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quality or grade that the consumer can use price as a guidepost. These guide posts are meaningful and useful to the consumer only when a manufacturer (or a distributor or retailer) clearly identifies the product by trademark or brand name and when he also establishes or suggests a realistic retail price, for each quality or grade. By such identity the seller voluntarily assumes responsibility for satisfactory performance in open competition with other products within the same price range. Thus, competition to maintain these values must of necessity be primarily in the laboratories and testing departments before the goods are offered for sale.

Under such a policy, there is aggressive competition to build up to a quality or value rather than down to a price, and consequently in both national trademarked products and distributor house brands, the consumer gets much more real value for her money.

This is the basic concept which motivates and governs all effective brand name merchandising and promotion down to the retail level.

The discount form of merchandising puts into reverse practically all of the creative and constructive forces inherent in the brand name system of distribution. By its very nature it is admittedly predatory in that its motivating force is sapped from the energy and goodwill developed by brand name manufacturers and retailers by heavy investments, research, and promotion.

From the marketing point of view, the primary purpose of this bill is not only to encourage manufacturers and retailers to compete openly on quality rather than just on price, but more importantly to give them specific proteetion on their investments in establishing quality and developing more helpful guideposts for the consumers in evaluating quality.

That price stabilization at the retail level and effective competition are compatible is convincingly demonstrated every day in the market. How then could anyone, except a person insulated from the actual competitive environment of today's market, continue to put forward such a theory?

CONCLUSION

From the record of hearings it may safely be concluded that a wide majority of all objections to this bill originate from a relatively few basic misconcep‐ tions regarding (a) the true significance of some current marketing policies and practices and (b) what would actually happen if there was more price stabilization at the retail level.

First. In evaluating the significance of objections to this bill, serious consideration must be given to the fact that it is evolutionary and not revolutionary as the testimony of many of the opponents would seem to indicate. It is evolutionary because its primary purpose is simply to extend to trademarked products the same rights that have been enjoyed for many years by large distributors of house brands. Those rights would entail permission to establish a retail price and maintain control of merchandising policies and operations through to the consumer. During the past few years the forces of free competition in the markets have clearly demonstrated that for the long range the consumer gets more real value for her money on her total purchases when manufacturers and distributors compete to build quality into a stabilized retail price.

Second. Those who theorize that "the only true competition is that which is on a price basis at the retail level," will find a positive and realistic answer to the contrary in the market itself. For under the controlled brand form of marketing, all of the forces of free and open competition are in full effect, and this same rugged competition would be in action on national brands under the provisions of this bill.

Third. Another stated objection to this bill, in the same area, is that "it would deny the consumer a right and an opportunity to share in any savings made possible by lower cost merchandising." This contention is based on the erroneous assumption that discount merchandising is a new type of distribution in which retailers operate on lower margins.

But no evidence whatsoever was offered in the hearings to indicate that the price cutting of branded products has resulted in lower total gross margins for such stores nor is such evidence available from any known source.

On the

contrary, it is the opinion of widely experienced marketing men that stores using the discount appeal operate on about the same gross margin as other nonservice stores that carry the same type of merchandise.

Fourth. The contention that this bill would result in increased prices to consumers and in lessened competition between manufacturers and retailers is not only the basis of most of the unwarranted opposition, but more importantly it is the most difficult to rationalize.

For consumers and others not well informed regarding promotional techniques, these savings may seem like evidence of the benefits from free and open price competition at the retail level. Therefore, it is understandable that there is deep concern when the uninformed public is told by representatives of the Government, by economists and by representatives of farm bureaus and labor unions that if this bill is passed these visible-but phony-savings would be taken away and the price of the goods might increase by as much as $14 billion annually.

Deep discounting gives visible savings on well-known brands. This the consumer sees. But what she does not realize is that most of these savings are nullified by higher markup on other less known products, because every retail store has to realize a certain minimum gross margin on total sales.

Therefore, it is a gross misconception or intentional deception for anyone to add up the savings on specific items used as samples, and project them on a nationwide basis as the formula for estimates of the increased price consumers would have to pay if this bill went into effect.

In conclusion, the type of opposition above recited gives emphasis to the major difficulty of getting practical legislation in this area of marketing. This is very pointedly summed up by a former chairman of the Federal Trade Commission who says that "even if the heavy facts of life are on your (business) side, rest assured that in the scales, one feather of governmental inference is worth a ton of private citizen's facts."

RESOLUTION

Whereas the Massachusetts Consumer Association is concerned over the socalled quality stabilization bill (H.R. 3669) presently before the Congress of the United States; and

Whereas the provisions of this bill are not in the interests of consumers; and Whereas this bill emphasizes the role of the manufacturer in price fixing and price rigging and practically eliminates the role of the retailer in the pricing process.

The Massachusetts Consumer Association in convention assembled at Framingham State College on April 6, 1963, resolve as follows:

To request all members of the congressional delegation of the Commonwealth in the Congress of the United States to vote and actively work against the passage of this bill, and

To notify all members of the congressional delegation of the Commonwealth in the Congress of the United States of our desire to learn of their respective activities concerning this bill.

Representative JOHN D. DINGELL,
House Office Building, Washington, D.C.

ANDERSON, IND., April 9, 1963.

DEAR REPRESENTATIVE: As a life member of the American Pharmaceutical Association, I would like to make it clear that they do not speak for me, when they support the quality stabilization bill.

This is nothing more than a fair trade bill under a different name and I am unalterably opposed to it.

Price control is people control-and this bill provides for price control. Retailers do need some kind of protection from loss-leader type sellingbut this bill goes far too far.

Sincerely,

J. D. SCHREINER.

Mr. W. E. WILLIAMSON,

STEPHEN F. WHITMAN & SON, INC.,
Philadelphia, Pa., April 22, 1963.

Clerk of the House Interstate and Foreign Commerce Committee, House Office Building, Washington, D.C.

DEAR MR. WILLIAMSON: This is to advise you that we sincerely endorse the passage of the quality stabilization bill. We made this recommendation because we believe that if quality products are to be maintained their prestige must be preferred in the marketplace.

Also, if the economy of the Nation is to be maintained each and every retailer must do business at a fair profit in order to pay taxes as well as general

expenses.

Will you please have this letter made a part of the record at the hearing. We also suggest that the committee report this bill favorably to the full Senate. Sincerely yours,

J. HAROLD ROTH,
Vice President, Sales.

LINCOLN METAL PRODUCTS CORP.,
Brooklyn, N.Y., April 23, 1963.

Hon. HARLEY O. STAGGERS,

Chairman, Subcommittee, House Interstate Foreign Commerce Committee, Washington, D.C.

HONORABLE SIR: I wish to be on record as supporting the so-called quality stabilization bill now being considered by your committee.

As a manufacturer who has worked very closely with the small dealer, I can see of no stronger weapon to help keep him in business than the quality stabilization bill now being considered.

This bill is meant for the small businessman who can conduct his business profitably and competitively.

As a manufacturer, it will help us in planning further ahead with the knowledge of customer satisfaction, and his ability to sell profitably.

I strongly urge passage of the quality stabilization bill.
Yours very truly,

Mr. W. E. WILLIAMSON,

HARRY SCHWARTZ,

Vice President, Sales.

MIRRO ALUMINUM CO., Mantiwoc, Wis., April 22, 1963.

Clerk of the House Interstate and Foreign Commerce Committee,
House Office Building, Washington, D.C.

DEAR MR. WILLIAMSON: Our company has long been an advocate of price protection particularly on quality brands. We have spent millions of advertising dollars to sell MIRRO to the American public at fair prices, but which mass merchandisers use as bait.

We believe that overproduction in most lines of branded housewares and electric table appliances does not permit any manufacturer to overprice his merchandise at the marketplace. We also believe that a great number of small retail establishments, who have been the backbone of our distribution to the consumer, should be protected against the mass merchandiser who uses well established lines to give the impression that all goods are similarly discounted. We own a trademark, MIRRO, have spent millions to make it a popular household name and should be privileged to control the price and the profit to the department and harware stores who have helped us over the years to build a tremendous MIRRO consumer franchise.

Sincerely,

G. C. KUBITZ, Senior Vice President, Marketing.

NATIONAL ASSOCIATION OF HOUSE TO HOUSE INSTALLMENT COS., INC.,
New York, N.Y., April 24, 1963.

To: House Interstate and Foreign Commerce Committee, U.S. Congress.
From: Edward L. Sard, executive director.
Subject: Quality stabilization bill.

The members of the National Association of House to House Installment Cos. (who have home offices in 37 States and serve some 5,500,000 American families) strongly endorse the quality stabilization bill now before your committee as a means of insuring the maintenance of quality of retail merchandise, thus protecting the consumer. Our members also endorse this legislation as a means of protecting the small businessman against the type of unfair competition that tends to eliminate the small retailer in favor of the giant chain retailer.

As an association composed of 333 retail firms (most of whom are small) and 198 manufacturers and suppliers (most of whom are interested in protecting their property rights in their merchandise), we feel most strongly that this quality stabilization legislation is essential to the economy of the country. EDWARD L. SARD.

STATEMENT OF LEHN & FINK PRODUCTS CORP., BY WALTER N. PLAUT, PRESIDENT, NEW YORK, N.Y., MAY 15, 1963

The quality stabilization bill, S. 774, HI.R. 3669, is, in my opinion, important legislation to Lehn & Fink Products Corp. and to most other national producers of quality consumer products. Since the fair trade laws of the various States have become largely ineffective because of judicial interpretations, we have found ourselves facing an increasingly difficult marketing situation.

Lehn & Fink Products Corp. has a long tradition of producing and marketing nationwide quality cosmetic, proprietary, and household products. We are convinced that where such products are made the subject of indiscriminate price cutting at the retail level, the consumer must in the long run be deprived of such quality products at reasonable prices because orderly and effective distribution channels must be disrupted.

The maintenance of the goodwill which is associated with our long marketing history requires that the consumer be able to purchase our products at uniform prices throughout the country and that wholesalers and retailers be enabled to earn a reasonable return for the services they perform in distributing our products.

I am convinced that the quality stabilization bill will effectively restore a marketing and distribution situation which will benefit not so much this company and its wholesale and retail customers as the consuming public.

NATIONAL RETAIL FURNITURE ASSOCIATION,
Washington, D.C., April 25, 1963.

Subject: H.R. 3669, Quality Stabilization Act.

Hon. HARLEY O. STAGGERS,

Chairman, Subcommittee on Commerce and Finance,
House of Representatives, Washington, D.C.

DEAR MR. CHAIRMAN: The purpose of this letter is to give your committee the position of the directors of the National Retail Furniture Association on H.R. 3669 on which you are currently holding public hearings.

We would appreciate it if you would authorize inclusion of this statement in the official record of the hearings.

After a poll of the association's membership in 1959, NRFA directors adopted a policy position which follows the wishes of the majority of members voting; namely, in favor of a Federal resale price maintenance law, provided it has a 2-way street provision placing enforcement responsibility on the owner of the trademark, brand, or trade name.

In line with this policy, we recommend that paragraph (11) of H.R. 3669 be amended to read as follows (new material is italicized):

"(11) In any proceeding under paragraph (1) it shall be a complete defense to the charge of unfair competition for the defendant (A) to establish that the plaintiff has not used due diligence in policing and in enforcing the provisions of this Act to effectuate observance or enforcement of plaintiff's

rights under paragraphs (7) to (17), inclusive, of this subsection against all other persons who are in substantial competition with the defendant and who are known to plaintiff to be violating the same subparagraph of paragraph (8) of this subsection on which revocation of the defendant's right to employ the brand name, or trademark was based, or has not used due diligence in taking civil action for damages and injunctive relief as provided in paragraph (10) to prevent and restrain further violations of paragraphs (7) to (17), inclusive, of this subsection or (B) to establish that the plaintiff has sold the same kind of goods of like grade and quality as the goods involved in such proceeding to another person similarly situated under terms more favorable or at lower prices than those under which the plaintiff sold such goods to the defendant." We believe that this supplementary wording will sufficiently protect cooperat ing merchants from sharp practice operators.

Without this supplementary feature, the owner of the trademark, brand, or trade name need only spend a postage stamp to revoke by mail the right of any person to resell his product, and thus remove the protection afforded to a defendant by paragraph (11) as written in the bill.

In our opinion, there is not sufficient responsibility and incentive for adequate enforcement in paragraph (11), and it needs to be amended as we suggest.

The reseller who violates will then know that the trademark owner has a strong incentive to revoke his right to resell and to sue for damages; and the trademark owner who wants to use the act merely for the advantage he can get by establishing terms of sale and then going to sleep or looking the other way when they are violated will then not be able to use as his dupe the merchant who operates in good faith.

Without adequate enforcement, the retailer who lives up to the trademark owner's resale terms can be made a sitting duck for the predatory operator who is quite willing to take the chance of violating if he has little fear of punitive action.

We believe that Federal legislation in this area must incorporate the principle that the privilege granted by Congress to the trademark owner must carry with it the commensurate obligation to enforce the terms established under the protection of the law.

We also respectfully suggest that your committee in its report state what factors are to be considered in determining whether enforcement has been diligent. We respectfully draw your attention to the factors established in the case of General Electric Co. v. R. H. Macy Co., Inc. (103 N.Y.S. 2d 440) where the court stated (see H. Rept. 467, 86th Cong., 1st sess., pp. 3 and 4) :

"While this court will not attempt to set forth in detail the requirements of a satisfactory future enforcement program, or a program generally to entitle a plaintiff to the protection of the fair trade law, certain basic essentials are emphasized by the facts of this case. General Electric, as any other manufacturer or producer, should

"(1) Keep itself informed as to price-cutting activities and other trends generally known in the industry or trade.

"(2) Close scrutiny should be kept over prior violators and appropriate action taken where indicated.

"(3) Investigate and follow up complaints vigorously.

"(4) Enforce fair trade prices by repeated legal action if necessary. "(5) The enforcement program must be a continuing and sustained one." We thank your committee for the opportunity to present these views and urge enactment of H.R. 3669 with the amendments we have proposed.

Yours sincerely,

DEREK BROOKS,

Vice President and Director of Government Relations.

TRADE-MARK SERVICE CORP., April 19, 1963.

Re quality stabilization bill-Opposed
Hon. VANCE HARTKE,

U.S. Senator from Indiana, Senate Office Building, Washington, D.C. DEAR SENATOR: I am opposed to your bill because you are assuming that fair sales and prices can be controlled by the indirect control of the owner's registered trademark.

There is no provision in the U.S. Constitution for Congress and the Federal Government to provide for the regulation of the "use and ownership" of trade

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