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Mr. JARMAN. Mr. Chairman and members of the subcommittee, I want to thank you for extending me the opportunity of testifying in behalf of the quality stabilization bills now pending before you. As you perhaps know, I introduced one of these bills, H.R. 4703, as did many of our colleagues, including our distinguished committee chairman, Hon. Oren Harris. Let me explain briefly my position with respect to the legislation now before you.

We have seen of late, Mr. Chairman, that more and more independent, locally owned businesses are encountering serious financial" difficulty. Much of this has been caused by unfair competition on the part of chain and other discount establishments. Frequently, wellknown, brand-named merchandise bearing a time-honored trademark, is offered for sale to the public at a retail price which is far less than the price at which the independent merchant can obtain the same product at wholesale. These drastically discounted brand-named items then are used as bait merchandise to attract the public. Followup sales of other merchandise, often of shoddy and inferior unbranded variety, are then made to the buyer who has been attracted.

In order to correct this serious situation, the bills before you would empower the owner of products identified by his trademark or brand name to prevent distributors handling his products from using such methods in reselling the trademarked or branded products, and thus damaging the mark or brand and associated goodwill. Whenever a trademark or brand name owner discovers his products being used by a distributor in any scheme involving mispresentation, bait merchandising, or sales at other than the established price, he may revoke the offending distributor's right to use his mark or brand in reselling such goods. In addition, the trademark or brand name owner is entitled to injunctive relief, if the offending distributor disregards the notice of revocation and continues the challenged sales practices.

In this light, this legislation is seen as merely an extension of our trademark and copyright lawsman extension enabling a trademark or brand owner to protect his property rights through the channels of distribution. Certainly, if we accept the right to own property and the corresponding right to protect such property, then we must accept the objective of quality stabilization-protection of valuable investments in trademarks, brand names, and goodwill from ruinous marketing tactics.

Another aspect of this bill relates to the question of protecting the individual consumer. A very high proportion of trademarked merchandise is of a kind that requires continuing service on the part of the retailer. I think that all of us are familiar with the shabby tactics of many discount organizations that saddle the purchaser with a piece of goods which does not operate properly or, perhaps, with a perfectly sound piece of merchandise, which in the normal course of operation requires maintenance and service. In either instance, too frequently the "quick buck” merchant simply is not there to give the consumer the maintenance and service backup that he deserves.

The independent smalltown merchant can be depended upon to give this service. He is a part of the community. These are his friends

sible way.

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Maryland, Congressman Samuel N. Friedel. Mr. Friedel is also & Anant

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 an 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 to of fixing prices under this particular section were limited only to those the who are in real fact in free and open competition with a fairly large image number of others equally situated. Am I correct!

Senator PROXMIRE. Yes, indeed.
Mr. DINGELL. That is very helpful.
Thank you very much, Senator.
Senator PROXMIRE. Thank you.
Mr. STAGGERS. Mr. Glenn?
Mr. GLENN. No questions.
Mr. STAGGERS. Mr. Van Deerlin?
Mr. VAN DEERLIN. No questions.
Mr. STAGGERS. Mr. Curtin?
Mr. CURTIN. No questions.
Mr. STAGGERS. Thank you very kindly.
Senator ProxMIRE. Thank you, Mr. Chairman, very much.

Mr. STAGGERS. Our next witness will be a colleague of ours from
member of the full committee and certainly is a very respected and
highly valuable member.

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. Ås 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 in restment in his product. My bill would permit him to do this by re

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a 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, recogrized, 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 my bill.

There is no doubt that the small business people are the backbone of every community in our country. They are the citizens who proride 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 legisation. The survey revealed that an average of 80 percent of Amercan housewives interviewed approved of quality stabilization. This ndicates to me that the consumers realize that, in the long run, there no substitute for the reputation of the manufacturer and the quality f his product, and the dependable service rendered by the smail Ptailer is almost as important to the consumer as a trustworthy prodet. Such service is usually not available from the discount house : the chainstore, which is inclined to sell the product and then irget about it. The manufacturer of quality products, the independent retail busissman, and the American consumer are all urgently in need of an 'ective remedy against the predatory, unethical, and deceptive praces used by some discount and mass merchandisers. These quality bilization bills provide the legal means to deal with this everreasing problem. There is no question in my mind that quality stabilization is clearly the national interest since its purpose is the protection, preserva1, and advancement of independent retailing as we know it in



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Mr. CEDERBERG. Mr. Chairman and members of the committee, I am the sponsor of one of the quality stabilization bills on which you are now holding hearings. I support unequivocally the principle involved in these quality stabilization bills.

I do this because I am convinced that it promotes the free, competitive enterprise system. I sincerely believe that it will help make possible the restoration and maintenance of competition on a fair basis between small and large manufacturers and between small and large retailers, so far as brand-name goods are concerned.

The market for such goods is created largely by the brand-name owner, through the competitive value his brand-name product gives to the consumer.

This bill gives the brand name owner the right to protect the market for his own brand name so that his resellers may be able to compete on even terms, one with another. The brand-name owner may elect to use the Quality Stabilization Act in the marketing of his goods, or he may ignore it.

This bill provides a simple means for protecting property rights in a brand, name, or trademark. It merely permits the owner of the brand to deny any further use of the brand to resellers who abuse and injure his good will in the brand name.

There are set out in the bill three specific grounds that permit the owner of the brand name to invoke the remedy of revocation as to practices affecting his brand: (1) bait merchandising practices; (2) selling at other than the price established for the branded product; or (3) publishing misrepresentation of the product. Resellers who utilize the product for any of these three damaging purposes may be denied their right to use the brand.

This bill applies only to competitive products that are sold under a brand name.

It would not prevent anyone from selling merchandise in whatever way and at whatever price he chooses, so long as he does not abuse the brand name and good will of another. This bill is aimed at unfair practices with respect to the use of an honored brand name. It is not directed at any particular class of reseller,

This bill will enable the retailer to sink or swim on his own competitive merits, rather than be destroyed by unfair competition. He will be given the right to fight on an honest—but unsubsidized-basis for his survival.

This bill will help eliminate confusion and loss of confidence now confronting the consumer. It will help the consumer avoid being trapped by the “come-ons” of deceptive merchandising.

And this bill will give the consumers a right of action against the manufacturer where they have been injured because of misrepresentations by the manufacturer as to the size, capacity, quality, condition, model, or age of his brand-name product.

This quality stabilization bill has my endorsement, my sponsorship, and my unreserved support. I urge speed in your consideration of it

, approval of it in your report. I hope that you will soon give me the opportunity to cast my affirmative vote for it on the floor of the House.

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Mr. STAGGERS. Mr. Cederberg, we appreciate your appearance before the committee. Mr. CEDERBERG. Thank you for the opportunity, Mr. Chairman,

Mr. STAGGERS. The next witness is our colleague from the State of North Dakota, the Honorable Hjalmar C. Nygaard. Mr. Nygaard, we will be glad to receive your testimony at this time.



Mr. NYGAARD. I am honored to have the opportunity to appear before this committee on behalf of H.R. 3669 (which is identical to H.R. 4541, a bill I introduced covering the same subject, commonly known as quality stabilization).

Having spent a great portion of my life in operating a small retail business, I am fully aware of the benefit that this type of legislation could be to small businesses throughout the United States. Though the effects of this bill would differ from that of the Fair Trade Act which was in existence in many States a few years ago, it will provide a few similar benefits for small business, particularly those in small communities. It is to be noted that the provisions of this bill are in the main not mandatory but are meant to promote the needed stabilization.

Having been in business at the time that all protection for the small businessman was eliminated, and realizing the impact that it had upon our volume and income in small communities, I am very firmly of the belief that a bill of this nature is essential—that is, if ever again the small community is to have any encouragement in its continued existence and render the service it did for so many years to its contiguous population and that of the surrounding communities.

It is very difficult today for anyone to continue in a competitive business if the cost of acquiring merchandise from the manufacturer is not afforded to all competitors in a similar manner.

It has become increasingly apparent that since the repeal of certain legislation some products have not shown suitable proportional and qualitative improvement, as their price increase would indicate. However the manufacturer who is attempting to provide to the dealer, and in turn the customer, a high quality product that will continue to perform its intended service for an appropriate number of years, should be protected. Both he and the customer should have the type of legislation which is proposed by this bill to protect them from being drawn into the cut-throat pricing system that has developed over the years. In its turn this pricing market has caused not only the closing of the small retail business and its attendant ruination of the small community, but also the cheapening of the product by the manufacturer to meet the price competition.

Mr. STAGGERS. Thank you for your appearance and testimony, Mr. Nygaard. Mr. NYGAARD. Thank you, Mr. Chairman.

Mr. STAGGERS. We will now hear from our colleague from the State of Washington, the Honorable Thomas M. Pelly. Mr. Pelly, you may proceed.

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