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Mr. STAGgers. There has to be something following this bill in order to make some adjustments, probably.
Senator PROXMIRE. Yes, indeed. This is not the final
Mr. DINGELL. Senator, I want to pay tribute to you, too. You are a very capable and dedicated Member of the other body, and I have long admired you.
You say that when goods usable for the same general purpose, if available to the public from sources other than the owner, have their prices fixed by the owner of the brand name or trademark, it is not price fixing. Do I understand that correctly from your statement this morning?
Senator PROXMIRE. I think it is fair to say it is not price fixing in the usual sense.
Mr. DINGELL. Then if a manufacturer fixes prices under those circumstances, he is not fixing prices!
Senator PROXMIRE. What I say to you, Mr. Dingell, is that everything you have bought as long as you have lived, everything that I have bought in a store as long as I have lived, has been fixed in price.
You cannot sell anything unless you fix a price on it. You and I do not go in and bargain with the retailer who is selling. He says: “If you want to buy my toothpaste, you pay 59 cents for it," and he will say that no matter what legislation we have, and he says that in the discount house. They fix the price.
Mr. DINGELL. Then this bill is price fixing after all!
Senator PROXMIRE. No, no, no. I think that this bill has nothing to do with price fixing.
Mr. DINGELL. All right, it is price fixing by the manufacturer?
Senator PROXMIRE. No. What I say this bill does is that it permits the manufacturer to establish his price, provided that price has to be established in a competitive atmosphere, and therefore it cannot really be fixed. It does not fix prices of all toothbrushes or all toothpastes or all TV sets.
Mr. DINGELL. But he can fix the prices of what he makes?
Senator PROXMIRE. Well, I think we are free to call it anything we want.
Mr. DINGELL. But it is price-fixing legislation?
Senator PROXMIRE. I would say it is not because the usual understanding of "price fixing” is you fix the price of a commodity right across the board and everything that is in competition with it, just as you might fix the price of milk or wheat.
Mr. DINGELL. Then if you fix prices you are not fixing prices?
Senator PROXMIRE. He certainly is not fixing the price for that whole spectrum of commodities, no. He is establishing his own prices,
Mr. DINGELL. But he fixes prices for what he manufacturers, and this is, therefore, price-iising legislation. That is what it amounts to,
Senator PROXMIRE. I think our positions are clear. I understand your position, and I think you are entitled to it. I disagree.
Mr. DINGELL. All right.
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 say, 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 Maryland, Congressman Samuel N. Friedel. Mr. Friedel is also a member of the full committee and certainly is a very respected and highly valuable member. STATEMENT OF HON. SAMUEL N. FRIEDEL, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF MARYLAND Mr. FRIEDEL. Mr. Chairman, I appreciate this opportunity to tes
I tify 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
fusing to sell to a retailer who is involved in any scheme of misrepresentation or bait advertising which lowers the price and prestige of his product. A manufacturer has a tremendous amount of work and money invested in his products before they are known, recognized, 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 wrong to permit unscrupulous operators to recoup their losses by 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 Amer
. ican 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 practices used by some discount and mass merchandisers. These quality stabilization bills provide the legal means to deal with this everincreasing problem.
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 America. Such legislation will enable the small businessman to compete effectively against giant retail corporations in the sale of national brands and the consumer will be guarded against the practices of loss-leader operators who use the brand name to fool the public.
For these reasons, I urgently request that the subcommittee give favorable consideration to quality stabilization legislation so that it may be enacted into law at the earliest possible time.
I thank you, Mr. Chairman.
I notice you refer to the retail groups of the country using this as a method of bringing in groups. Are you saying that the large chainstores are the ones who are guilty of this as a general rule?
Mr. FRIEDEL. All the large chainstores are not.
Mr. FRIEDEL. That advertise a certain product, a brand name. When the consumer goes into the store, he finds out that this product has already been sold out, and then they say, "Well, we have another product here that is much better. It is a little cheaper, a nonbrand name." Such advertising is used to bait them into the store.
Mr. STAGGERS. I understand now. That intrigues me, though. I notice that you and Mr. Proxmire use almost the same language in referring to the large groups that are driving the small businesses out of operation.
Now, where they do not have the discount houses—you have them in Baltimore and in Washington, but a lot of small communities across the land do not have discount houses. Now, we do have the chainstores. Are they the ones who are doing this, or what?
Mr. FRIEDEL. In certain instances, yes. I could cite a certain neighborhood drugstore. Now, he sells certain articles. When he buys the articles, it costs him more than the big giant retailers sell it for, and that is unfair competition. He just cannot buy it as cheap as the large chain. He cannot buy it by carload lots and get it at great discount.
Mr. STAGGERS. Some of these-I am just trying to establish this some of these small businesses, perhaps, are inefficient for one reason or another. Are you saying, then, they should be protected in the sale of these articles up to a certain point, or what?
Mr. FRIEDEL. Competition will bring everything into line.
Mr. FRIEDEL. Competition on nationally advertised products. Now, this bill would not affect any name brands or products that are not nationally advertised, but competition will bring all the others in line that are nationally advertised.
Brand name products are the ones that are generally advertised much cheaper than the usual price to bring people into the store to sell them other products than just that one particular item.
When they advertise one well-known item at a very reduced rate, they have hundreds and hundreds of other articles that the consumer might purchase.