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STATEMENT OF MR. G. G. BLAISDELL, PRESIDENT, ZIPPO MANUFACTURING CO., RELATIVE TO H.R. 3670

The story of Zippo is a simple one. I founded our company in the dark depression days of 1932 and began manufacturing a cigarette lighter which I called Zippo. We built a quality product and for 31 years, every one of the millions of lighters which we have manufactured has borne the brand name "Zippo." I hope it's familiar to you and that you own one.

I learned early that things happen in manufacturing which can result in a faulty product or even one that can wear out too quickly. I learned that when this does happen, you had better be ready to fix it fast-and preferably, without charge.

This, then, is the policy on which Zippo Manufacturing Co. has been built. Because of it, we have been impelled to build the finest lighter that we know how. Thanks to it, our product has attained an enviable position with millions of smokers as a lighter that works. Always, or Zippo fixes it-free. With this kind of acceptance has come a brand recognition enjoyed by few other products.

It has enabled us to withstand the many, many production and business problems of the last 31 years. Because of it, we have weathered the mass importation of tens of millions of cheaply made, detailed copies of our lighter, most of them from Japan, but from many other countries as well.

A company's brand name and the goodwill it symbolizes is a great asset in a competitive market, but how can a brand compete against itself and grow? It can't because when a product cannot be handled at a profit, it ceases to be handled. Yet, unethical and unprincipled retailers feature name brand merchandise in “bait" or "loss leader" advertising, building traffic on these brands, and making profit on unknown and unbranded merchandise displayed nearby.

As manufacturers we sorely need legislation that recognizes our rights, our investment in the integrity of the name brands we make and sell and advertise; the trademarks that identify them and represent our obligation to the consumer. Legislation of this kind would, in addition, protect the small and independent retailer against deceptive pricing practices against which they, like we, have no

recourse.

The quality stabilization bill (H.R. 3670) would insure the protection of name brand quality of product to the consumer. It would provide for price protection and an adequate profit margin for the retailer and wholesaler. It would assure the ethical manufacturer that his long-term investment in the quality of his product and its recognition by the consuming public can be legally safeguarded, so that his integrity can remain unquestioned.

STATEMENT OF LEONARD C. TRUESDELL, PRESIDENT, ZENITH SALES CORP., CHICAGO, ILL., APRIL 22, 1963

Once again I am writing regarding the quality stabilization bill and to point out that since my last statement the situation has become much more serious. Many, many thousands of small retailers throughout the United States are suffering terribly.

With the slightest decline in business, literally thousands of these retailers will go bankrupt quickly.

The reason for the retailers being on the ragged edge of going bankrupt is that prices have degenerated to the point where a retailer can barely pay his overhead and earn a meager loving. He is unable to pay his people satisfactory living wages. All of this has been forced upon them because a few large companies have been successful in building a business in which they take well-known brands of products and price them as price leaders or bait to get traffic into the store.

While a few of these companies have been successful, it has been at the expense of thousands of small businessmen, and the time has come when the general retailing of all types of products in the United States is going to be dangerously hurt unless Congress provides the proper regulations to enable all businessmen, especially the small retailer, to make a fair and honest margin of profit.

Unless these retailers can immediately start to earn a margin of profit which experience indicates is required to exist in business, we are going to

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be confronted with a serious number of bankruptcies or these dealers will be simply forced out of business completely.

It is my sincere hope that the Congress will take immediate action to improve this situation.

STATEMENT OF BROWN-FORMAN DISTILLERS CORP.

Brown-Forman Distillers Corp. began business in 1870. The guiding philosophy of its founder, George Garvin Brown, was to produce the highest quality whiskies that could be made. This has been, and is today, the keystone policy of Brown-Forman. Over the years we have expended millions of dollars in establishing and maintaining the highest standards of excellence of the various brands of this company through research, development, and quality control.

Mere excellence of products is not enough for commercial success in a highly competitive market. Quite large annual expenditures through advertising, merchandising, and promotion to acquaint the trade and the consumer with the merits of our products are necessary. In the end, the product must be sold at a price reflecting its quality and which returns a reasonable profit.

The American consumer expects quality of product that is commensurate with its price. "You get what you pay for" is the axiom of the marketplace. A product sold at a reasonable and stable price maintains its reputation for quality. One which is sold at cutrate prices is soon presumed to be of cutrate quality. A debased price structure can destroy overnight the efforts and expenditures of years to establish a reputation of premium quality.

H.R. 3669, the quality stabilization bill, will protect the manufacturer of high quality goods from loss of product goodwill and reputation through uncontrolled and destructive price wars, enabling him to more confidently invest in product development and improvement.

For these reasons, Brown-Forman Distillers Corp. supports and urges the passage of the quality stabilization bill, H.R. 3669.

STATEMENT BY ROBERT C. FERNLY, EXECUTIVE SECRETARY, NATIONAL
INDUSTRIAL DISTRIBUTORS' ASSOCIATION

Our association, composed of more than 500 leading distributors of industrial supplies and equipment throughout the United States except 13 Southern States, strongly favors the passage of the quality stabilization bill known as H.R.. 3669 and others. This position was established by almost unanimous vote of members attending our annual meetings in May 1961 and June 1962.

This act will enable our suppliers to protect their inherent property rights in their trademarks, brands, names, and thereby insure that the ultimate user of industrial supplies and equipment will be able to receive the value of distributors' services such as engineering advice, prompt delivery from local stocks, etc. As independent businessmen, we favor manufacturers utilizing industrial distributors as the most efficient marketing channel for industrial supplies and equipment. Without this legislation, manufacturers may tend to undertake their own wholesale distribution, as, under present law, they then have complete control over merchandising practices utilized in conjunction with thier brands and trademarks.

The bill promotes this highly worthwhile objective through purely voluntary means and no additional Government personnel or funds are required to enforce it.

STATEMENT OF DWIGHT D. TOWNSEND, DIRECTOR OF THE WASHINGTON OFFICE OF THE COOPERATIVE LEAGUE OF THE USA, APRIL 16, 1963

Mr. Chairman and gentlemen of the committee, we appreciate this opportunity to present the views of the Cooperative League of the USA on the proposed bill, H.R. 3669, otherwise titled the quality stabilization bill.

The Cooperative League is a national federation of all types of cooperatives. Nearly all of the 14 million families who own and control cooperatives in the United States are represented in the Cooperative League.

This bill proposes exactly the same brand of minimum price fixing under the guise of “quality stabilization" that has been proposed previously under a similar euphemism, “fair trade.” The new facade is no less infamous than the former, and the Cooperative League is as vigorously opposed to this bill as to its predecessors. We resent efforts to camouflage a legislative proposal which from the day of its enactment would suppress competition by permitting manufacturers to fix minimum retail prices and thus pick consumers' pockets of hundreds of millions of dollars every year.

The most heinous offense under the antitrust statutes of the United States is conspiracy to fix prices. This legislation not only winks at price fixing. Under it, the Government would endorse price fixing and use its full authority to enforce price fixing. We are unalterably opposed to any such efforts to legitimize monopolistic price fixing. If this bill is enacted, the Clayton Act and the Sherman Act are effectively repealed.

To bring such legislation to Congress under the cloak of quality stabilization not only insults the intelligence of Congressmen but makes a mockery of our laws and our private enterprise system.

We remember the Office of Price Administration. During wartime emergency, this agency fixed maximum prices. OPA was-like all Federal agencies-responsible to the people through their elected representatives in Congress. Though its purpose was to protect consumers by fixing maximum prices, OPA was barely tolerable, even in wartime.

Yet now you have before you a proposal to allow private interests who are entirely beyond the reach of popular control to fix minimum prices-not maximum prices, mind you, but minimum prices in peacetime. This, gentlemen, is absolutely intolerable.

The first victim of this legislation would be the consumer. The second would be the small businessman who has been hoodwinked into supporting it. If it is true as these misguided merchants insist-that their large-scale competitors enjoy lower operating costs per sales dollar, this legislation cannot save the small retailer. The large chain will simply offer more services with each purchase, offer more inducements to enter the store, or find ways to circumvent the fixed prices of, shall we say, quality stabilized merchandise.

Just as right-to-work proposals aggravate employer-employee relations, just as tax equality proposals would impose tax penalties on not-for-profit business, and just as fair trade begets trade that is remarkably unfair to consumers, so quality stabilization would stabilize neither quality nor service but only price. Quality stabilization is a semantic trick, and the Nation's 180 million consumers have a right to expect that this subcommittee will expose it.

This legislation should be disposed of with finality and dispatch so as to conserve the energies of Congress for more constructive purposes.

The Cooperative League is uncompromisingly opposed to H.R. 3669, and we welcome the opportunity to make our views known.

STATEMENT ON BEHALF OF THE PAINT & WALLPAPER ASSOCIATION OF AMERICA, INC., SUBMITTED BY ROBERT E. PETIT, EXECUTIVE VICE PRESIDENT

The officers and board of directors of the Paint & Wallpaper Association of America, Inc., on behalf of members throughout the United States, enthusiastically support the quality stabilization bill.

We feel that this legislation is imperative to the future well-being of the thousands of paint and wallpaper retailers who attempt to market quality merchandise at fair prices. We believe that the manufacturers and distributors of quality merchandise stand shoulder to shoulder in their attempt to market such products in an ethical, profitable manner.

Those who destroy precious reputations painstakingly built through years of fairness in dealing with the consuming public can and are destroying all incentive to make and market products of other than superficial quality. We believe this bill can restore some semblance of order in the marketplace, and will provide those who desire to make and market products through ethical channels the support they need to continue their efforts.

STATEMENT OF H. B SPEYER, VICE PRESIDENT AND TREASURER, CHAMPION SPARK PLUG Co.

We, as manufacturers of a trademarked quality product, namely, Champion spark plugs, are very much interested in seeing that subject legislation is pased. One of the main reasons, of course, is to preserve the traditional American system of distribution which is being rapidly destroyed by the evils of predatory cut pricing.

It will be optional with the manufacturers whether to use the Quality Stabilization Act in the marketing of his products. If the manufacturer elects to use the act, the reseller will receive notice of the conditions under which his right to use the trademark will be revoked.

Finally, this bill solves the problem of jungle pricing and permits the malufacturer to name the retail price at which his trademarked quality product must be sold. The manufacturer has the responsibility and must account to the public for the value received in the product according to the price.

STATEMENT BY JAMES A. HUESER, MANAGER, OF INDEPENDENT GARAGE OWNERS OF AMERICA, INC., TULSA, OKLA., APRIL 17, 1963

Comes now the Independent Garage Owners of America, Inc., a national federation of 6,000 owners of independent automotive repair shops in 40 States in the United States of America.

Independent automotive repair shop owners all over America are in favor of the enactment of the quality stabilization bill, because it will enable the independent automotive repair shops to stay in business by being able to compete on an equal basis for the sale of automotive repair parts and repair of automobiles.

For example, mass merchandisers (discount stores, supermarkets, drugstores, etc.) are able to sell brand name automobile parts such as spark plugs, headlamps, mufflers, tailpipes, oil filters, air cleaners, brake linings, brake shoes, and other parts at retail prices far below the wholesale cost the independent automotive parts wholesaler. The retail prices vary. But on brand name spark plugs for example, the retail price at the mass merchandisers is 10 to 20 cents less than the wholesale price which the independent automotive repair shop must pay. The manufacturers are unable to do anything about this because they do not have control over the retail distribution of their product.

As a result much of the motoring public buys automotive parts from the mass merchandisers, thereby making it more difficult for the independent automotive repair shops to compete for the parts and repair business. This in itself is bad enough. But the motoring public, because it can purchase parts at prices below wholesale, have turned themselves into amateur repairmen. This not only makes it difficult for the independent repair shop to compete for the repair business, but the amateur mechanics are endangering the lives of other people through faulty repairs.

Therefore, it is vital for the quality stabilization bill to be enacted without delay to protect the lives of the motoring public and the future of the independent automotive repair shops in America.

STATEMENT ON BEHALF OF THE PHILLIPS-VAN HEUSEN CORP., SUBMITTED BY LAWRENCE S. PHILLIPS, EXECUTIVE VICE PRESIDENT

The interests of our company are a direct reflection of the interests of our more than 6,000 independent retailers throughout the country. Innumerable conversations with many of our customers lead us to believe that they almost unanimously feel that the passage of a quality stabilization bill is vital to their future and to their existence.

The typical small retailer in the men's furnishings field cannot possibly compete with the sprawling, predatory, unscrupulous giants whose avowed publicly stated business procedures are in direct conflict with the tens of thousands of small independent retailers in this country.

The independent retailer's only competitive tool against the unprincipled and ruthless retail operator, are service and brands. To cripple the meaning of a brand for these people would be like taking away their right leg.

On behalf of our retail accounts and our more than 3,000 employees, we urge favorable consideration of the quality stabilization bill.

STATEMENT OF OSCAR KOLIN, VICE PRESIDENT OF HELENA RUBINSTEIN, INC., IN SUPPORT OF H.R. 3669

This statement is presented to the Subcommittee of the House Committee on Interstate and Foreign Commerce in support of the quality stabilization bill. I respectfully request that it be included in the record of the hearings held by your subcommittee.

I am a vice president and a director of Helena Rubinstein, Inc. (which I shall hereafter call Rubinstein). Rubinstein and its predecessor or predecessors in interest have been engaged in the manufacture, distribution, and sale of cosmetics, toiletries, and related products in the United States for almost 50 years.

My statement is devoted to the importance of this bill to the cosmetic manufacturer and distributor, as well as to all manufacturers of branded products. I am strongly in favor of legislation to protect brand names and trademarks. I am firmly opposed to predatory marketing practices which destroy the value of such brand names and marks. It is my belief that the continual rise of discount houses will eventually result in the destruction of American business and economy as we know it today. This trend, if it continues, may involve the disappearance of nationally advertised branded, quality, consumer products. To date fair trade laws have been our only means of combating these practices I am convinced that the best answer to the problem lies in the quality stabilization bill and I sincerely hope that it will soon become law.

Here are my reasons. To explain, I will discuss the impact of the discount house on the manufacturer, the retailer and, most important of all, the consumer, the three categories of persons directly affected.

We are confronted today with two types of discount stores. The first feeds upon the hard-earned contributions of established businesses and makes no contribution of its own. Most often it is a small store located in the middle of the busiest commercial center of a large town or city among many longestablished retailers. This small cutrater frequently sells only very well-known branded merchandise and it sells this merchandise at reduced prices. In recent years, however, another type of cutrate operation has appeared on the scene. Very often this establishment is a large chain or department store which handles two types of merchandise: (a) Quality branded goods which are sold as bait at reduced prices to induce customers to enter the store, and (b) several kinds of obscure, often inferior, merchandise, to which it attempts to switch the customer as allegedly superior products, and which it sells at prices calculated to bring the highest profit. Such deceptive and misleading merchandising practices will, in the long run, prove harmful to the consumer.

1. The manufacturer.—A manufacturer of a trademarked or branded product, in open competition with similar products, has a recognized right to protect the goodwill of his product by establishing a minimum retail resale price for the product either through unilateral policy or under fair trade statutes. This right is recognized as a legitimate means of safeguarding the manufacturer's proprietary interest in the goodwill of his product, and of protecting that valuable property from destruction and impairment through predatory pricecutting, loss-leader selling, and other destructive marketing tactics.

A manufacturer of a branded product must create a product of quality. This involves extended research, product testing, and considerable financial investment. After years of hard work and continuing substantial expenditures, a goodwill is finally built up for the brand he has created, as well as a nucleus of loyal customers. As a result of careful cost calculations-the cost of the product itself, of its packaging, and of distribution (advertising, demonstration, sales promotion, sales representatives, etc.), the manufacturer establishes a price for these quality products. The price must be realistic and competitive with the prices of other manufacturers of branded cosmetic products-and the cosmetic industry is an extremely competitive one. Let me assure you that today the profit margin of a manufacturer of a quality cosmetic product is extremely narrow-with not one penny remaining for additional expenses.

Our traditional American system of distribution has been-and must continue to be based upon free, open and fair competition. Different manufac

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