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and his neighbors with whom he is dealing and his relationship with thern is not one that is based on the profit motive alone. In these days when cheapness abounds in our society, any effort toward excellence needs to be preserved. The relationship between the main street retailer and his customer approaches a level of excellence. These measures before you would seek to maintain this valued element, along with encouraging manufacturers to strive for superiority of product and technique.
Further, Mr. Chairman, this legislation, if passed, would be permissive in its nature. There is no obligation upon the trademark or brand name owner to avail himself of the rights accorded him under the proposed legislation. It is conceivable that the owner may not be interested in protecting his goodwill, trademark, or brand name from the unfair methods of competition defined in this bill. But, whatever his decision, it will be his own. No one may force him to decide either way. Whether he does so, or not act, is his own decision, provided his products are in free and open competition with other similar products. Similarly, those engaged in merchandise distribution, that is, the wholesaler and retailers, are not in any way obliged to handle trademarked or branded merchandise subject to the quality stabilization resolution. As always, they will decide for themselves what products they will stock and offer for sale. American consumers, too, enjoy full freedom of choice under this measure—they are free to accept or reject all merchandise, to pick and choose between protected and unprotected products.
Finally, quality stabilization does not seek to protect the interests of the consumer and the merchant alone. It seems to me that, in a sense, it strives to preserve an institution, a way of life, if you please. The merchant and his customer are integral parts of the American community, and when we move to preserve the structure of our communities' main street, we are seeking to maintain smalltown U.S.A. It is this heritage that has made us great; it can be protected and enhanced by the enactment of the legislation before you. Therefore, Mr. Chairman, I respect fully urge that this committee favorably report a national quality stabilization bill.
Mr. STAGGERS. Thank you, Mr. Jarman. We appreciate your appearance and testimony.
Mr. JARMAN. Thank you, Mr. Chairman.
Mr. STAGGERS. The next witness is the gentleman from Minnesota, also a member of the full committee, the Honorable Ancher Nelsen.
Mr. Nelsen, we will be happy to hear you at this time.
STATEMENT OF HON. ANCHER NELSEN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MINNESOTA
Mr. NELSEN. Mr. Chairman and members of the Subcommittee on Commerce and Finance, over a period of years, this committee has addressed itself to the competitive problems which vex the small businessman. Hearings on legislation in this area have been held in 1958, 1959, 1962, and the problem is still with us.
Now your committee resumes hearings on H.R. 3669, the quality stabilization bill, and its companion measures, including one introduced by me.
I sincerely believe the quality stabilization bill is the most practical solution yet proposed, and I urge that each of us give the necessary leadership so that it may quickly become law. There are a number of reasons for my support of this bill.
It is, to my mind, of great importance to the small businesses of this country, and particularly to the independent retailers along the main streets of thousands of smaller communities in America.
Small business is suffering today from no want of sympathy, but what seems to be lacking is understanding-realistic comprehension and honest facing up to the nature of the real challenge—a challenge resulting from a breakdown in the fundamentals of our system. As a consequence, the small businessman, merely because he is small, no longer is able to compete as he must compete if he is to survive.
This is not a question of ability, of capital, of store location, or parking facilities. It is simply a fact that the workings of the marketplace today more and more exclude the small retailer as a competitor and, hence, eliminate him as a participant in our Nation's pattern of enterprise and as a social and cultural contributor to the life of his community.
Before a businessman, large or small, can have a business and be a businessman, he must have a product to sell. What we see in the marketplace today is a purposeful and deliberate effort to take from the small independent retailer the only products which he can sell. These are the best-selling products in the marketplace, identifiable, honored, and famous brand names and trademarks.
The quality stabilization bill will equalize rights in the distribution of identified articles. It will give the small businessman—the hardware dealer, the jeweler, the druggist, the electrical appliance dealer, the book dealer, and others—the opportunity to compete, to succeed, even to flourish.
The quality stabilization bill would give nobody a subsidy. It would cost the Government nothing. It would protect the independent retailer, add dynamic incentive to the selling power of America's independent distributors, and prevent retail monopolies.
What is more, the quality stabilization bill would give certain rights to brand owners who do not own or control their own distribution system but who distribute through the hundreds of thousands of independent retailers. These rights are already enjoyed by brand owners—such as the multimillionaire and even billionaire retail chains—who own their own distribution outlets and price control their private brands.
Only last year, the Department of Commerce said, "Some 398,000 companies went out of business, 14,000 more than in 1960.”
With the enactment of the quality stabilization law, more than 4 million small businessmen will have a better chance of staying alive as businessmen, and this Congress will have demonstrated to the Communist world that in America there is room for small business as well as big.
Mr. STAGGERS. Are there any questions? If not, we thank you for your appearance, Mr. Nelsen.
Mr. NELSEN. Thank you, Mr. Chairman.
Mr. Staggers. The next witness is our colleague from Michigan, the Hon. Elford A. Cederberg. Mr. Cederberg, we welcome you to the committee.
STATEMENT OF HON. ELFORD A. CEDERBERG, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF MICHIGAN 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.
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. STATEMENT OF HON. HJALMAR C. NYGAARD, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF NORTH DAKOTA 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.
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.
STATEMENT OF HON. THOMAS M. PELLY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF WASHINGTON
Mr. PELLY. The lifeblood of any nation or society is formulated by its economy.
The Constitution of the United States of America is, in fact, a formula that provides the richest lifeblood to each of the persons who make up this great country.
There is constant change. But whatever the change-of Government, of freedoms, of opportunities-whatever the philosophy or ideology that takes control, the existence of the citizen must fundamentally depend always on the flow of economic blood through the Nation's veins.
To avoid a clot or stoppage of the flow, the consumer must have a standard of value by which to purchase; the retailer must have protection to compete and the safeguard of his own integrity by the maintenance of the quality of the merchandise he handles; the distributive system must be kept clear of obstructions; and the heart of the system—the manufacturer--must has the right-yes, the incentive—to create, produce, and distribute an ever better product of highest quality.
A simple, precise bill stands today before Congress. Its sole purpose is to furnish a freedom, a right to compete by giving the manufacturer the means of controlling the use of his reputation, his brand name and its goodwill, and by giving the reseller and the consumer the privilege of making his own purchasing choice.
It is called the quality stabilization bill.
Mr. STAGGERS. We will now hear the gentleman from Indiana, the Honorable Ralph Harvey.
STATEMENT OF HON. RALPH HARVEY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF INDIANA
Mr. Harvey. Mr. Chairman, I appreciate this opportunity to file a statement indicating my strong support for the quality stabilization bill, which many of us from both sides of the aisle felt justified in introducing
The importance of this legislation cannot be minimized and I commend the House Interstate and Foreign Commerce Committee for the consideration given this bill.
In my opinion, enactment of this proposal will have a clear-cut effect on our economy, and I urge your support.
For the manufacturers of brand-name products, passage of this bill will prevent trademarked merchandise from being sold at discount prices for promotional purposes. For the legitimate merchant, it will protect the profit margin which is so vital to the success of any business enterprise. Last, but certainly not least, favorable consideration of this measure will help to restore and maintain consumer confidence in the quality of the products we buy.