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consumer-it is the quality of the merchandise that determines the value of it. And a manufacturer can put any price he wants on it, and this in the consumer's eye will not make it a good or a bad product.

But we also submit that if the manufacturer feels that the worth of his product demands that it can be highly priced, then he, of course, can set a higher price at which he sells to the retailer. There is no reason to also let him determine the markup for the retailer. And we feel very strongly about this.

I realize that time is short, but I would like to conclude with this statement, that we have had occasion in our various stores to verify a definite consumer opposition to fair trade. The people want lower prices, and they want to pay only for those services they use and no others. Our impression and view are apparently not isolated ones. We are impressed by the disfavor with fair trade traditionally expressed by governmental bodies, labor organizations, consumer and farm groups, and many other spokesmen in the business community. And we respectfully submit to this committee that quality stabilization is not in the public interest.

Mr. DIXGELL. Your statement has been most helpful to the committe. I am grateful to you for being present. I am sure the committee is very appreciative of your kindness and of your assistance to us in our consideration of this legislation.

Gentlemen, we are grateful to you both for being present. I am sure you gentlemen are aware of my views on this legislation.

The Chair regrets to announce that the House is now considering the feed grains bill under the 5-minute rule. And under the rules of the House this subcommittee no longer has authority to meet. For

reason, the Chair will announce that the committee will convene tomorrow morning at 10 o'clock sharp.

I express my personal apologies to those who are present for the delay in appearing.

With that, the committee will stand ajourned until 10 o'clock tomorrow.

(Whereupon, at 5:15 p.m., the committee recessed, to reconvene at 10 a.m., Friday, April 26, 1963.)

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QUALITY STABILIZATION-1963

FRIDAY, APRIL 26, 1963

HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON COMMERCE AND FINANCE OF THE
COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,

Washington, D.C. The subcommittee met, pursuant to recess, at 10 a.m., in room 1334, Longworth House Office Building, Hon. John D. Dingell presiding.

Mr. DINGELL. The Subcommittee on Commerce and Finance of the Committee on Interstate and Foreign Commerce will come to order.

The committee is hearing this morning witnesses on H.R. 3669 on the bill by the distinguished chairman called the quality stabilization bill.

The Chair is very happy to welcome our beloved colleague and distinguished friend, the Honorable Chet Holifield from California, to be our first witness.

STATEMENT OF HON. CHET HOLIFIELD, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF CALIFORNIA

Mr. HOLIFIELD. Mr. Chairman, members of the committee, my support for the quality stabilization bill is well known to you, but I do appreciate your permitting me to come before you to express my views regarding this vital legislaiton.

I have introduced H.R. 3863, which is identical to H.R. 3669, sponsored by your chairman, the Honorable Oren Harris. The fact that this bill is impressively bipartisan is significant. But even more significant is the fact that it is backed by men who re experienced in the area with which the legislation is concerned.

It is no accident that Senator Monroney, a former retailer, is fully ehind the principles of this bill. It is not a coincident that Senator Iumphrey, Representative Nygaard, Representative Stubblefield, and iyself are sponsoring the bill. It is because we as small businessmen have personally experienced e unfair types of competition that threaten the small businessman's That is why we are working so hard for the enactment this year of e quality stabilization bill. The small businessman should have a fair profit on his investment d for his long hours of work. I might interject here a remark not in my prepared testimony, that am very pleased to note that some of my friends who are representaFes in the unions are here this morning. I think it is time for them receive a few grains of truth on this subject and dispel some of the

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incentive to people to be ingenious and to create and to give them Mr. I a special reward for that ingenuity and that creativeness.

Mr. ] It is a modification of pure competition. And so when we talk about

Mr. ] competition being the life of trade and competition being necessary

bs dIr. in the marketplace, we do not necessarily mean the ruthless type of competition which cannibalizes itself and destroys itself by its escesses and abuses. We are talking about competition under orderly STATEI rules of society to protect all of the component factors of society to an

NAN equitable extent. This is what the quality stabilization bill will do: It will bring about equity in one area where equity does not nor ob

TAIL tain. It will not force any manufacturer to use it; it will not give any manufacturer a chance to use it in a monopoly item area. It will not create an obligation on the part of any consumer to buy that item. He

Mr. can obtain various similar items and buy them if he does not want the stabilized item. It is an orderly adjustment of what I consider to be an inequitable situation, condition, in our pattern of production and distribution which threatens to eliminate that final link of independent

Mr. retailing.

Mr. Now, if independent retailing is worthy of a place in the market, if it is something that we want to preverve to give opportunity to the little man to start into business and grow big, it has a justifiable position in the marketplace. I say that it has such a position and millionstal A of small retailers throughout the country which would certainly also say that it is justified. They are putting in 10, 15, 16 hours a day. They are putting in their life savings into little drugstores, into little retail hardware and clothing and grocery stores. They are struggling against many odds in the competitive area.

Can't we give them a little bit of the protection that we give to every other facet in the chain of production and distribution?

I don't buy this idea of running scared under the bed, at the alarm banner of price fixing. If we are going to be honest and realistic, price fixing, modified price fixing, is a part of our economy. We do not have a complete, pure, competitive, free enterprise system, and any. body that says we have just simply does not understand what is going on in this country. We have competition in this country in business

for a But it is a modified, regulated type of competition. It is not the ruthless type of competition that we had in the early days when supply was less than demand. Today we have a situation in every area,

whether it be in food fiber in the farm areas, or in the manufactured product, where we have a capacity to overproduce the consumptive power of the market. The rules of free competition might well have been justified by some, during the era when sunplv exceeded demand. Today we have supply much greater than effective demand, and, therefore. we must introduce into our economy rules and regulations to modify pure, ruthless, cannibalistic competition.

Thank you very much.

Vr. DINGELL. The Chair is particularly grateful to our old friend and colleague coming down here and giving us the benefit of his views and experience. As the gentleman knows, I am a great admirer of his I cherish his friendship highly, and I hope the fact that I disagree with him on this bill will not be held against me.

Mr. HOLIFIELD. It certainly will not.

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The decent merchant who wishes to retail good merchandise made in union-wage factories finds himself at the mercy of the "price gimmick," "deceptive advertiser," the mass handler of nonunion-made merchandise from various parts of our country or from Japan. These operators use national brand merchandise as "come-on" for the purpose of unloading on the consumer a large amount of nonstandard, nonunionmade merchandise.

Such practices as I have outlined are threatening this last link in the distributive chain.

The independent operator cannot last if he is forced to operate in a cost of operation area where his costs are rigid until it reaches the point of delivery to the consumer. There it is suddenly faced with ruthless competition, I would assume that everybody within reach of the sound of my voice would agree with me that the small businessman is a desirable factor in our society, that he does perform a service and that he is worthy of his hire—and his hire is reasonable profits.

Now, let me further explain the independent businessman's present dilemma as a result of fixed costs of operation and unmodified com-r. petitive conditions in selling,

1. The article he sells in a national brand item is a nonmonopoly item. Similar articles are made by dozens of competitors. Again let me refer to Arrow shirts. I cite "Manhattan," "Van Heusen," "Jayson," "Hathaway," plus hundreds of less well known shirt manufacturers.

So there is no doubt that in selling this nationl brand item, he is selling a nonmonopoly item.

An important point to remember is that the quality stabilization bill cannot be applied to a monopoly item. There must in every instance be similar items available to the consumer.

2. The independent retailer's cost area contains many noncompetitive areas. I cite a few :

(a) Wages, in most areas unionized. They are fixed.

(6) Rents.' Percentage of sales based on a retail scale related to different kinds of businesses plus traffic count of people who would pass in front of his door.

(c) Insurance. All old line insurance companies charge almost identical rates.

(d) Interest rates on commercial loans.

Usually the smaller merchant pays in an identical rate from all banks in a trade area.

(e) Transportation costs on goods; as noted before, these costs are noncompetitive, fixed by interstate commerce rates.

(f) Utilities. All fixed noncompetitive rates set up by public utilities commissions which, incidentally, include a floor of guaranteed profits to the utilities above their investment and costs. And in most instances, a guaranteed wage to their employees. A fixed wage to their employees, fixed by negotiation.

(9) Last, but not least, the manufacturer must supply the retailer any specific item at a nondiscriminatory price (Robinson-Patman Act). ` I refer, of course, to the provisions of the Robinson-Patman Act.

The nondiscriminatory price for an identical item gives the retailer some protection as between himself and a competitor retailer, but it

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