mittee if it is so desired. They just recently bought two more stores who sell branded goods. I also am introducing a recent letter signed by this company, under the masthead of an old established firm, wherein their leadline states, "Our First Major Sale in 50 Years." They go on to mention such outstanding names as Hickey-Freeman, Kuppenheimer, Botany 500, and others. A careful examination of the previously noted financial report discloses that they bought this business a few days prior to this ad. The same report also indicates under "Special Notice" that this company did not take over any of the liabilities of the Weinberg Bros. Clothing Co., a corporation, the company they are advertising. This means that they did not buy this as a corporation, but merely bought the assets and then had the effrontery to fool the public by stating, "Our First Major Sale in 50 Years." This gives the consumer the impression that there has been no change at all. I am also introducing two of the Weinberg newspaper ads. I would especially call your attention to this statement in the ad: *** There's no use kidding ourselves! After 50 years in business we should know better *** but our buyers bought more nationally advertised famous brand suits than we have room for. This statement made less than a week after the purchase of the store.. I will also draw your attention to the $63 suit in this ad. It reads "formerly sold for $99.50." The mohair and wool fabrics that they have described cost them $38.95. We checked this with the manufacturer that they bought it from. At $99.50, this would show over 60 percent gross, as compared to the traditional 41 percent to 43 percent gross. In the men's wear field, 60 percent gross is an unheard of markup and obviously this is a false statement. If these people follow their usual pattern, within 90 days, they will have a going-outof-business sale at Weinberg's, and this gives them a double-barrel shot at the consumer. I am also introducing several of a series of ads of Erie Clothing Co., operated by the same people-not the same name, but the same people starting with an ad dated October 28, 1962, showing a goingout-of-business sale with city permit No. 1552. This is followed up with other going-out-of-business sales. Then in another ad on December 29, 1962, and January 12, 1963, they start naming the number of days they still have to go. On February 14, 1963, they have a full-page ad in the Chicago Tribune, showing a reorganization sale and using the brand names across the top with a statement of our organization sale means savings of 25 to 75 percent with no tie-in between the brand names and the prices. On February 23, 1963, they have a forced reorganization sale. Now, this forced reorganization, or reorganization, nobody could fathom as to what the difference was, but nevertheless the next one-it is a forced reorganization sale. There are also many other Erie ads of which I have copies here, running the reorganization theme. Both the brand-name manufacturer-I would also like to introduce an ad that our company ran on a sale. And I want to point out to you that on this sale, while the majority of the goods carried in our stores is branded goods, there is no brand name mentioned in there at all. I also want to point out how we qualify the goods that we are selling. As an example, we say: "Famous brand hats," and we say: "Discontinued styles," because that is what they are getting; they are getting previous year's merchandise. They are not getting fresh new goods that we are buying for the coming season. And we so inform them. On the suits, you will notice there are boxes indicating the sizes so that, if we do not have your size, you are not making a trip to our store under some false pretense that we can fit you. We tell you the truth all the way through. And in suits we tell them that there are discontinued styles in the lot. Now, under all-weather coats we have this statement that you would be interested in: "A terrific value for the man who does not mind a discontinued style." They are getting the truth all the way. We are not hurting anybody there. Our store is not hurt by it, because we build up goodwill with this kind of thinking. The manufacturer is not hurt in any way, and no other retailer is hurt by our advertising, because it is all honest. Both the brand-name manufacturer and the retailer of quality men's wear are entitled to some protection against these types of operations. And what is even more important, the consumer is entitled to protection in his relationship with operators of this kind. I am citing these examples because this is right in our own backyard and we know what goes on in Chicago. I can assure you that this is not a local condition, but one that is quite prevalent nationally. This entire method of doing business is frowned on by people who are conscious of their obligation to the consumer, as well as to our industry. This type of business is unfair competition for the honest retailer who plays the game fairly and squarely. These are "borax" operations which get every dollar they can out of the consumer. This is a carryover from the days of "caveat emptor," buyer beware-and does not fit in with modern society. Certainly, a brand-name manufacturer should have the right to determine whether retailers of this kind will keep his product a leader in the field. The quality stabilization bill will be very helpful in curing this ailment. And, in closing, I want to sum up why I believe that this subcommittee should favorably report on this bill. It is for the best interests of the quality manufacturer, the quality retailer, and the consumer. The consumer will get the best service and fairest prices through this bill, the retailer will not be harassed by unethical competition, and the manufacturer should have the inherent right to protect his label without being sniped at by retailers. who are trying to outsmart the public. And now, quoting a well-known brand manufacturer-"What's in a brand name?" So long as it remains anonymous, a product can be as footloose and changeable as it likes. But, as soon as it gets an advertised brand name, it has to grow up and behave itself. Well-known brand names live in the constant spotlight of competition where everyone can see them. They invite trial and comparison. That is why they advertise. And that is why, over the years, the public comes to prefer products with brand names. It knows that it can depend on them. It knows that shopping without them would be shopping in the dark. Thank you, gentlemen. Mr. DINGELL. Does that complete your statement, Mr. Karoll? Mr. DINGELL. Does that complete your statement, Mr. Karoll? Mr. DINGELL. Mr. Long? Mr. LONG. No questions, Mr. Chairman. Mr. DINGELL. Mr. Glenn? Mr. GLENN. No questions, Mr. Chairman. Mr. DINGELL. Mr. Van Deerlin? Mr. VAN DEERLIN. I think not. That is a very interesting review, well illustrated, and it is something that I have been interested in for a long time, and I have talked about as a television newscaster. In fact, I began to think that maybe some of the San Diego sharpies learned their stuff in Chicago. There will be the question in my mind as to whether this legislation, while containing safeguards against this kind of thing, may not go beyond this field unnecessarily, and I shall proceed with an open mind, but I do compliment you on a very effective presentation on this phase of the matter. Mr. KAROLL. Thank you, sir. Mr. DINGELL. Mr. Keith? Mr. KEITH. I am sorry that I did not get here sooner, Mr. Chairman, to have the benefit of this statement which has been so highly complimented. It is fine for us to hear from the National Association of Retail Clothiers & Furnishers in support of this; but, at the local level, I have not heard from a single clothing store or manufacturer. The druggists and the hardware people have been carrying the ball. Before we are successful in getting this legislation before the Congress for a vote, we must have more widespread support than we are getting at the local level. Have you any comment on that? Mr. KAROLL. Well, yes. Mr. ROTHSCHILD. May I comment on that, Mr. Chairman? It is unfortunate, but there has been the general misconception in these hearings this year and the year before and the year before that, that quality stabilization is a drug bill. It is not a drug bill; it affects the entire gamut of brand name operations and is particularly needed in the men's apparel field. Before you came in, Mr. Keith, Mr. Karoll intorduced into the record a number of records from manufacturers of brand names indicating a geat need and a keen support for this bill. This bill has been considered at our conventions by our resolutions committee, by our board of directors, by representative groups of merchants from all parts of the country who are very much in need for protection against the bootlegging of brand names in men's wear merchandise; by discounters, price cutters, going-out-of-business sale operators, and other fringe ethical operations. I am delighted, Mr. Keith, that you raised the question, because I think it should be very clear that all industries-drug, men's wear, hardware, furniture-are keenly interested, wherever there is a brand name on a consumer item which is subject to unethical practices, injuring the manufacturer and the ethical retailer-there is the need for this legislation. Mr. KAROLL. I think that the retailers of the country could be more effective in letting the people in their areas know about this. I am not talking about the men's wear only in that field. But I think there has been-there has not been enough done on that, because to me the quality stabilization bill is a bill that is completely fair, and it is not tying down any manufacturer who feels that he does not want to be part of this. There is nothing in that bill that forces him into it. So he has a freedom of movement. If he does not want to be part of it, then he can stay away from this bill. Now, I think this makes this bill such a wonderful bill because there is still freedom of choice on the part of everyone involved, including the consumer, who can say if this item is too high: I do not want it. Mr. KEITH. Thank you, Mr. Chairman. Mr. DINGELL. Your statement has been very interesting. I was particularly interested in your comments as to the need for this legislation. Are you satisfied there is no other recourse for the small buinessman who is injured by these big advertising practices to which you refer to as switch advertising? Mr. KAROLL. Well, I am convinced that they have been able to get away with it up to this point. This I have seen from the practical standpoint. From the legal standpoint, I really do not know, because not being a lawyer Mr. DINGELL. You indicated you had made a rather thorough study of some of the advertisements that you produced before the committee this morning. Mr. KAROLL. Yes. Mr. DINGELL. Now, perhaps Mr. Rothschild, who is sitting next to you, would hold up one. That is the reorganization sale. Now, your comment on that one was what? Mr. KAROLL. Well these people first ran a going-out-of-business sale. They had to get a permit from the city of Chicago, and I think it was permit No. 1552. They then took it for 60 days, which is the maximum you can get. They can renew for 30 days, which they also did. And then, when this was over with, they started in with a reorganization sale. Now, I do not know the legal aspects, whether this is unlawful. It would appear to me that it would be, as a layman, not as an attorney. But still they are doing it. Mr. ROTHSCHILD. May I add, Mr. Karoll, that the evil of this ad from the viewpoint of the quality stabilization bill is the use of the brand names in the ad. Mr. DINGELL. Well was there any intention on the part of the advertiser not to sell this commodity, according to your knowledge? Mr. KAROLL. Well, yes, I have some knowledge, because I know the purchasers. These people are making on the outside that have no relationship to these ads or to these Mr. DINGELL. You mean you are telling me that they were advertising commodities that they had no intention of selling? Mr. KAROLL. When they bought this store out, they might have had a small quantity of this goods. I know this, that under the law, they are not supposed to bring in any additional goods. Mr. DINGELL. I see. But your assertion is that they were, reduced to the simple terms, advertising goods that they had no intention of selling, is that correct? Mr. KAROLL. They had some of these goods at the time of purchase. They then bought nonbranded goods, which was by far the majority of their stock. The vast majority of their stock was nonbranded. And they continued advertising even at the point of reorganization, and my guess would be-now, this would be a guess-that by the time they ran the reorganization, they had very, very little branded goods in there. They were not filling it up. Mr. DINGELL. In other words, you are making the assertion here, Mr. Karoll, that they were advertising goods they had no intention to sell? Mr. KAROLL. Yes. Mr. DINGELL. In other words, you are saying to the committee they had no intention of selling the goods advertised in this particular advertisement? Mr. KAROLL. Well, they had some of that goods, and I would say there is a possibility of a man going in there and getting that suit, but I would say percentagewise that there was a 99-percent possibility or probability of him not getting it, against that 1-percent possibility of getting it. Mr. DINGELL. Well, you are saying, then, that this was an alluring but insincere offer to sell the commodities; is that right? Mr. KAROLL. That I am saying very definitely. Mr. DINGELL. I see. Well, this is very interesting, because it so happens that this is the exact quote from the language of the Federal Trade Commission's guides against State advertising. Now, has your organization initiated any action through the Federal Trade Commission against this kind of practice? Mr. ROTHSCHILD. May I answer that? The Federal Trade Commission does not have jurisdiction in advertising of retailers engaged in intrastate commerce. Mr. DINGELL. As a matter of fact, there is a case pending before the courts on that one case right there, is there not? Mr. ROTHSCHILD. The case in New York I believe has been dropped by the Federal Trade Commission. To the best of my knowledge there is no test case now pending, on the theory that, because advertisements move in interstate commerce, the Commission has jurisdiction. Mr. DINGELL. It is very strange, because I know of one particular oculist who sells only in intrastate commerce, who has been under the bane of a Federal Trade Commission consent decree for a number of years for violating Federal Trade Commission Act. What I am asking is, Has your organization engaged in any scrutiny of the Federal Trade Commission Act and the Federal Trade Commission guides against bait action adopted as long ago as February 1959 with regard to the particular kinds of advertisements that you are complaining about this morning?, |