turers produce the same or similar products for resale at various retail prices in accordance with their respective established patterns of doing business. These prices will vary on the basis of each manufacturer's basic investment in product research and promotional development. For example, there are colognes on the market for $0.50 and for $10; we can find lipsticks for $0.25 and $5.

A few years ago our company introduced a device involving an entirely new and more simple and efficient method of applying mascara and sold it under the trademark Mascaramatic, at the retail price of $2. This applicator was one of the greatest innovations in the makeup segment of the cosmetic industry and its influence was such as to revolutionize the entire method of mascara application and the expansion of the entire eyemakeup market. The product was copied by competitors and today similar items are being sold in the U.S. market at prices ranging from $0.79 all the way up to $5. These areas of research and risk investment resulting in new quality products could not be maintained with out a minimum retail resale price structure. As long as there is free and open competition, why must there be recourse to the cut pricing of branded goods? 2. The retailer.-In order to make ends meet, the legitimate cosmetic retailer. whether a department store, chain or drugstore, must obtain its regular markup. When a discount house begins to cut resale prices, the retailers have several choices:

(a) To maintain prices and thereby lose a certain trade to the discounter. (b) To meet the cut prices and thereby lose money on its branded products. (c) To drop the line of the brand manufacturer.

It is apparent that the very existence of the small retailing units which comprise such an important part of this country's merchandising system will thus become prejudiced, with the very real possibility that hundreds of thousands of these small retailers will go out of business. It should be remembered that it was the depression of the 1930's which caused numerous States to pass legisla tion legalizing fair trade agreements. It is important to recall the situation that existed during these depression years. When a retailer started to meet cut prices, he had to turn to the manufacturer to obtain additional discounts. The Danufacturer had little choice. He either had to acquiesce in the demands of the retailers, lose money and subsequently face bankruptcy or, even if he would not meet the demands of the retailer, he was out of business anyway.

And this pattern, reminiscent of the depression years, will repeat itself. If all retailers in the same community cut their prices to meet the competition of the cutrate house, with each price cut, a new community retail price for the same branded commodity will be established. As a consequence, every retailer, without exception, will lose money by selling branded merchandise. This is obvionsly a literal point of no return.

3. And now let's consider the final victim---the consumer. It is well recognized that nationally advertised and branded consumer commodities most easily lend themselves to loss leader and cut-rate merchandising. The cutrate price offered to bait a customer appears, at first, to look like a big bargain to the consumer, but if a manufacturer is forced to give additional discounts to resellers, or go out of business, one of the first economies he will have to effect will be on the quality of his product. Or else, and this is what I believe will happen, the manufacturer will have to increase the price in order to allow additional discounts to the retailer. And so finally, it will be the consumer who will pay the penalty, for he will either be purchasing products of inferior quality of paying higher prices as a result of this price pyramiding.

The manufacturer, confronted with a demand for additional discounts, could very well decide that he must preserve the quality of his product at all costs and that he will not be a party to an inflationary spiral by raising prices. However, he would still like to stay in business and thus he must find a means of allowing the additional discount. His costs have been calculated with great care and he must, therefore, substantially reduce or eliminate entirely distribution expenses such as advertising, sales promotion, sales representatives, cosmeticians, etc. The total effect of reductions and eliminations of this character upon the very heart of American economy is obvious. Thus, the overall picture is clear. The alternatives are on the one hand-inflation, pronounced economic displacement, a deceived consumer, the elimination of many retailers and manufacturers, the disappearance of quality commodities or, on the other hand, the means of protecting all segments of the community-quality stabilization. Our company is firmly in favor of the quality stabilization bill. We believe in it. We know that it is the only way for the cosmetic industry to survive. I therefore respectfully urge its favorable consideration.

STATEMENT OF THE NATIONAL SPORTING GOODS ASSOCIATION IN SUPPORT OF THE QUALITY STABILIZATION BILL (H.R. 3669)

The board of directors of the National Sporting Goods Association at its annual meeting voted unanimously to support the principles of the quality stabilization bill (H.R. 3669). The National Sporting Goods Association is an association of independent sporting goods retailers located throughout the country. The headquarters of the association is at 23 East Jackson Boulevard, Chicago 4, Ill.

Sporting goods retailers are primarily small business. The Census of Business in 1958 showed annual sales of only $58,328 per store. The need for this legislation is now. The NSGA board of directors considers this bill the most important single bill for sporting goods retailers of all bills being considered by the Congress in this session.

Distribution is the final important link between the manufacturer and the consumer. Price cutting and dishonest practices are destroying the distributive economy as we know it.

The bill is permissive and only those manufacturers who wish to have their trademarked goods covered will make use of it. Retailers and consumers will have a free choice as to whether or not they will purchase these products or competitive ones offered by other manufacturers.

The bill is of greatest value to the small businessman. If we are to make it possible for him to compete he needs this protection, and he needs it nowbefore it is too late.

STATEMENT OF AMERICAN PHARMACEUTICAL ASSOCIATION ON H.R. 3369

The American Pharmaceutical Association, organized in 1852, is the national society of individual pharmacists in the United States. It is completely representative of the pharmacists of this country, both by professional specialty and geographical distribution.

Although the American Pharmaceutical Association is not a trade association, we have an interest in legislative proposals which affect the distribution of products available to the people of our country. We believe the public deserves quality products and honest services at reasonable prices.

The purpose of H.R. 3669, the quality stabilization bill, is to stabilize the quality of "goods, wares, and merchandise" by allowing manufacturers to control retail practices which may encourage quality deterioration of their "goods, wares, and merchandise" which bear a nationally recognized brand, name, or trademark. The bill would permit the manufacturer-owner of a brand, name, or trademark to retain property rights in the name regardless of sale or transfer of the "goods, wares, and merchandise." The bill gives the manufacturer-owner the right to revoke the privilege of sale of such "goods, wares, and merchandise" for any of the following reasons:

A. Because the reseller has employed "goods, wares and merchandise" bearing the brand, name, or trademark, in furtherance of bait-merchandising practices. B. Because the reseller, with knowledge of the manufacturer-owners' currently established resale price, has advertised, offered for sale, or sold such “goods, wares, and merchandise" at prices other than those currently established by the manufacturer-owner.

C. Because the reseller, with attempt to deceive purchasers, has published a misrepresentation concerning such "goods, wares, and merchandise."

The bill is completely permissive in that the question of whether or not its provisions are employed is entirely left to the discretion of a manufacturer.

The American Pharmaceutical Association supports H.R. 3669, the quality stabilization bill, and we hasten to point out that our support is without selfinterest: the bill specifically exempts from its coverage: "Sale of drugs, medicines, and devices for which either Federal or State law or regulations require a prescription from a physician, dentist, or such other persons as the various States may authorize to prescribe such items."

When a pharmacist dispenses pursuant to a prescription order he performs professional services and has both the professional and legal responsibility to determine the charge for rendering such professional services. Prescription charges do not represent the price of "goods, wares, and merchandise" that are merely sold in commerce. Up to the point when a pharmacist takes an article

in hand preparatory to dispensing a prescription order, the physical article is essentially a commodity. But the very act of dispensing the prescription medication, with all the attendant professional services of the pharmacist, introduces a marked change. This is the point at which a physical article passes from the world of commerce into the world of professional service.

The American Pharmaceutical Association joins the numerous other national trade and professional associations supporting H.R. 3669, the quality stabilization bill. We believe the bill is a constructive attempt to eliminate certain predatory practices involving quality products.

STATEMENT BY JOHN D. KELLY, EXECUTIVE COORDINATOR, NATIONAL ASSOCIATION OF TOBACCO DISTRIBUTORS, APRIL 24, 1963

The members of the National Association of Tobacco Distributors have long taken an active role in endorsing and supporting any and all endeavors which in their opinion would bulwark the freedom of initiative and preserve, in the public interest, the small business segment of our national economy.

In our opinion, the quality stabilization bill as contained in H.R. 3669 is critically necessary to the preservation of a marketplace economy wherein small retail and wholesale businesses can survive and hopefully even prosper.

Since the beginning of the century the "loss-leader" has been a favorite device utilized by certain retailers to bleed the vitality of competition from their less favorably circumstanced competitors. Nationally known products, or products of universal appeal, having widely established values, are disposed of by lossleader practitioners at cost or less than the actual cost of acquisition. This offer and sale at such ruinous prices is intended as an enticement calculated to increase customer traffic to the place of business of the "loss-leader" seller and to induce the purchase of other merchandise for which no standard price is generally known. The customer is thereby entrapped, without suspicion, into purchasing other goods, often at an exorbitant markup, more than sufficient to make up the loss on the "leaders."

In spite of all protestations to the contrary the consumer, and I use the term collectively to include all consumers and all the purchases made in the "lossleader" seller's store or stores, never saves anything when the loss-leader is employed.

The mercantile history of the United Statets is dotted with cases where single products and even whole companies have foundered not because of any inherent defect or lack of quality of the products themselves, but simply because the consuming public has, for some reason, lost confidence in the brand.

It has long been recognized that one of the surest ways to destroy acceptance and confidence in a product is to imply that the product is not worth what consumers are accustomed to pay for it. Use of a particular product as a loss-leader or in bait-advertising almost inevitably leaves the public with the feeling that the manufacturer or distributor of the product are taking an unwarranted or inordinate profit, in effect "gouging" the public. Anyone with the slightest knowledge of retailing and wholesaling is aware of this phenomenon.

The evil of the loss leader does not stop with the bilking of the public or the destruction of the loss leadered brand's integrity and acceptance by the consuming public.

An independent business, such as a small local wholesaler or retailer, must, of necessity, base his own image and community reputation on the quality of the brands of merchandise he carries. The public comes quickly to recognize that so and so company has such and such brand of a particular product. When one of these brands is debased and the public loses confidence in it the unfavorable public reaction almost invariably extends itself to include the innocent dealers in the community, along with the suspicion that they have been taking unfair advantage of their customers on every product they carry.

Most ethical retail and wholesale dealers live constantly with the fear that a brand in which they have invested considerable time, effort, and money in cultivating its acceptance by their customers and the general public, will find its way into the hands of a cut-price merchant. The loss leader practitioner rarely has an investment in the brand and less frequently has he an interest in its future potential. He seeks only to satisfy his own current need for a good traffic puller. He will use it for the sole purpose of getting customers into his

store in the hope that he will be able to sell them other more profitable merchandise once they are there. In such situations the item is quickly discarded by the price cutter once the public has lost faith in its value and perforce will also be discontinued by ethical dealers because the market for it has been destroyed. Thus the loss leader injures every level; from the manufacturer, through wholesaler and retailer right down to the ultimate consumer.

The foregoing establishes one of the principal reasons why small business continues in its present state of decline, as testified by numerous economists and market analysts. Caught in the vise of mounting costs and cut-price competition the small businessman lacks the financial resources to fight back. Unless some method is found to proscribe this vicious method of competition, and we sincerely believe that the quality stabilization bill offers a great hope for solution, then small businessmen regardless of the efficiency with which they operate their businesses will continue to decline in numbers and vitality. Our economic system and our antitrust laws were never intended to reward business merely because it is large or penalize efficient operations merely because they are small. It is obvious that a remedy is imperative.

For all of the foregoing reasons our association must unqualifiedly endorse the purposes expressed and inherent in H.R. 3669. However, we would be derelict in our responsibilities to this honorable body if we did not point out certain infelicities in draftsmanship within the current bill which may lead to radical misinterpretations of its purposes and effects. This committee is well aware of occasions in the past when laws beneficial and salutary in intent have been subverted by awkward language to nullify their main purposes and sometimes even to create an effect diametrically opposite to that intended by the sponsors of the law.

Section 14 of the present bill before you for consideration, at page 8 lines 3 through 13 inclusive, contains language which may be construed as having deleterious effects far from the intention of the bill's proponents. As presently drafted, that portion of the bill may be deemed to imply that the owner of the brand or mark may set higher prices for wholesalers than that charged direct buying retailers and that such owners, in combination sales, may sell below cost another's branded product provided that the same is tied in with the sale of his own merchandise. We are convinced that this is neither the intention nor the desire of those public spirited citizens sponsoring this legislation. Experience, however, has shown that, given the opportunity, ill-disposed individuals can seize upon apparently innocent loopholes to frustrate the most honorable of intentions and the most high minded of desires.

To obviate such untoward and unwanted likelihood, I beg leave to submit to this committee the following revisions of lines 3 through 13 inclusive of page 8 of the present bill, which revisions demonstrate conclusively that it is not the intention of the present legislation to, in any way, modify the provisions of the Robinson-Patman Act with respect to nondiscriminatory prices or the provisions of any antitrust law with respect to tie-in sales at below cost prices:

"Each currently established resale price and resale price range shall be uniform at each and nondiscriminatory to any level of distribution within each marketing area. Such owner of the brand, name, or trademark may so establish, for resale of a combination of two or more items of goods, subject to his currently established resale price or resale price range, a resale price or price range different from the sum of the current established resale price or price range for the items when sold individually. Such owner of the brand, name or trademark may also engage in other promotional activities not made unlawful by any other statute."

STATEMENT OF DR. HOWARD A. PRENTICE, EXECUTIVE VICE PRESIDENT, THE PROPRIETARY ASSOCIATION, WASHINGTON, D.C.

The Proprietary Association, an 82-year-old national association of the manufacturers of proprietary medicines, supports the principles embodied in H.R. 3669 and urges favorable consideration and passage of this bill.

The Proprietary Association's membership includes the manufacturers of drug products-packaged medicines-which are completely labeled with directions for use and with warnings against misuse, and which are advertised to the public for use in home medication. Such products are known as "proprietary medicines."

Proprietary medicines are sold under brand names, many of which are registered in the Trademark Division of the Patent Office. They are nationally advertised and in several instances are internationally advertised. A tremendous amount of good will has been created for these products and their trademarks constitute a very valuable asset to their owners.

One of the important objectives of the Proprietary Association is to preserve and improve the integrity and stability of the trademarks which its members own or control and pursuant to and under which they conduct business.

Because of the importance of trademarks to the business of our members, we believe it is essential to the welfare of our industry and the public we serve to have effective, enforceable laws to protect those trademarks.

Therefore, the Proprietary Association endorses the aims of H.R. 3669.

STATEMENT OF MRS. DEXTER OTIS ARNOLD, PRESIDENT, GENERAL FEDERATION OF WOMEN'S CLUBS, WASHINGTON, D.C.

The General Federation of Women's Clubs, on behalf of its 11 million members, wishes to go on record as being opposed to the fair trade principles as set forth in H.R. 3669, the Quality Stabilization Act, which would amend the Federal Trade Commission Act.

We strongly oppose any legislation which denies free competition among retailers and which would permit price fixing by manufacturers. Such action undoubtedly would result in higher prices to the consumer and would be very detrimental to our free enterprise system.

STATEMENT OF R. LEE WATERMAN, VICE PRESIDENT-MANAGER, CONSUMER
PRODUCTS DIVISION, CORNING GLASS WORKS, CORNING, N.Y.

Corning Glass Works manufactures and sells glass, and glass ceramic cooking ware under the brand names "Pyrex Ware" and "Corning Ware."

I shall present the views of a manufacturing company which has built its business and reputation on the development of new and improved materials and products through extensive research. We constantly strive to improve the quality and usefulness of the products which carry our brand names.

Our type of product is purchased relatively infrequently by any one family unit. We must, therefore, depend on wide distribution in all parts of the country to obtain sufficient volume on which to base efficient manufacturing methods. It is a fact that the price a consumer must pay for our products is determined primarily by differences in volume of production rather than by differences in distribution costs.

As an example, I cite a 9-inch Pyrex pie plate. This product was introduced in 1916, and has not changed in any essential particular since, excepting for improved glass quality. A recent survey indicated that there is at least one glass pie plate in 70 percent of the homes in this country.

In 1916 and during the early 1920's it was made on hand presses and sold in retail stores for $1.

In the late 1920's because of the introduction of semiautomatic machinery the price dropped to 90 cents.

In the 1930's a sufficient volume had been obtained to justify automatic forming machines which dropped the price to 45 cents.

Today, a constantly increasing volume has justified larger and faster forming equipment and handling machinery; and the retail price is 39 cents.

Our pie plates and related products are now purchased in sufficient volume to make possible a glass melting furnace costing over $1 million, forming presses costing approximately $250,000 each, and annealing ovens costing $80,000 each— all to product articles which retail at from 10 cents to $2.

The distribution which has made this possible has been based on the acceptance of our products by consumers, and on the cooperation of more than 300 wholesalers and 45,000 retailers in making these products available to consumers in all parts of the country. Such a relationship has also made possible the pioneering of many new products which required initially substantial investments in tools and facilities. We have concentrated our efforts over the years