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THE QUALITY STABILIZATION BILL DOES NOT CONFLICT WITH STATES RIGHTS

To allege that the quality stabilization bill is an invasion of States rights is superficial and misleading for the reason that the intrastate application of the Sherman Act and other antitrust statutes over the last half century have created the compelling need for this legislation at the Federal level.

Since the 1911 decision by the U.S. Supreme Court in the Dr. Miles case (200 U.S. 373), the Sherman Act has been held to ban resale-price maintenance contracts.

Thus State policy as to this subject matter has been subordinate to Federal policy for at least half a century.

Among those making this illogical argument that the quality stabilization bill is an invasion of States rights is the Department of Justice.

If the Department of Justice followed through on its line of thinking, it would call also for the repeal of the Sherman Act as it affects retail transactions, and by the repeal of the Sherman Act thus restore the entire area to State control. The weight of the common law until the Dr. Miles decision was that resale price maintenance in the distribution of trademarked products was valid. In 1900, 10 years after the Sherman Act was passed, Mr. Justice Holmes, then the chief justice of the Supreme Court of Massachusetts, recognized the common law doctrine that resale price agreements were not a rstraint of trade. He called this the "inherited doctrine."

The common law background of the validity of resale price maintenance led Mr. Justice Holmes in his dissenting opinion in the Dr. Miles case to point out that "there is no body of precedent that by any logic requires the conclusion to which the court has come (that resale price maintenance contracts violate the Sherman Act). The conclusion is reached by extending a certain conception of public policy to a new sphere ***. I cannot believe that in the long run the public will profit by this court permitting knaves to cut reasonable prices for some ulterior motive or purpose of their own and thus to impair, if not to destroy, the production and sale of articles which it is assumed to be desirable that the public should be able to get."

Viewed in the proper light, the quality stabilization bill represents an attempt to restore in a limited area the status of the common law before the Sherman Act preempted the field.

Such restoration can only be done by an act of Congress.

The central concept of the quality stabilization bill is that the trademark used to identify goods constitutes a separate property interest severable from the goods themselves and, like other property interests, entitled to be protected by law.

The U.S. Supreme Court in Old Dearborn in 1936 (299 U.S. 183) explicitly recognized this concept, saying:

"We are here dealing not with a commodity alone, but with a commodity plus the brand or trademark which it bears as evidence of its origin and of the quality of the commodity for which the brand or trademark stands. Appellants own the commodity, they do not own the mark or the goodwill that the mark symbolizes. And goodwill is property in a very real sense, injury to which, like injury to any other species of property, is a proper subject for legislation."

Congress by its enactment of the Lanham Trademark Act in 1945 recognized upon practical considerations the essential interstate characteristics of a registered trademark.

The quality stabilization bill in essence is a statutory confirmation and implementation of the Old Dearborn decision and is consistent in jurisdictional scope and in underlying philosophy with the Lanham Act.

This is confirmed in detail in an opinion of Herbert A. Bergson, of the firm of Bergson & Borkland, of Washington, D.C. Mr. Bergson was for years the Assistant Attorney General of the United States, in charge of the Antitrust Division of the Department of Justice. Mr. Bergson's opinion is attached as an appendix to my statement.

The quality stabilization bill enables the trademark owner to protect his property, his trademark, by denying its use to those who abuse it.

The quality stabilization bill is consistent with State constitutional concepts and State laws that property rights are entitled to protection.

No State has ever enacted legislation dealing with this property control approach as applying specifically to trademarked goods; therefore there is no overruling or overriding of State policy as to the concept of law provided in the quality stabilization bill.

The quality stabilization bill is applicable only to trademarked goods in or affecting interstate commerce.

Under a quality stabilization law there should be no areas from which predatory pricing practices could spill across State lines and defeat the carefully structured public policy of the invaded State-as happened under both the MillerTydings and McGuire Fair Trade Enabling Acts.

ANY STATE-BY-STATE "EXCLUSION" AMENDMENT TO THE QUALITY STABILIZATION BILL WOULD BE DESTRUCTIVE

Any so-called "States' rights" amendment permitting a State to exclude itself from the operation of the Quality Stabilization Act would subject quality stabilization in effect to the same disintegrating pressures as have at last destroyed the State-by-State contract system of fair trade.

Texas and Missouri are two of the States that have never had fair trade acts, and thus have operated as areas of immunity from which every State in the Union--and, most effectively, States contiguous to Texas and Missouri-have been bombarded mercilessly, by mail with catalogs, circulars, newspapers, etc.-by radio and television-and by traveling peddlers-with offers of quality-brand products required in fair trade States to be sold fairly at uniform prices offering sufficiently attractive competitive values to have made those trademarked products the most popular of their kind.

This disaster was made possible inevitably by an arbitrary "spoiler" amendment quietly injected into the McGuire bill in committee. Had the McGuire bill not been so amended, the act would have prevented such destructive invasions of Fair Trade States.

Any State-by-State "exclusion" amendment to the quality stabilization bill has clearly the same ultimate purpose as the "spoiler" amendment of the McGuire bill and would have the same effect.

The perversive effect of this "amendment" would accelerate the elimination of quality stabilization from one State after another-until the intent of Congress, in its attempt to exclude deceptive and destructive practices throughout the entire Nation, would have been defeated.

Thus, by the contemptuous device of a "spoiler" amendment the conscientious manufacturer, ethical reseller, and the public would be found again exposed to the cannibalistic practices of so-called mass merchandisers who have mastered the trick of diverting store traffic from ethical resellers-thereby starving ethical manufacturers of trademarked quality products, thus forcing them to dilute the quality of their once-honored products to meet the demands of retail monopolists for lower and lower prices with which to destroy each other as they build higher and higher the ramparts of monopoly.

Upon comparative examination the obvious purpose of any "State-by-State exclusion" amendment to the quality stabilization bill is unfairly destructive of the trademark property of the manufacturer, and is hostile to the rights and interests of ethical resellers and of the public.

SHOULD STATES BE PERMITTED TO "SECEDE" FROM THE UNION IN THE MATTER OF

PATENT RIGHTS?

Property rights in patents-in trademarkes-and in copyrights—are identical in their constitutional significance. They provide the incentivism to creative service to meet public needs.

To emphasize the absurdity of an amendment for exclusion of State by State from the provisions of the Quality Stabilization Act, it is only necessary to ask what would be the result of a similar amendment to our patent laws.

Would it not be equally destructive of incentive to create new and useful products to provide by law that any industrial State, whose legislators wanted to free its manufacturers from the necessity of respecting patents owned by others, could do so simply by an act of its legislature excluding that State from any need to honor the patent laws?

How long would the U.S. patent system-recognized as the prime catalyst of our entire economy-have any significance, or be of any value in promoting science and the useful arts, if such exclusions, State by State, could be made effective?

Any Federal legislation that imposes arbitrary economic imbalance between States is essentially destructive legislation. In fact one of the great economic

advantages of the proposed Quality Stabilization Act is that it provides for uniformity of application throughout all the States.

If any State-by-State "exclusion" amendment were included in the Quality Stabilization Act, Congress will have done little more than perpetuate, by Federal law, the present checkerboard system of random States in which orderly marketing of trademarked products is permitted.

Checkerboard marketing is impractical and costly. Most manufacturers have found it an impossible system of distribution. That is why they have abandoned fair trade and, as a practical matter, would not be able to use a Quality Stabilization Act similarly disabled.

Is a repetition of that disastrous fair trade collapse what the proponents of such a "spoiler" amendment really desire?

RETAIL MONOPOLISTS SHOULD NOT BE GRANTED LICENSE TO HIDE BEHIND A MISTAKEN CONCEPT OF WHAT CONSTITUTES "STATES' RIGHTS"

The adoption of any State-by-State "exclusion" amendment in the quality stabilization bill would, in effect, subvert the right and duty of our Nation to stand firm and in orderly economic unity to meet new and serious threats confronting its people.

Problems have arisen from intensified foreign economic competition strengthened by an unprecedented economic alliance of industrial nations of Europe. Those allied nations now move, under uniformly prescribed conditions, to create among them what is, in economic effect, a United States of Europe, free from import duties and other restrictions that have impeded heretofore the interstate movement of merchandise across their borders.

They call this their "Common Market." It is much more than that. It is also a common organized source of competition with our United States for the markets of the world.

In that competition we of America find ourselves at a serious disadvantage as to competitive costs of production. In the European Common Market, labor rates, both skilled and unskilled, are far below labor rates in the United States. Our regulations governing imports into our country permit nations of the Common Market, as well as Asiatic nations with even lower labor rates, to penetrate our market in such volume as to help us not at all in our present shaky unemployment conditions. Those conditions-understandably-are aggravated also by the rate at which retail monopolies in America are driving out of business each day, and often into profitless inactivity, literally thousands of citizens experienced in distributive and relative services.

America's security can endure only through a continuation of America's economic strength. Yet we have found good Americans misguidely advocating a disabling so-called States' rights amendment to the Quality Stabilization Act, which amendment would make impossible the maintenance in America of anything like the economic unity, in method and purpose, wisely embraced by the increasingly industrious and prosperous nations of the European Common Market. Such an amendment clearly would introduce, in and among the States, an unrelenting ideological fight for and against State-by-State legislative action to withdraw the State from the united economic front proposed under quality stabilization. Thus would be concentrated on individual State legislatures, in predetermined sequence, the full power of organized retail monopolists--striving to persuade its legislature to make cach State a "Casbah" in which they may practice all the evil arts intended to be restrained by the quality stabilization bill.

The quality stabilization bill is intended to, and in unamended form would, permit, under Federal law, throughout all of the United States, at the will of any manufacturer of a competitive product bearing his brand, name, or trademark, the establishment of certain uniform conditions governing production and distribution of that product.

Under the proposed act to establish such uniform conditions each State is recognized as having, as a State, a right to be protected against unfairly disruptive competition originating outside its borders.

Enacted without crippling amendment, the quality stabilization bill will enable manufacturers to compete, throughout all of the United States, on uniform terms and conditions, and without exposure to (a) bait-merchandising practices, (b) deceptive pricing policies, or (c) published misrepresentation concerning the manufacturers' trademarked goods.

Is it believable that our United States could long maintain its economic supremacy, against competing nations united solidly under uniform conditions affecting production and distribution, with our country operating from a confusing and disrupting crazy quilt of competitive conditions?

Dare we ignore the right of each and every State to be protected from unfair encroachment from other States that promote the growth of retail monopolies, against which the public would otherwise have no defense?

LOOK WHO WANTS "QUALITY STABILIZATION" DEAD

Quality stabilization has been an issue of growing importance to the public since 1959, when it was first revealed by QBA as perhaps the only soundly based approach to the establishment of a constitutional Federal policy capable of resisting, and perhaps reversing, the age-old and merciless drive of consciousless men seeking monopolistic control of retail sales. These men strive constantly to attract gullible customers by parading, in their windows, and in their advertisements, at uneconomic prices, honored branded products.

QBA proposes no new restraints upon a manufacturer of a brand of merchandise he intends resellers shall price, up or down, as they may please.

However, QBA is joined, by much more than 70 national trade associations whose members resell trademarked products, in an urgent request that Congress, by enactment of the quality stabilization bill, encourage manufacturers of good intent to invest their trademarked products with that additional 10 percent or so of prime cost by which the product carries to the public often a bonus of 50 percent or more in "miles" of service and satisfaction.

We all, or no doubt most of us, have read of the cry of desperation emanating from the recent national conference in California, of representatives of the National Association of Consumer Organizations (NACO), the questionable name chosen for itself by the only national discount organization. The president of the association was quoted in the trade press as saying the quality stabilization bill "threatens our very existence and is the largest danger facing the industry today."

These words of the president of the National Association of Consumer Organizations seem rather incongruous since the quality stabilization bill is not directed at any class of reseller-whether discount house, a cooperative, a chainstore or whatnot-but is aimed instead toward the cannibalistic abuse and misuse of the goodwill of an honored trademark regardless of who commits such degrading practices.

The obvious conclusion is that among those who wish quality stabilization dead are the retail monopolists themselves, possibly some financial institutions that have overloaned to the retail monopolists, certainly including the susceptible newspaper that relies on local advertising of retail monopolists for an important part of its income, and the manufacturer who relies upon the retail monopolist's discrediting of competitive quality products to create store traffic that is diverted to the purchase of his inferior product.

NOW LOOK WHO WANTS QUALITY STABILIZATION

That the homemakers of America overwhelmingly want the quality stabilization bill enacted soon is authoritatively established by the certification by Ernst & Ernst, nationally known and respected certified public accountants, of results of a massive survey of national opinion showing that 81.1 percent of homemakers are asking for this proposed legislation. A photocopy of the economically and politically significant Ernst & Ernst report is included as an appendix to this statement.

A total of 15,295 homemakers selected at random (and in equal numbers) from every congressional district in the United States were interviewed. This work was done for American Issues Press, Inc., by experienced pollsters working out of more than 200 offices of Manpower, Inc., throughout the United States.

The total included is more than 10 times the 1,500 citizens customarily questioned by opinion survey organizations as adequate to provide, within 1 or 2 percentage points, a dependable cross-sectional result.

Question No. 6 of the American Issues Press survey presents the true essence of the quality stabilization bill, H.R. 3669, in text and in purpose. Of the opinions expressed on that question, a total of 81.1 percent of housewives voted, in clear effect, for the quality stabilization bill.

That question No. 6 read as follows:

"Do you believe that the manufacturer who really wants to give you the highest quality, highest dependability, and highest value, in his trademarked products, should be permitted to protect that quality and value for you *** and protect his own good reputation *** by lawfully preventing any change, either up or down, by any storekeeper, in the retail price such quality manufacturer may name to be paid for his quality product everywhere?"

Federal legislation permitting (but not requiring) price and quality stabilization of a trademarked product by its manufacturer is supported by the American housewife as sorely needed for the protection of her family. She needs that help and she knows it. She appreciates those who support her interests as a homemaker. She finds it difficult to understand people who are unable or unwilling to support quality stabilization as a firm solution of her greatest economic problem.

HOUSEWIVES ASKED FOR THE SAME PROTECTION IN 1952-THEY KNOW NOW WHY THEY DIDN'T GET IT

In a similar national survey 11 years ago covering more than 10,000 housewives-with results also tabulated and certified by Ernst & Ernst-78.6 percent of the American housewives polled said they preferred that the manufacturers of their favorite trademarked products "set and lawfully enforce" the prices of those products.

In that 1952 survey a total of 10,279 housewives answered the following question:

"Would you rather have the storekeeper fix at any time to suit himself all the prices you pay for all the products he sells you or would you rather have the manufacturers of your favorite trademarked products set and lawfully enforce the prices of those products?"

A total of 8,080 housewives, 78.6 percent, said they wanted the manufacturer (not the retailer) to set and lawfully enforce the prices of their favorite trademarked products.

The American housewife knows what helps her and what hurts her. She is learning, surely, who helps her and who hurts her. The proof is overwhelming that she wants the quality stabilization bill enacted by this Congress.

These survey reports may convince you that only about 20 percent of the homemakers of the Nation remain so uninformed as to still be blind to the destructive objectives and consequences of retail monopoly, now being so rapidly forced on the public.

So it would seem that the retail monopolists, and others who want quality stazilization dead, are very much in the minority.

Any Member of either House who desires further information bearing upon the grassroots significance of the QBA housewives' survey, the Ernst & Ernst survey report of which is herewith exhibited, will have the full cooperation of QBA whenever desired.

The housewife is believed to be entitled to the full support of both Houses of Congress on the basis of her overwhelming expression of serious need for protection from the cannibalistic proclivities of retail monopolists.

There is no more crushing form of monopoly than is retail monopoly. Retail monopoly extorts at will from the consumer, while it dictates to the manufacturer downgrading product specifications, then fixes the price it will pay.

Some influential leaders in one State or another, have expressed bewilderment that citizens claiming for long to be opposed to all harmful monopolies, and to be strong supporters of our antimonopoly laws, now stand out so amazingly and shout against quality stabilization.

WHEN ETHICAL RESELLERS ARE FORCED TO QUIT A PRODUCT

How does retail monopoly destroy? It's like this:

Manufacturers of popular trademarked proudcts normally at first have received nearly all their business from ethical resellers, who compete for the consumer's purchases by delivering product quality and dependable service at fair prices.

When retail monopolists destroy, with their store-traffic "bait" prices on it, the well-earned popularity of a trademarked product, they at once create unfairly the idea that the ethical service-type seller has been deliberately overcharging for that product. The result is understandable.

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