values. The constant advertising of the brand names informs the consumer of price levels and the brand line people are well aware of the fact that should they try to price their goods beyond its actual worth, they will be stopped first by the retailer, who is an expert in his field and who sees the various lines. If by chnace it gets by him, then the consumers as a group are pretty smart and they won't buy the goods if they are not priced right. For example, in the shirt field, Manhattan, Arrow, and Van Heusen are constantly striving to be tops in their field. Despite the fact that all three produce a very fine garment, they try to establish their prices at the lowest possible level; the amount they do otherwise, their competitors will get the business. Branded manufacturers have a tremendous investment in advertising as well as the many years spend in building up their lines, so they cannot become careless in what they do, both as to quality and price. There are many fine nonbranded lines; yet, where there is no brand name involved, there is not the same stake involved because even if the product were to come out less than what was desired by the manufacturer, he, nevertheless, has not lost the value of the brand name. But when one of the brand name manufacturers turns out an item that is inferior, the consumer will stay away from that name. If he turns out an item and prices it too high, he will also lose out. There is a built-in protection for the public in branded lines. With these checks in mind, the manufacturer should have the right to merchandise his product in a manner that he determines to be to his best interest and for that reason, I urge the passing of the quality stabilization bill. 4. I have here a group of ads that will give you a very clear picture of how brand names can be used in a very legitimate manner, telling your story to the consumer, naming the brand, the price, and not telling him that he is getting something for nothing. The average gross markup on the merchandise advertised in these ads is between 41 and 43 percent. Mr. ROTHSCHILD. Would you gentlemen like to have these ads passed to the committee table? (Mr. Dingell assumes the gavel.) Mr. DINGELL. The committee will receive them for the files, and we will make a determination at a later time at to whether it is appropriate to have them included in the hearing record, without objection. Mr. KAROLL. Thank you. You will also see the ads of a group of stores that use the brand names in a manner that would be outlawed by the quality stabilization bill. I am certain that you will agree with me that this type of advertising is misleading and gives the consumer a very distorted picture of our industry at the top of their ads-various brand names3-G, Cooper, Juilliard, Alligator, Knox, Florsheim shoes, and so forth. You will notice a spread of brand names across the top of their ads; there is no relationship or tie-in between the body of their ads and the brand names. They just list the price under that, but do not tell you what brand they are referring to. There are three clothing brands there, and they do not distinguish the price of one against the other. They merely say: We are giving you these three brands, they name prices below that, and they in no way tie in the difference-giving them all this flexibility, so that when a customer comes in and asks them the price on a 3-G suit, "Well, this is the one that is $118," or whatever it might be, because he is not pinning himself down to what he is giving them in any way. It is quite obvious that the objective here is to trade on the brand names to the detriment of both the manufacturer and the retailer who handle these brands in an honest and forthright manner. The two operations that I have just shown you and illustrated are the group belonging to my family and which I am the operating head of, and another men's wear organization in Chicago which operates several stores under several names that they have bought out. My reason for that is that I know the workings of our company and I have watched the workings of this other group. I think that this advertising will tell you more about the merits of the quality stabilization bill than a book written on the subject by an expert. I have in my possession a financial report on this company, indicating the number of stores they keep buying out. This report, prepared by Dun & Bradstreet, can be made available to the subcom |