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brands, names, or trademarks. These bills establish the right of the owner of a brand, name, or trademark to retain his property right in his identified goods in all sales or transfers of such goods until they reach the ultimate consumer. The owner of the brand, name, or trademark would have authority to revoke the use of his identifying mark by anyone selling such goods if the seller (1) has used such goods in furtherance of "bait" merchandising practices; (2) has advertised, offered for sale, or sold such goods at prices other than those established by the owner; and (3) has published misrepresentations concerning such goods with intent to deceive the public.

The Committee on Interstate and Foreign Commerce has dealt with this subject in the 85th, 86th, and 87th Congresses. In fact, a bill was reported in the 86th Congress and in the 87th Congress. The bills being considered today, H.R. 3669, and others, follow very closely the provisions of the bill, H.J. Res. 636, reported in the 87th Congress. A copy of H.R. 3669 and all departmental and agency reports thereon will be inserted in the record at this point.

(H.R. 3669, together with the agency reports, follows:)

[H.R. 3669, 88th Cong., 1st sess.].

A BILL To amend the Federal Trade Commission Act, to promote quality and price stabilization, to define and restrain certain unfair methods of distribution and to confirm, define, and equalize the rights of producers and resellers in the distribution of goods identified by distinguishing brands, names, or trademarks, and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That (a) this Act may be cited as the “Quality Stabilization Act".

(b) Section 5(a) of the Federal Trade Commission Act, as amended, is hereby amended by adding at the end thereof the following new paragraphs:

"(7) The owner of a brand, name, or trademark shall be deemed to retain his property rights therein, and in the trade and public goodwill symbolized thereby, regardless of any sale or transfer of the goods to which such brand, name, or trademark relates, and no such sale or transfer shall be deemed to diminish or extinguish any such rights.

"(8) Any person who resells goods identified by a distinguishing brand, name, or trademark, either on the label, container, or dispenser thereof, may rightfully employ such brand, name, or trademark, but only in effecting the resale of such goods and subject to the following provisions of this paragraph. If goods usable for the same general purpose are available to the public from sources other than the owner of such brand, name, or trademark, and are in free and open competition therewith, the right of any person to employ such band, name, or trademark in effecting resale of goods so identified may be revoked by the owner of such brand, name, or trademark, subject to the provisions of paragraph (10) of this subsection, on written and dated notice of revocation, if, within ninety days prior to the date of the written notice of revocation

"(A) such person has employed goods bearing such brand, name, or trademark in furtherance of bait merchandising practices;

"(B) such person, after written notice given by such owner of such owner's currently established resale price or price range, has advertised, offered for sale, or sold any such goods, acquired by such person after he has been given such notice, at a price other than such currently established resale price or at a price not within such currently established resale price range; or

"(C) such person, with intent to deceive purchasers, has published a misrepresentation or misrepresentations concerning such goods.

The owner of a brand, name, or trademark who avails himself of the provisions of paragraphs (7) to (17) of this subsection for the purpose of establishing a resale price or price range shall thereby subject himself, without respect to the amount in controversy, to the jurisdiction of the district court of the United States for any district in which goods identified by such brand, name, or trademark are offered for sale, but such jurisdiction shall apply (i) only for the adjudication of issues involving a complaint, by a bona fide purchaser at retail of

goods so identified, that the owner of such brand, name, or trademark had published, in an offer of such goods for sale, misrepresentation as to the size, capacity, quality, condition, model, or age of such goods, upon which misrepresentation such purchaser had relied with resultant unfair damage and loss to him, and (ii) only if the owner of such brand, name, or trademark is not subject to process in the courts of the State in which such purchaser acquired such goods. "(9) Notwithstanding revocation pursuant to paragraph (8) of this subsection of the right of a person, in reselling goods, to employ the brand, name, or trademark which identifies such goods

"(A) such person may, in the regular course of his business and within a reasonable time after the date of such revocation, sell all such goods of which, on such date, he is possessed: Provided, That in such sale he shall commit none of the acts described in subparagraphs (A), (B), and (C) of such paragraph (8); or

"(B) if such person, promptly upon such revocation, shall have supplied to the owner of such brand, name, or trademark a correct itemized listing of the inventory of such goods with a statement of the price paid per item and the total price (including transportation costs) paid therefor, together with a firm offer to sell and deliver all such inventory to such owner at any time within ten days thereafter upon payment of such total price plus the cost of transportation to the owner in the manner directed by such owner, then such person, upon expiration of the ten-day term of such offer without acceptance, may so sell such goods in such inventory, in the regular course of his business and within a reasonable time thereafter, without restriction as to price, in which event each advertisement of, or offer to sell, such goods, shall state plainly that the right of the reseller, offering such goods, to employ in any way the brand, name, or trademark carried by the goods has been revoked as to any such goods not in that reseller's possession at the time of such revocation.

"(10) Any person whose right to employ a brand, name, or trademark has been revoked by the owner thereof pursuant to the provisions of paragraph (8) of this subsection, and who thereafter, except as authorized by paragraph (9) of this subsection, resells goods identified by such brand, name, or trademark, or who otherwise employs such brand, name, or trademark in effecting resale of such goods or any other goods, shall be liable in a civil action for damages and injunctive relief by the owner of the brand, name, or trademark, to prevent and restrain further violations of paragraphs (7) to (17), inclusive, of this subsection. Such owner may sue in any district court of the United States in the district in which defendant resides or is found or has an agent, without respect to the amount in controversy, and shall be entitled to (i) recover the amount of any damages sustained, (ii) injunctive relief to prevent and restrain further violations of paragraphs (7) to (17), inclusive, of this subsection, whether or not specific money damages are established, and (iii) recover the cost of suit including reasonable attorneys' fees. Any injunction granted under clause (ii) of this paragraph shall remain in effect for one year from the date it is granted unless it is the second or a subsequent such injunction issued against the same defendant in favor of the same plaintiff in which case it shall be a permanent injunction; except that any such injunction, upon petition of such plaintiff, may be vacated unconditionally by the court granting it.

"(11) In any proceeding under paragraph (10) it shall be a defense for the defendant (A) to establish that the plaintiff has not used due diligence to effectuate observance or enforcement of plaintiff's rights under paragraphs (7) to (17), inclusive, of this subsection against other persons who are in substantial competition with the defendant and who are known to plaintiff to be violating the same subparagraph of paragraph (8) of this subsection on which revocation of the defendant's right to employ the brand, name, or trademark was based or (B) to establish that the plaintiff has sold the same kind of goods of like grade and quality as the goods involved in such proceeding to another person similarly situated under terms more favorable or at lower prices than those under which the plaintiff sold such goods to the defendant.

"(12) No action pursuant hereto shall preclude remedial action otherwise available for wrongful use of a brand, name, or trademark.

"(13) Paragraphs (7) to (17), inclusive, of this subsection shall apply to all acts and transactions of the character referred to therein, in or affecting commerce, which Congress may lawfully regulate.

"(14) As used in paragraphs (7) to (17), inclusive, of this subsection

"(A) The term 'person' means any individual, partnership, association, or corporation.

"(B) The term 'goods' means goods, wares, and merchandise.

"(C) The term 'currently established resale price' means the price for goods identified by a brand, name, or trademark specified by written notice invoking paragraphs (7) to (17), inclusive, of this subsection given by the owner of such brand, name, or trademark to the person reselling such goods. "(D) The term 'currently established resale price range' means all prices including and between the minimum and maximum resale prices for goods identified by a brand, name, or trademark, specified by written notice invoking paragraphs (7) to (17), inclusive, of this subsection given by the owner of such brand, name, or trademark to the person reselling such goods.

Each such currently established resale price and resale price range shall be uniform at each level of distribution within each marketing area determined by the owner of the brand, name, or trademark. Such owner of the brand, name, or trademark may so establish, for resale of a combination of two or more items of goods, a resale price or price range different from the sum of the currently established resale prices or price ranges for the items when sold individually. Such owner of the brand, name, or trademark may also engage in other promotional activities not made unlawful by any other statute.

"(15) All rights and remedies provided in paragraphs (7) to (17), inclusive, of this subsection, to owners of a brand, name, or trademark, shall be also available to any owner of a brand, name, or trademark who, in the sale of goods identified by such brand, name, or trademark, shall compete, at any level of distribution, with any reseller offering such goods: Provided, That, within each marketing area referred to in paragraph (14) of this subsection, such owner shall sell such identified goods, at whatever level of distribution, only at the price or within the price range currently established by such owner for that area and for that level of distribution.

"(16) The following transactions shall be exempt from paragraphs (7) to (15), inclusive, of this subsection

"(A) Sales of bulk commodities when sold without wrappers or containers. "(B) Sales by any officer acting under the orders or authority of any duly constituted court; or sales by any person in mitigation of damages or enforcement of a lien or other secured interest in said goods, when such person is not primarily engaged in the distribution of goods for resale. "(C) Sales of damaged, deteriorated, defaced, or secondhand goods, when plain notice of the condition of the goods is given to the public.

"(D) Sales of drugs, medicines, and devices for which either Federal or State law or regulations requires a prescription from a physician, dentist, or such other persons as the various States may authorize to prescribe such items.

"(E) Sales to or by the Federal, State, or municipal governments or their political subdivisions or agencies.

"(F) Sales to charitable, educational, medical, and religious organizations, for their own use and not for resale.

"(17) If any provision of paragraphs (7) to (17), inclusive, of this subsection or the application of any such provision to any person or circumstance shall be held invalid for any reason it is the intention of the Congress that the remaining provisions thereof shall not be affected but shall remain in full force and effect."

Hon. OREN HARRIS,

DEPARTMENT OF AGRICULTURE,
Washington, D.C., April 29, 1963.

Chairman, Committee on Interstate and Foreign Commerce,
House of Representatives, Washington, D.C.

DEAR MR. CHAIRMAN: This is in reply to your letter of February 22, 1963, for a report on H. R. 3669, to amend the Federal Trade Commission Act, to promote quality and price stabilization, to define and restrain certain unfair methods of distribution, and to confirm, define, and equalize the rights of producers and resellers in the distribution of goods identified by distinguishing brands, names, or trademarks, and for other purposes.

The Department recommends against this bill.

The objective of H.R. 3669 is the same as that of H.R. 457, for which we have submitted a report recommending against the bill. The exemption of certain transactions provided for in paragraph 5(a) (16) of the act, as added by H.R. 3669, would reduce, somewhat, the scope of the bill. However, neither this change nor others made, alters our judgment that enactment of either bill would not be in the public interest. We do not think that these bills are an effective way to promote quality of the products of agriculture.

Authorizing owners of brands, names, or trademarks to exercise greater control than they now have over resale prices to the consumer would be against the public interest, particularly for food products. The bill would give added advantage to large-scale, well-financed manufacturers and merchandising organizations capable of engaging in extensive brand advertising and promotion. All merchants would be compelled to abide by minimum resale prices. Those merchants who, by the adoption of more efficient methods, achieved real economies in distribution would not be able to pass on the resulting savings to consumers if they were required to observe the retail prices established by wholesalers or manufacturers. Prices paid by consumers for food and fiber would be higher than otherwise; the sales of some products might be reduced; and higher prices at the retail level would not result in higher prices for farmers.

The proposed legislation does not define "bait merchandising practices" referred to in paragraph (8) (A) on page 2 of the bill. Without further clarification, this could either result in injustice to the vendee or present enforcement problems for the owner of the brand, name, or trademark. Moreover, the statutory remedies which paragraph (10) on page 5 of the bill proposes to make available to an owner of a brand, name, or trademark, whether or not he has an agreement or contract with a vendee prescribing minimum prices, and the consequences imposed upon the vendee by the provisions of the bill, appear to be unwarrantedly harsh.

The Bureau of the Budget advises that there is no objection to this report from the standpoint of the administration's program.

Sincerely yours,

Hon. OREN HARRIS,

ORVILLE L. FREEMAN, Secretary.

EXECUTIVE OFFICE OF THE PRESIDENT,

BUREAU OF THE BUDGET, Washington, D.C., April 26, 1963.

Chairman, Committee on Interstate and Foreign Commerce,
House of Representatives, Washington, D.C.

DEAR MR. CHAIRMAN: This is in response to your request for views of the Bureau of the Budget on H.R. 457 and H.R. 3669, similar bills to amend the Federal Trade Commission Act, to promote quality and price stabilization, to define and restrain certain unfair methods of distribution and to confirm, define, and equalize the rights of producers and resellers in the distribution of goods identified by distinguishing brands, names, or trademarks, and for other purposes.

These measures would provide, among other things, that the owner of a brand, name, or trademark would retain his property rights in such brand, name, or trademark in the event of sale or resale of goods bearing his brand, name, or trademark. They would also grant the owner the right to sue in a civil action for both damages and injunctive relief. H.R. 3669 would allow certain exemptions

to the provisions of the bill and thereby reduce, somewhat, the scope of that

measure.

The Departments of Agriculture and Commerce have submitted reports to your committee opposing enactment of these bills. The Department of Justice, in its testimony before your committee on April 23, 1963, also strongly opposed enactment of H.R. 3669.

In view of the objections raised by those agencies in their reports, the Bureau of the Budget recommends against enactment of H.R. 457 and H.R. 3669. Sincerely yours,

PHILLIP S. HUGHES,

Assistant Director for Legislative Reference.

Hon. OREN HARRIS,

GENERAL COUNSEL OF THE DEPARTMENT OF COMMERCE,
Washington, D.C., May 3, 1963.

Chairman, Committee on Interstate and Foreign Commerce,
House of Representatives, Washington, D.C.

DEAR MR. CHAIRMAN: This is in further reply to your request for the views of this Department with respect to H.R. 457 and H.R. 3669, similar bills to amend the Federal Trade Commission Act, to promote quality and price stabilization, to define and restrain certain unfair methods of distribution, and to confirm, define, and equalize the rights of producers and resellers in the distribution of goods identified by distinguishing brands, names, or trademarks, and for other purposes.

If enacted, this bill would add various paragraphs to section 5(a) of the Federal Trade Commission Act (which deals with unfair methods of competition). The essence of the provisions thus added would be that the owner of a brand, name, or trademark retains his property rights in such brand, name, or trademark; and that, based on those property rights, he may revoke the right of any person to resell goods bearing his brand, etc., who

1. Uses the goods for bait merchandising;

2. Resells the goods at prices other than those stipulated by the owner of the brand, etc., or

3. Has published misrepresentation of the goods with the intent to deceive purchasers.

Provisions would be made whereby a reseller whose right had been revoked could liquidate his inventory provided he committed none of the three acts enumerated above. As an alternative, he could offer his stock to the owner of the brand, name, or trademark, at his invoice cost, and if the offer were not accepted within 10 days, he could sell out his stock in the regular course of his business and within a reasonable time, without restriction as to price, provided each advertisement carries notice that the right of the seller to use the brand, name, or trademark had been revoked except as regards his stock of such goods at the time of revocation.

A person using a brand, name, or trademark after his right to do so had been revoked would be deemed to have committed an act of unfair competition, and could be sued by the owner of the brand, etc., in the U.S. court for damages and injunctive relief. H.R. 3669 would allow certain exemptions to the provisions of the bill, including sales of bulk commodities not in wrappers or containers; sales of commodities pursuant to court authority; sales of damaged, deteriorated, and secondhand goods; sales of precription drugs; sales by or to governmental agencies; and sales to charitable, educational, medical, and religious organizations for their own use.

The Department of Commerce recommends against enactment of this legislation.

Under the terms of the proposed bills, price competition at the retail level, based on local conditions, and on costs of management at the individual store, would be illegal for price-maintained items of the same brand. The lessening of price competition would necessitate greater emphasis on nonprice competition, such as more extensive advertising and display, and elaboration of customer services. These added costs could be expected to be reflected in higher prices. Retail firms marketing under a brand-owner controlled pricing system would have substantially less incentive to hold down their costs. The more efficient firms in a position to pass on some cost savings to consumers would be foreclosed from competing pricewise.

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