The ethical reseller, rather than submit to the retail monopolist's unfair effort to make him look like a robber, stops selling that product. So the manufacturer almost at once loses these smaller resellers as outlets that have helped build his market and who normally sell most or all of his production. Thereafter the helpless manufacturer, to stay in business, must sell most of his seriously shrunken output through a comparatively few retail monopolists. Those retail monopolists demand constantly lower prices from the manufac turer, so that their bait of sensationally lower and lower prices on a once-favored product can be offered the public. RETAIL MONOPOLISTS "LOVE 'EM AND LEAVE 'EM" When a manufacturer's sales drop, his workers, buildings, and machinery are idled. He faces serious losses that may force him out of business. But the retail monopolist, when he has destroyed public confiidence in a oncehonored product-as a store-traffic lure has only to sell out his inventory of that product and then shift to plunder likewise another, and another product, with no concern for the manufacturer's unfair losses or for the deception the retail monopolist has worked upon the public. The housewife soon learns that she gets only the lessened quality-the lower value according to price forced by the retail monopolists' demands for uneconomic price cuts. Too many times she bit at the retail monopolists' bait, and got what hunters of "something for nothing" always get. She got hurt. Is that why retail monopolists, according to the AIP surveys seemingly have less than 2 out of 10 American housewifes as their gullible customers? Is that why so many retail monopolists, after their initial "brass band" period in their area has passed, can't pay their bills? The consuming public is being taught slowly but surely by their experience with retail monopolists that reduction of a product's quality to make possible even a 10-percent reduction in factory price-to meet pressures of piratical price cutters-usually reduces the product's value to the consumer by much more than 10 percent. It's the top 10 percent of a product's prime production cost that carries to the consumer a far greater proportion of that product's values than does any other 10 percent. Sometimes cheapening by 10 percent, or less, a product's prime cost to manufacture reduces its value to the consumer by 50 percent or more. CONSUMERS ARE CAUGHT IN THE MIDDLE The consumer gets hurt as the cannibalistic degrading of an honored trademarked product continues. Forced to cut his prices, the manufacturer at once tries desperately to "make 15 workers do the work of 20." Do you doubt that his expert quality control people are laid off first? Then, because of increased pressure for still lower prices, the manufacturer may have to use, where possible, cheaper and cheaper labor until the product at last has become, at any price, a fraud on the public. Retail monopoly and communism have a common goal. Each gives constantly less and less to its victims for the substance each takes from them. It can be understood how, forced out of business by retail monopolists, ethical retailers begin "to wonder whether it could be worse under communism." A disheartened Pennsylvania jewler, for example, with two children to feed, clothe, and educate, wrote Quality Brands Associates: "To me this danger (retail monopoly) is more serious than the threat of communism itself." THERE IS ONLY ONE READY ANSWER The quality and stabilization bill, when enacted, will give each manufacturer the power to protect his trademarks, protect his resellers, and protect the public against predatory price cutting for bait purposes, and against misrepresentation of the merchandise. The enactment of the quality stabilization bill can mean a great deal to almost any man's family through its protection against depreciation of the quality of well-known trademarked products-protection through stabilization of retail prices-by any manufacturer who so elects. It is high time we gave back to the ethical independent reseller the opportunity to offer to the public only products protected against the degradation forced by retail monopolists. HANDY "DIRTY WORDS" SUCH AS "FAIR TRADE" AND/OR "PRICE FIXING" CAN BE SERIOUSLY MISLEADING All thoughful men are conscious of the deplorable practice of besmearing soundly based and conscientiously supported legislation by tagging it, deceptively, with some widely used malodorous term publicly associated with something seemingly related but discredited in practice as harmful to the public. As an example, in discussions of the pending quality stabilization bill, a few highly influential and unqestionably sincere citizens have been insisting that the bill is a "Fair trade" bill, which it in no sense is. Some of the same, and other, citizens often refer to the quality stabilization bill scornfully as a “price-fixing” bill. It is understandable how, under mounting pressures of other problems, men may thus be led to embrace deceptively attractive, and entirely erroneous, conclusions. For example, most of us have been told how the term "price fixing" became an epithetical "dirty word" designating a collusive horizontal "mass murder" price control practice, now forbidden by our antitrust laws. In that forbidden, but still persistent, "price fixing" practice, a group of manufacturers representing the principal or perhaps the sole, source of supply of a certain category of essential product, would secretly agree that each of them would "fix" that product at a certain unconscionably high price. Such surreptitious horizontal price fixing was--and of course is-plain skulduggery and is viciously against public interest-primarily because it eliminates all inducement to the manufacturer to enhance product values through free and open competition for public favor between products of the same general class. Horizontal price fixing leaves the public helpless to protect itself under the free play of discrimination in its choice between freely competing brands of products best suited to its varying needs, as the public would be free to do under the Quality Stabilization Act. Under horizontal price fixing all, or nearly all, products available for a particular purpose are held to a fixed price through one unholy conspiracy. In such conspiracy a few manufacturers or a few resellers could--but no longer lawfully can-function in collusion to establish a monopoly by which to extort unconscionably from purchasers within the area controlled by that monopoly. THE SHERMAN ACT IS ANTIMONOPOLY; SO IS QUALITY STABILIZATION The Sherman Act-with hearty approval of all understanding citizens except those whose crimes it would restrict-was established to correct the evils of horizontal price fixing which may forbid not only secret horizontal agreements to increase prices unconscionably, but may also forbid horizontal agreements by manufacturers or producers to reduce prices, in concert, to starve out and exterminate competitors or to destroy public confidence in an honored quality product. Such conniving price-fixing agreements sometimes are intended to—and do— accomplish such purposes within a relatively small marketing area, whether the purpose is to raise prices horizontally on a particular product, or category of products, or is to temporarily reduce prices to a point that starves out competition. Large retail monopolists-rapidly growing larger and more numerous—are doing just that, persistently, in the process of eliminating by increasing thousands their smaller retailing competitors. A single retail monopolist can seriously restrict the sale of a popular product. For two or more retail monopolists to join in a colusive downward price-reducing raid to exterminate smaller competitors in any marketing area would violate the Sherman Act but might involve such shrewd retail monopolists as to make it extremely difficult for Federal agencies to conclude any timely corrective prosecution. QUALITY STABILIZATION PUTS NO BURDEN ON GOVERNMENT The antimonopoly Quality Stabilization Act will permit manufacturers to correct such competition-stifling price cutting without burdening any of the Federal agencies. As has been said, the dirty words price fixing was invented and has been publicized persistently, for many years, as a handy label with which to designate the destructive practice of robbing the public and crushing competition— through collusive horizontal pricing agreements. It is unfortunate that many of our citizens have been persuaded, by such repetitious use of the words "pricing fixing," to forget that no sale of any kind can ever be concluded until and unless either the seller, or someone in his behalf, “fixes” a price for the product. And let us recognize the fact that the manufacturer, by stabilizing the retail price of his product, is thus better able to stabilize and improve its quality—its value to the consumer according to the price paid. Due to the collapse of fair trade, there are mushrooming in America instrumentalities by which the growth of monopoly in merchandising is accelerated. As a matter of basic strategy, the perpetrators conceal from the public the fact that price in itself does not determine value. There is also obscured the fact that, whenever, as is its purpose, predatory price cutting of a quality product contributes to the forced elimination of ethical independent wholesalers and retailers in any area, monopoly of distribution increases its power. QUALITY STABILIZATION IS NOT FAIR TRADE The quality stabilization bill proceeds from a wholly different basis than did fair trade. The sole purpose of the quality stabilization bill is to protect, against destructive practices, the property rights of a manufacturer in his trademark or brand name, which is the identifying symbol of his precious reputation-often his most valuable asset. Although fair trade's basic objective was commendable, price control by contract or agreement was in effect the legal result. The quality stabilization bill extends protection against abuses of the brand name not only with respect to pricing, but also as to "bait and switch" merchandising tactics and as to misrepresentation of the branded product. The difference in approach between quality stabilization and fair trade is made apparent also by the difference in the "remedy" provided by each. Under fair trade the producer, or any reseller affected, could ask a court to compel the reseller to raise his prices to those established by the manufacturer under fair trade. Under the Quality Stabilization Act the brand-name owner, after revoking, for cause, a reseller's right to make any use of the manufacturer's trademark, will ask a Federal court to prevent the reseller from misusing and damaging the manufacturer's most previous property-his brand name. Not only is the quality stabilization remedy different from fair trade in its processes. Quality stabilization is based upon a well-established concept of protection of property rights of the manufacturer in his trade name and in the goodwill it represents. This is a clearly constitutional approach based upon unassailable considerations of property rights well established by the U.S. Constitution and by the Federal judiciary. After all the same concept that makes unlawful a malicious personal attack upon your own good name, leading to a restraining court action and the recovery of damages, differs not at all in principle from the quality stabilization concept, which likewise protects the good name and good reputation (the going value) of a manufacturer from practices that would destroy him. Under the Quality Stabilization Act the owner of a trademark may deny its use to those who would defame it. This is completely consistent with the law of property that has developed over the centuries to encourage citizens to increase their capacity for public service. To own property as a means of better serving public interest would offer no incentive unless the property is recognized as investing the owner with the right to determine the conditions under which others may make use of, or may be excluded from the use of, such property. FACTS ABOUT THE QUALITY STABILIZATION BILL BRING MILITANT SUPPORT Public support for the quality stabilization bill is becoming more militant whenever the following facts begin to be understood: (1) The proposed act can be applied only to trademarked products the makers of which have chosen to give their trademark and the citizens who have learned to trust the mark protection from those who would abuse the mark. (2) No manufacturer is required to bring any of his products under the act. (3) No reseller or consumer is required to purchase any product stabilized under the act. There must always be other products offered for the same purpose to give the public a choice or the price of the product cannot be stabilized under the act. (4) A price-stabilized product must compete with all price-stabilized products available for the same purpose. (5) A price-stabilized product must compete also with all nonstabilized products available for the same purpose. (6) Thus the public has the full benefit of both price competition and quality competition. (7) Fully authenticated reports of the vast national housewives' survey mentioned herein and exhibited herewith show that the public can be trusted under any competitive condition to determine, from neighborhood gossip and from experience, which product constitutes the best and which the worst "buy" for the need at hand. Obviously, any manufacturer who overprices his product soon feels the pinch of withdrawal of support made certain by decisions of this grassroots "court of last resort." (8) The public knows many times more about its needs and its budget capacities than any sheltered theorist. The public can best find for itself suitable values, once protected by the proposed act against retail monopolists' trickery. The public needs the wider range of choice of products and the trend toward stability of identified values the proposed act will provide. (9) Under the proposed act there will always be made available, for retail monopolists to sell, products to compete, at fully flexible prices, with every important stabilized product offered. The retail monopolists will be deprived only of the chance to force an honored quality product to destroy its own honestly earned popularity as the retail monopolist degrades it and destroys confidence in it. (10) The proposed right of a manufacturer to stabilize his resale prices as a means of protecting his property rights in the public goodwill earned by him and symbolized by his trademark is well within the framework of his unquestioned right to make the product wholly unavailable to the retail monopolist or to the public at any price. Any manufacturer, with complete impunity, can do just that by simply closing his plant and going out of business as retail monopoly otherwise might easily force him to do. Such action is clearly within what has been referred to as the citizen's inalienable right to drop dead. AMERICAN ISSUES PRESS, INC., ERNST & ERNST, Chicago, Ill., May 26, 1961. We have tabulated from questionnaire forms forwarded to us by pollsters of Manpower, Inc., during the period from February 1, 1961, to May 15, 1961, the totals of the replies to the questions shown by the questionnaire forms entitled "American Issues Press, Inc.-Telephone Survey of Homemakers." Previously, our assistance had been solicited by you in refining the questions used in this survey, in the interest of maximum clarity and accurate research results. Modifications in form suggested by us were adopted and the questions were revised by you accordingly before proceeding with the survey. Each form was coded to identify the congressional district and State in which it was used and bore a certification by the pollster to the effect that the questions had been asked by telephone of a number of homemakers without deviation from text. The replies tabulated by us covered a total of 15,295 interviews with homemakers, such homemakers having been selected in equal number from each of the 437 congressional districts of the United States, the boundaries of which districts are determined by population distribution. The results of our tabulation of responses for the entire United States are as follows (no opinion responses are not included in determining percentages): Question No. 1. When you go shopping *** do you buy mostly those brands of products easiest for you to see and reach * * * or *** do you look for certain well-known brands you may have tried and like? Easiest to see and reach_ Percent__ Well known. Percent.. No opinion-- 1,000 6.8 13,729 93.2 566 Question No. 2. Do you buy mostly the lowest-priced products or do you consider both quality and price in deciding upon the value of a product to you? Question No. 3. If a manufacturer is forced to reduce his own prices *** to avoid losing the business of discounters *** and so decides to use *** in making his trademarked products ** fewer and less skilled employees at cheaper pay rates *** and decides to use lower and lower grades inferior material *** do you believe that homemakers who buy that downgraded product get less * or more *** in value *** for what they pay? Less... Percent_. More... Percent.. No opinion_ * of 12,349 93.7 828 6.3 2,118 Question No. 4. As to lower-quality trademarked products of manufacturers who try to reach consumers ** who are attracted more by low prices than high quality *** do you believe that such manufacturers of lower-quality products should continue to rely upon storekeepers to fix *** as they please *** the retail prices to be paid by their customers for such products? Question No. 5. Do you believe *** that a product *** made of lower qual ity *** to sell at as low a price as may suit the storekeeper *** sometimes meets *** reasonably *** a limited need *** or a limited budget * of the homemaker * ** and that *** therefore ***the homemaker should be able to continue to easily find such products to buy? Yes 11,418 Percent 84.0 No 2,171 Percent 16.0 No Opinion 1,706 * Question No. 6. Do you believe that the manufacturer *** who really wants to give you the highest quality *** highest dependability *** and highest value *** in his trademarked product *** 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 nane*** to be paid for his quality product everywhere? not * * * be permitted by law to establish the lowest price at which a retailer could sell that manufacturer's trademarked product *** while leaving the retailer always free to charge you at any time for that same product some higher price the retailer himself might want you to pay? Should 4,677 Percent 36.3 Should not 8,216 Percent 63.7 No opinion 2,402 ERNST & ERNST. |