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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.
It is bipartisan.
It has my sincere support.
Mr. STACGERS. Thank you for your testimony, Mr. Pelly.
Mr. PELLY. Thank you, Mr. Chairman.

Mr. STAGGERS. We will now hear the gentleman from Indiana, the
Honorable Ralph Harvey.

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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.


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Mr. STAGGERS. Thank you for your appearance, Mr. Harvey.
Mr. HARVEY. Thank you, Mr. Chairman.

Mr. STAGGERS. The next witness is our colleague from Kentucky, the Honorable Frank A. Stubblefield.




Mr. STUBBLEFIELD. Mr. Chairman and members of the subcommittee, I do not want any doubt in anyone's mind about where I stand on the quality stabilization bill. I am for it. I want to vote for it on the floor of the House this year. Help give me that opportunity.

I've long been committed to the principles of this bill. It restores sanity to the marketplace. It will help keep merchants in business. It will help the small towns and the communities of my district.

I think it high time that we stop discriminating against the small

I believe we should have some of this "equal protection of the laws" for the small businessman.

If you have adequate capital, you can already do everything lawfully that the quality stabilization bill will permit when it is enacted.

Go into one of the giant chainstores in Washington, D.C. You'll find one product after another that has the store's own label on it. Then go across the country to that chain's other stores. The prices are identical for those products.

Gentlemen, they control the price because it's their own trademark in their own stores,

But the manufacture of the famous name product who wants mass distribution through the Nation's independent merchants can't protect his retail outlets by insuring them an adequate profit. If he tries to do it, if he tries to stop the use of his product as “loss leaders," if he tries to stop the predatory merchants from getting the product, he gets hit by the Department of Justice or the Federal Trade Commission. He's committed an act of unfair competition.

And there are several other ways that lawfully the manufacturer or retailer can do what the quality stabilization bill will permit. For example, the well-financed manufacturer can consign his products through retail outlets. Or he can set up exclusive franchises. Or he can sell door to door.

This Quality Stabilization Act can't be used unless there is free and open competition. There's no price fixing under it. Every manufacturer using it has to face the tough realities of the marketplace. He'll survive or fail depending on how much he gives for how little. He's not shielded against anything.

Neither is the small merchant. He'll have to take his chances too. Many will fail despite the enactment of this bill. That's deplorable, but Congress cannot in good conscience subsidize anyone.

This Nation is great because it fights hard. But you need in every battle fair ground rules of competition. The quality stabilization bill will provide those ground rules.

Mr. STAGGERS. Are there any questions? If not, we thank you, Mr. Stubblefield.

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Mr. STUBBLEFIELD. Thank you, Mr. Chairman.

Mr. STAGGERS. The next witness is our colleague from Montana, the Honorable James F. Battin. Mr. Battin, you may proceed.

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Mr. BATTIN. Mr. Chairman, I am for the quality stabilization bill

. I have joined about 25 of my colleagues in the House in introducing this much-needed measure.

Enactment of the quality stabilization bill will serve the consumer. He may select, under this act, products of top value, which is the quality of the product as related to its price. Or he may select those products made strictly to sell “at a price." This act can't be used unless there is free and open competition. That guarantee under our free competitive enterprise system will benefit, as always, the consumer. It gives the people of our Nation the highest standard of living ever enjoyed by any nation or any people at any time.

Enactment of the quality stabilization bill will help the American wage earner. It will help stabilize employment and give the wage earner more in the marketplace for the dollars he earns. It will help the wage earner because it, too, will help the employer, and the health and prosperity of the wage earner and the employer are interdependent.

Enactment of the quality stabilization bill will help the small businessman. The small merchant with limited dollars will be able to compete with the giant. The predatory merchant and the bait advertiser will be checked by this bili,

Enactment of the quality stabilization bill will help the manufacturer safeguard his property rights in his brand name. This bill, in providing the incentives of our free enterprise system, will promote the making of the best possible products because under the Quality Stabilization Act the reputation earner thereby can be protected.

I urge your quick and favorable consideration of the Quality stabilization bill. It will serve the Nation well.

Mr. STAGGERS. Mr. Battin, we are glad to have your testimony on this legislation.

Mr. BATTin. Thank you for the opportunity, Mr. Chairman.

Mr. STAGGERS. The next witness is our collague from Indiana, the Honorable Richard L. Roudebush. Mr. Roudebush, you man proceed. STATEMENT OF HON. RICHARD L. ROUDEBUSH, A REPRESENTA

TIVE IN CONGRESS FROM THE STATE OF INDIANA Mr. RoUDEBUSH. I am glad to be one of the many sponsors of the quality stabilization bill. I support it because I see what is happening to the

small stores, and the good people that run them, back in the Sixth District of Indiana.

I don't believe there is anyone that knows how long the small independent merchants will be able to survive in what are appropriately called the Hometowns of America. Because they're dying awfully fast. These small merchants, these honest people, are confronted by giants.

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Mass merchandiser, they call these giants. Turnover is their gospel, but service to the community is rarely in their handbook of operations. The loss leader is their formula; but service on the faulty product is usually someone else's responsibility. Huge capital is only one more of their weapons of assault; but credit to the consumer who is in hard luck is not permitted.

Perhaps the Quality Stabilization Act will not save even one independent merchant. Even so it still should be enacted. Because we owe it to these fine people who have helped build this country and given the leadership that built its communities to at least be given, in turn, a fighting chance of survival. I sincerely believe it will help the small businessman survive because most of them are efficient merchants.

This quality stabilization bill contains not one penny of subsidy to the small man. It gives him only a chance to compete on a fair basis by eliminating unfair competition.

The discount move toward monopoly has mushroomed to mammoth proportions. Discount store enthusiasts say they will take over, lock stock and barrel, before 1970, 80 percent of the retail business of the country.

E. B. Weiss, vice president of Doyle, Dane, Bernback, Inc., in his study entitled “Marketing's Stake in the Low-Margin Retail Revolution," predicted that by 1966 about 50 giant retail organizations will control 50 percent of the Nation's total retail volume in practically all major merchandise classifications.

Mike Goldgar, chairman of United Star Cos., Atlanta, Ga., predicted in an article appearing in Home Furnishings Daily of February 13, 1962, that the discount field in 1972 will consist of 500 stores, averaging 200,000 square feet. They will operate on a flat gross margin of about 25 percent. Groceries, run as a subsidy department, will account for 30 percent of total volume, while approximately 45 percent of all soft goods, including fashion merchandise, will be produced abroad.

One huge discount chain, Jubilee Cities, lays it right on the line as to its practices. Its president, Lawrence Altman, was interviewed in the December 1961 issue of the Discount Merchandiser, and here is what Mr. Altman says:

Question. What about traffic appliances? Are you interested in carrying these?

Answer. Yes. As a matter of fact, we plan to own and operate our own traffic appliance departments. It will be simply a loss-leader operation. We are going to take a percentage of the store items that will identify value and use them as giveaways to build an image. When we get to soft goods, we give them a quality image at low prices. If you see our advertising you will understand that we sketch our own fashion ads. We think that will build up our fashion image throughout the store. Our concern is to make a profit through volume.

Thus Mr. Altman confirms the use of two ingredients in their merchandising formula. The first is the low price, oftentimes a lossleader baiting price, used in part to give the impression that all the store's prices for all its multitude of products are likewise bargains. The second ingredient is the use of a reputable brand name as the

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The pricing policies of the discount houses do present deceptive attractiveness to the public. But the long-range result is almost certain to be a reduction in competition and greater monopolistic concentration in distribution. This clearly is not in the public interest

. Mr. Staggers. The committee appreciates your appearance, Mír. Roudebush.

Mr. ROUDEBUSH. Thank you, Mr. Chairman.

Mr. STAGGERS. The next witness is our colleague from the State of Washington, the Honorable Walt Horan.

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Mr. HORAN. I want to thank the members of the committee for affording me the opportunity to appear before you on behalf of the legislation you are considering. In these days of “controlled deficits" and managed unbalanced budgets, we are all necessarily concerned with the fiscal situation of our Nation. It is not a good situation.

The legislation before you should aid greatly in strengthening one of the major segments of our country's domestic economy, the small businessman. I have sponsored legislation in the past which is designed to allow a tax break for the small businessman. We in the Congress frequently consider legislation designed to strengthen the economy of the small business community. I feel that the legislation before you today, if passed, will provide a real boost to our Nation's small business economy.

Our trademark system provides incentive to manufacture and distribute products of greatest value and dependability. Under present laws, no adequate provision is made for the protection of goodwill in the manufacturer's trademark. This legislation will benefit the manufacturer, small business retail outlets, and the consuming public.

The manufacturer has a heavy investment in plant, equipment, inventories, and national advertising. He must keep his workers emploved and his factory busy.

Trademarked products allow him to protect his investments. But, when a popular trademarked product is used as bait to attract customers, retailers are forced to abandon the product as unprofitable. The loss of public confidence in the trademarked product through sale by nonservire-type retailers, coupled with the loss of support for the product on the part of retail sellers, greatly affects the manufacturer. This legislation will enable the manufacturer to protect his property rights in a trademark.

This bill will also allow small businessmen to compete on a more eguitable basis with nation wide, large firms.

Mr. STAGGERS. Thank you for your apperance and testimony, Mr. Horan.

Mr. Horan. Thank you, Mr. Chairman.

Vir. STAGGERS. The next witness is another colleague from the State of Washington, the Honorable Catherine May. Mrs. May we are glad to welcome you to the committee.

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