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

It is a modification of pure competition. And so when we talk about competition being the life of trade and competition being necessary in the marketplace, we do not necessarily mean the ruthless type of competition which cannibalizes itself and destroys itself by its excesses and abuses. We are talking about competition under orderly rules of society to protect all of the component factors of society to an equitable extent. This is what the quality stabilization bill will do:

It will bring about equity in one area where equity does not now obtain. 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 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 retailing.

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 millions 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 anybody that says we have just simply does not understand what is going on in this country. We have competition in this country in business. 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 supply 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.

Mr. 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.

Mr. DINGELL. The Chair is very grateful. Thank you for coming. Mr. HOLIFIELD. Thank you.

Mr. DINGELL. The next witness will be Mr. Rooke, accompanied by Mr. Jehle, and we have Mr. Foulkrod.

You are Mr. Rooke?

STATEMENT OF RALPH E. ROOKE, CHAIRMAN OF COMMITTEE ON NATIONAL LEGISLATION, THE NATIONAL ASSOCIATION OF RETAIL DRUGGISTS; ACCOMPANIED BY PHILIP F. JEHLE, WASHINGTON REPRESENTATIVE AND ASSOCIATE GENERAL COUNSEL

Mr. ROOKE. Mr. Chairman, I recognize that our statement will contain repetition of some other statements that have been made but they will express the thoughts of a lot of people and I appreciate the opportunity of presenting them to you.

Mr. DINGELL. Proceed.

Mr. ROOKE. My name is Ralph R. Rooke, and, for 42 years I have practiced pharmacy in Richmond, Va., where I now own and operate two community drugstores. I am a past president of the National Association of Retail Druggists and also of the Virginia Pharmaceutical Association.

I appear here as a chairman of the NARD Legislative Committee. The NARD, as you know, is a small business organization having a nationwide membership of more than 36,000 independent drugstore owners. The NARD speaks for its membership of family druggists on all legislative matters affecting their professional and competitive interests.

Accompanying me is Philip F. Jehle, Washington representative and associate general counsel of the NÁRD.

Mr. Chairman and gentlemen, the National Association of Retail Druggists supports the quality stabilization bill which has been introduced by your great committee's chairman, the Honorable Oren Harris, and more than a score of colleagues in the House. We hope for and strongly urge its early enactment.

NARD takes this position not only in the interest of the men and women in retail pharmacy today but of those who will enter the profession in coming years as well.

The actions taken in Congress today will shape the business world of the future.

Largely in the business trends already well underway in this decade lies the answer to the role which independent business is to hold in national economic affairs during the 1970's and beyond.

In all candor, though, the Nation's small entrepreneurs have but. slight reason for hope and encouragement-to the extent today's business trends are in fact forming the business world of tomorrow.

However reviewed, not much opportunity for business independents can be foreseen in the business world being shaped by such anticompetitive forces as predatory pricing, monopolistic mergers, price discriminations, fraudulent advertising, credit and capital deficiencies, and unjust tax treatment.

We in the small business community need your help to stop the destruction, by mass merchandisers who call themselves discount

operators, of small, independent business firms. The predatory pricing practices of these operators menace not only the retail druggists but all small retailers.

They have created an illusion that by the development of new merchandising techniques they are able to bring goods and services to the consumer in many fields at far lower prices than independent retailers customarily charge. But, it's merely an illusion.

They are using age-old gimmicks-the loss leader, price juggling, bait advertising. Admittedly, they've changed the loss-leader techniques from a product to a department basis, but it's essentially the same tired old trick.

The predatory price cutter, with his superior capital resources, has sometimes been willing to sink hundreds of thousands of dollars to capture a foothold in the marketplace, and his price juggling technique is the oldest and one of the most vicious methods of removing smaller competitors.

By these predatory practices, the discount operators have demoralized retail pharmacy and small business in general, and—in the public interest-Congress should call a halt.

You may have been told that the discount operators are able to function more successfully than conventional small businesses because they are more efficient. But this isn't true. All available statistics show that independent retail pharmacy is an extremely efficient segment of the business community. If it were not, it would have been put entirely out of business long ago.

If you ask how the discount operators are able to get by when their operating costs are so high and their merchandising policies are based on price juggling and deception, the ready answer is that many of them do not get by.

For example, within the last few months, the business press has reported the bankruptcies of such celebrated discount operators as Masters of New York, Bargain City, Towers, Grayson-Robinson, and many others.

All of these discounters had pharmacy departments which played an essential part in their merchandising schemes. In many cases, the entire pharmacy departments were run for loss-leader purposes, to lure traffic into the store in the hope that people would purchase other, higher margin items.

It isn't always the drug department that's used as a loss-leader lure. Sometimes the discounters turn to foods, sporting goods, or appliances. Obviously, small businessmen dealing exclusively in these fields cannot meet this kind of predatory competition and survive.

These four justly celebrated operators have gone out of business. and we do not mourn their passing from the retail scene, but unfortunately they took with them into bankruptcy many small, independent retailers in varied fields.

I have my own personal knowledge of bankruptcies that have occurred in retail pharmacy and in other small businesses. They are happening in Richmond, and right across the Potomac River in Arlington.

But bankruptcies are not the only measure of the economic health of retail pharmacy. I keep in touch with economic conditions-involuntarily, at times-when I have to listen to drug wholesalers and other

uppliers complaining about the slow pay of one struggling drug store roprietor or another. I hear of stores quietly closing their doors. heir owners then have to go to work for some chain or discount

perator.

It's a sad fact that few of the retailers who were forced out of busiess by the discount operators will ever be replaced. The small busiessman, helpless in the face of predatory price cutters, sees no future or himself or his family in a venture which can be wiped out almost vernight by unfair competitive techniques.

Others besides independent retailers can read the handwriting on he wall. The Nation's banks, which traditionally have been an imortant source of financing for small businesses, are not unaware of e facts of today's commercial life. They are less and less willing to sk their depositors' capital in the financing of retail business enterrises-they're afraid the would-be borrower will become the next ictim of the predators in today's marketplace.

What would the quality stabilization bill do to correct this situa

on?

It would strengthen our antitrust laws by outlawing certain unfair ethods of competition that promote monopoly in distribution. The bill would let the owner of a product identified by his tradeark or brand name stop distributors from, first, making misreprentations about it; second, using it as bait merchandise; and, third, lling at other than the established resale price.

This would allow the product owner to prevent damage to his tradeark or brand name and to the goodwill it may have taken him years build up.

Whenever a trademark or brand name owner discovered his prodrts being used by a distributor in any such violation, he could revoke e distributor's right to use his mark or brand in resale. If the ofending distributor disregarded the notice of revocation and connued the challenged sales practices, the owner could get a court ininction to stop him.

Essentially, the bill would do no more than recognize, first, the roperty values inhering in business goodwill and in the trademark or rand name adopted to maintain and extend such goodwill; and, secnd, the need to give trademark or brand name owners a means of rotecting their rights from injurious marketing practices. It is erely an extension of our historic trademark and copyright law. We in the National Association of Retail Druggists would welcome our consideration of one change in the provisions of H.R. 3669 and ssociated bills. Paragraph 16(D) specifically excludes from the rovisions of the quality stabilization bill sales of prescription drugs nd medicines.

Because of the manner in which many large discount operators have sed prescription drug departments for loss leader purposes, the Naonal Association of Retail Druggists believes this exclusion should e eliminated.

Chairman, I have some examples of what I am talking about here some ads which I have with me. One is from Woolco, in which the escription department is advertised along with fishing tackle, campg equipment, baseball shoes, and other sporting goods items.

Woolco is, as you know, a discount branch of the F. W. Woolwort Co. I have one other that I did want to mention, if you will bear with me a minute.

We have one here in which Miltown, a tranquilizing tablet, is soli for $2.90 for a bottle of 50. I cannot buy them at less than $3.25 a bottle, and I don't think that Mr. Woolco can buy them for $29 either. He sells it at $3.35. I have another one here, $2.90. But the wholesale price is $3.25 on that particular item.

If we accept the basic American right to own property and the cor responding right to protect it, then we must accept the objective of the quality stabilization bill-the protection of valuable investments in trademarks, brand names, and goodwill from ruinous marketing practices.

Nothing in the bill would bar a distributor from removing the trademark or brand name from the product-thus separating the physical property, which he owns, from the goodwill which is another's property-and then selling the commodity at his own price or in his own way, as long as he does so without making use of another's goodwill. We believe that the quality stabilization bill would simply reestablish economic fairplay in the marketplace.

Mr. Chairman, in the interest of saving time, I will skip over to page 7.

In all honesty, it must be conceded that this bill, when enacted, is not going to be a panacea for all the ills of small business.

It also needs tax justice, more capital, and credit assistance, and greater antitrust protection generally.

The quality stabilization bill would be, however, a truly significant element of the antitrust program that is sorely needed if small business is to emerge, healthy and strong, from its current environment of catastrophe.

It is the responsibility of Congress and the administration to maintain, through wise national policies, an economic climate favorable to the birth and the growth of small business.

Without a sound and thriving community of small, independent business, our free enterprise system cannot function along its traditional lines.

In behalf of the 36,000 independent drugstore owners who belong to the National Association of Retail Druggists, I urge you, Mr. Chairman and members of the committee, to take immediate steps to enact H.R. 3669, the quality stabilization bill.

It can help to preserve and strengthen the hard-pressed but still vital, small business segment of our national life.

I thank you, Mr. Chairman.

(The complete prepared statement of Ralph R. Rooke is as follows:) STATEMENT OF RALPH R. ROOKE, CHAIRMAN OF COMMITTEE OF NATIONAL LEGISLATION, THE NATIONAL ASSOCIATION OF RETAIL DRUGGISTS

Mr. Chairman and gentlemen of the House Commerce and Finance Subcommittee, my name is Ralph R. Rooke, and, for 42 years, I have practiced pharmacy in Richmond, Va., where I now own and operate two community drugstores. I am a past president of the National Association of Retail Druggists and also of the Virginia Pharmaceutical Association.

I appear here as chairman of the NARD Legislative Committee. The NARD, as you know, is a small business organization having a nationwide membership