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This bill will help sustain, in a positive way, our brand name system of distribution that has in the past enabled legitimate retailers and manufacturers to build a successful marketing economy second to none in the world.
Opponents of quality stabilization legislation attack it by smear propaganda, identifying it with fair trade and price fixing. Anyone who reads and studies this bill can easily determine for himself that no provision in the bill identifies it with fair trade or even remotely with price fixing.
The quality stabilization bill contains none of the usual fair trade language. There is no provision for contracts as the bill is wholly predicated on the owner's property rights in his good name; there is no dependence on a nonsigner clause as is the case with fair trade. The essential difference is that fair trade enforcement is to compel à dealer to raise his prices for a product, while under the quality stabilization bill, the action is one akin to trespass—to stop a reseller from abusing a manufacturer's property right in his trademark reputation.
In urging speedy consideration of this bill by this committee I direct your attention to the fact that unrestrained price slashing disables labor, industry, resellers, and the public. Unless the quality stabilization bill is enacted, our entire economy will deteriorate at a time when our President is asking for economic growth to strengthen our Nation for survival.
I represent the great industrial Calumet region of Indiana. In recent years consumers and small retailers have been asking me what can be done to reestablish confidence in retail marketing. Unemployment in my area is critical.
Enactment of this quality stabilization legislation will contribute more toward restoring employment than any other legislation before this Congress. When a manufacturer is forced to make 15 men do the work of 20, and is forced to employ cheaper and less skilled labor as well as inferior materials, both American labor and the American consumer are injured where it hurst most. Congressman John Dent, our colleague, will testify as to pressures upon our production economy resulting from the jungle merchandising prevalent today.
In conclusion I call to your attention that almost 70 national trade and professional organizations have endorsed the quality stabilization bill." These include: National Retail Hardware Association. National Office Machine Dealers Association. Independent Garage Owners of America. National Association of House to House Installment Companies, Inc. National Sporting Goods Association. National Association of Retail Clothiers & Furnishers. National Retail Furniture Association. Retail Jewelers of America. Master Photo Dealers & Finishers Association. National Appliance & Radio-TV Dealers Association. National Wholesale Jewelers Association. National Stationery & Office Equipment Association. Vholesale Stationers' Association. og Wholesalers' Association of America. Billiard and Bowling Institute of America.
Gift and Decorative Accessories Association of America.
I call further to your attention that this is strictly nonpartisan legislation. Eleven U.S. Senators of both parties have cosponsored the quality stabilization bill, and approximately 25 Members—from both parties-have introduced the identical bill in the House of Representatives.
I remind you again of the approval given this measure last year by your committee, by the Rules Committee, and the special subcommittee of the Senate.
And I urge you to think of the purposes of the bill and its goals not in terms of theory, not in terms of statistics, but as a measure affecting people of flesh and blood with a real problem of survival or failure in
Now, let us get down to cases. You say goods are usable for the same general purposes if they are available to the public from sources other than the owner. Then you go on to say, “other than the owner of such brand name or trademark in free and open competition therewith.” Now, what does this mean! For example, Kodak has been marketing somewhere between 85 and 95 percent of the film throughout the whole United States. Is Kodak going to be able to fix prices under this bill?
Senator PROXMIRE. Well, I think this is the kind of administrative judgment or determination that has to be made by the administrative branch and by the courts in determining where you have actual free and open competition. So people would say, where you have 85 or 90 percent of the market, it is not real free and open competition. I think you could make a strong case that way. I would be inclined to subscribe to it.
On the other hand, if you have 10 percent of the market or 5 percent of the market, in most cases you might say this is vigorous competition.
Mr. DINGELL. I see. If you have 25 percent, is that free and open competition?
Senator PROXMIRE. As I say, you cannot draw a line and say 26 is and 24 is not, or vice versa.
Mr. DINGELL. You see, you are the author of the bill. Now, we are construing the bill, and we are creating the legislative history as to what this bill means. If this legislation should become law, the courts are going to be called upon to construe this particular section to find out what it is.
Senator PROXMIRE. Yes, indeed.
Mr. DINGELL. As the author, I think you have the responsibility to tell this committee this morning what free and open competition is. That is one of the reasons you are here to testify before this committee.
Senator PROXMIRE. I understand.
Mr. DINGELL. Now, what I am trying to find out is when does it cease to be free and open competition. Is 25 percent free and open competition; 35 percent free and open competition; 45, 50 percent free and open competition, so that we know just how far price fixing under this legislation is going to be able to go?
Senator PROXMIRE. In the first place, I do not think it is price fixing, Mr. Dingell.
In the second place, I think it would be extremely unwise, improper, and incompetent for me to say that it is any particular percentage. It depends on the industry; it depends on the pattern in the industry; it depends on the history of pricing in the industry; it depends on many, many things. In some industries I think you could say a relatively small amount, 20 or 25 percent, would be monopolistic. Most of us feel that the automobile industry is very competitive, although one company has more than 50 percent of the manufacturing and sales.
So I think you cannot lay down the law and stick to it, and I think an offhand remark by me would be unwise and improper.
Mr. DINGELL. Would you sav, then, that the courts should be extremely careful in construing this section, that they should construe most strictly and rigorously this section, for the protection of the small
businessman so that he cannot have the prices fixed by someone who has an unduly dominant position in the industry or who markets an unduly large percentage ?
Senator PROXMIRE. I would be very much inclined to agree with that statement. I think it is a good one. I would like to see rigorous enforcement of this to see that competition is encouraged in every pos
Mr. DINGELL. In other words, you would try to see that this right of fixing prices under this particular section were limited only to those who are in real fact in free and open competition with a fairly large number of others equally situated. Am I correct?
Senator PROXMIRE. Yes, indeed.
Mr. STAGGERS. Our next witness will be a colleague of ours from
IN CONGRESS FROM THE STATE OF MARYLAND Mr. FRIEDEL. Mr. Chairman, I appreciate this opportunity to testify before you today in support of my bill, H.R. 3943, a companion bill to H.R. 3669, introduced by the Chairman of our full committee, to promote quality and price stabilization.
As a member of the Interstate and Foreign Commerce Committee, I listened to some of the testimony last year on quality stabilization legislation, and I am more convinced than ever that such a bill must be enacted into law to protect the consumer, as well as the small businessman, from unfair practices. It is for this reason that I introduced H.R. 3943.
There is no doubt that loss-leader advertising is one of the worst forms of unfair competition encountered by the small retailer. All kinds of small businessmen in Baltimore City have been affected by the destructive practices of loss-leader operators, and I am sure the same is true in other cities. I am convinced that their only salvation lies in the enactment of a national quality stabilization law to permit them to compete fairly in the marketplaces.
The legislation you are considering today is simply designed to strengthen our antitrust laws by stopping certain unfair methods of competition. I think we all agree that the owner of a product which bears his trademark or brand name is entitled to protect his investment in his product. My bill would permit him to do this by re
S STAY fusing to sell to a retailer who is involved in any scheme of misho de representation or bait advertising which lowers the price and prestige
of his product. A manufacturer has a tremendous amount of work to end and money invested in his products before they are known, recogto punized, and respected as quality items by the consumer. Only after
this has been accomplished does the manufacturer create a demand
for his product and realize a fair return on his investment. It is has been wrong to permit unscrupulous operators to recoup their losses by on selling these name brands at reduced prices to get the consumer into
his store so he can influence him to buy unknown, higher profit goods, of questionable quality.
It is also important to note that this legislation will not require the manufacturer, the retailer, or the consumer to do anything he does not wish to do. There is no obligation upon the brand-name owner to take advantage of the rights given him under this legislation. It is inconceivable to me that the owner of a trademarked or brand-name product would not want to protect his investment as provided in my bill, but if he does not wish to do so, that is his privilege. I think it is important to remember this permissive provision of
There is no doubt that the small business people are the backbone of every community in our country. They are the citizens who provide leadership and responsibility in civic affairs. Yet cutthroat competition for the small businessman is increasing and there were more than 17,000 business failures in 1961.
I think it is time we offered these small business concerns some protection against the pricing policies of discount houses and large chainstores. Through enactment of a quality stabilization law, we will afford these small business retailers an opportunity to compete fairly in the marketplace.
There has been some discussion about the value of such legislation to the consumer, but there is no question in my mind that the housewife will be the ultimate beneficiary of quality stabilization. I recently read about a survey conducted in every congressional district in the United States to obtain consumer reaction of this type of legislation. The survey revealed that an average of 80 percent of American housewives interviewed approved of quality stabilization. This indicates to me that the consumers realize that, in the long run, there is no substitute for the reputation of the manufacturer and
the quality of his product, and the dependable service rendered by the small retailer is almost as important to the consumer as a trustworthy product. Such service is usually not available from the discount house or the chainstore, which is inclined to sell the product and then forget about it.
The manufacturer of quality products, the independent retail businessman, and the American consumer are all urgently in need of an effective remedy against the predatory, unethical, and deceptive prac
tices used by some discount and mass merchandisers. These quality i stabilization bills provide the legal means to deal with this ever
There is no question in my mind that quality stabilization is clearly in the national interest since its purpose is the protection, preservation, and advancement of independent retailing as we know it in