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STATEMENT OF HON. CATHERINE MAY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF WASHINGTON
Mrs. May. Mr. Chairman and members of the subcommittee, I appreciate the opportunity to submit a statement in support of the quality stabilization bill of which I am a cosponsor having introduced H.R. 3745 during the current session of Congress. The provisions of H.R. 3745 are identical to H.R. 3669, the quality stabilization bill introduced by the distinguished chairman of this committee, Mr. Harris.
Perhaps the most significant reason that I am an ardent supporter of the quality stabilization bill is that I am a housewife who demands quality in the products I buy. There is nothing that disturbs me more when I go to the market than to find that I have been tricked into believing I am purchasing a quality product when, in fact, the product is inferior.
It has been my sad experience as a housewife to find a great deal of evidence of dishonest and price-cutting practices that are destroying the goodwill symbolized by brand names and trademarks, and I am seriously concerned to find that parasitic practices are on the increase. Too often we find the emphasis in marketing is shifting to the “price" and the "gimmick" and it is the consumer who is cheated because it is the quality of the product that suffers. Misuse of brand name associations and trademarked products should be of serious concern to the Congress. Resellers who have helped the manufacturers to establish honored brand names and trademarks are today finding that they must shift their emphasis to cope with price and gimmick selling in order to stay in business.
It is not only the consumer who suffers but it is also the resellers who actually would prefer to engage in demand-creating activities that emphasize quality and service at a fair price. My alarm is also for
the manufacturers who desire to produce quality trademarked products and prefer to have them sold and serviced on a quality basis at a fair price.
I feel that the quality stabilization bill provides the remedy and that Congress has the responsibility to act to protect our brand name system of distribution. My mail indicates that my constituents agree. Businessmen in nearly every category have informed me of their support for the quality stabilization bill. They tell me the need is desperate. But these same retailers have a long-range interest in serving the needs of the homemaker.
I am but one of the homemakers of America but I feel that other homemakers like myself want to know more about where they stand when they go to the market. We want assurances that we get the same top quality and price as any other consumer. Our chances are far better when the manufacturer is permitted to stabilize his prices.
As a person formally involved in the field of advertising I know that a very high percentage of demand for commodities is tied to brand names and trademarks. A very important part of the small business commodity is geared to the advertising, promotion, and distribution of brand name and trademarked products. The ability of businessmen to identify themselves with various brand names, with honored trademarks, has helped to establish their business. invest their
savings, build buildings, expand, remodel, increase employment, and embark on long-range plans of operation.
The quality stabilization bill provides an immediate answer to the urgent call from citizens and from businessmen to whom we must look for a thriving and successful business community. I sincerely urge this committee to favorably consider the quality stabilization bill.
Mr. STAGGERS. The next witness is our colleague from New York, the Honorable Emanuel Celler. Mr. Celler, you may proceed. STATEMENT OF HON. EMANUEL CELLER, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF NEW YORK Mr. CELLER. H. R. 3669 is the latest version of that hardy perennial, a national "fair" trade bill, to permit, indeed encourage, retail price fixing.
Concealed as usual behind a fog of euphemisms, this consumer price-increase bill is presented to you in this session, as in the last session, dressed up in the seductive sheep's clothing of a “quality stabilization” bill. Last year's "quality stabilization” price-fixing bills contained a large economy-size preamble of “unfair trade practices the bills purportedly would have prevented. At that time I suggested that the length of the preamble gave rise to the inference that a blackand-white animal resided in the bill.
This year there is no such covert attempt to conceal the price-fixing purpose of this obnoxious legislation. Nevertheless a small dose of Chanel No. 5 has been applied to this black-and-white animal by euphemistically dubbing it a "Quality Stabilization Act.” When a cat would eat her kittens, she calls them mice.
H.R. 3669 is as drastic a “fair” trade price-fixing bill as has ever been proposed.
Before pointing out its particular features, which are the bases of this assertion, I purpose to deal with the main thrust of the bill.
1. IN THEORY AND PRACTICE THESE BILLS ARE AGAINST THE PUBLIC
I have long been an opponent of the system of price fixing that is permitted by the so-called “fair” trade laws. Such price fixing flies in the face of our antitrust laws and the free competitive system which the antitrust laws are designed to protect. This bill would gouge out a large hole in our antitrust laws.
"Fair" trade was spawned by wholesale and retail merchant associations, primarily the National Association of Retail Druggists, to permit vertical price fixing in the depression days, when the Federal Government was sanctioning horizontal price fixing by manufacturers through NRA. A powerful lobby was able to pressure 45 States into accepting the NARD's draft of a "fair" trade bill. Although manufacturers were comparatively inactive in this early effort, the rallying slogan then as now was "protection of the manufacturers'
se emplzz trade name or trademark.” Somehow all trade names and trade
marks were elevated to Cadillac significance, subject to being sullied diate ace by association with anything but an artificially high price. to πόρτα και
A. PETRIMENT TO THE CONSUMER
The history of the last two decades has demonstrated that "fair" trade laws work to the detriment of both the consumer and the small businessmen purportedly protected by them. Most impartial commentators have condemned them. In some 24 States the courts have invalidated “fair” trade acts, or at least their nonsigner provisions. In an appendix to this statement I have attached excerpts from the opinions of a number of such courts. Some of the sponsors of these quality stabilization bills, I note, come from States where “fair” trade laws have been invalidated in whole or in part. These bills would impose a Federal "fair" trade law even on those States where "fair trade has been rejected.
The principal evil that results from "fair" trade—the maintenance of artificially high consumer prices has been exposed in State after State. After the Supreme Court of Ohio ruled the nonsigner clause unconstitutional, for example, prices on automatic coffeemakers quickly dropped from the $39.95 "fair” trade price to a $29.97 competitive price. Electric frying pans, which had a list price of $19.95 were reduced to $13.87. After an initial flurry of reduced-price sales, in Ohio as in the case of other States that outlawed "fair" trade, the market soon became stable. The dire consequences that had been predicted by the “fair” traders—widespread business failures, increased concentration, and predatory excesses by monopolists—did not occur. The only result was that the consuming public received the benefit of having prices settle in the competitive market at about 20 percent lower than the former "fair" trade prices.
The Department of Justice in the past has presented to Congress several surveys which have demonstrated how much more the consumer must pay in "fair" trade States than in non-“fair”-trade States.
In 1952, when the McGuire Act was being considered, I conducted a survey and brought into the House of Representatives three baskets. I had purchased 11 identical articles in 3 different Peoples Drug Stores. I purchased one basket in the District of Columbia, where there was no “fair” trade. I purchased the same articles in Bethesda, Md., where there was “fair” trade. I purchased another basketful in Arlington, Va., where there was "faír” trade, and compared the prices that I paid for these identical articles. On no item did I pay less than 10 percent more in a "fair" trade State than in the District and on some items I paid as much as 53 percent more. My statement to the House appears in the Congressional Record of May 7, 1952, at
pages 4909 and 4910, as follows: I purchased 10 cubic centimeters of u. 40 protamine zinc Lilly insulin, used by diabetics. The price in the District of Columbia was 98 cents. The price in Maryland was $1.29. The Maryland price was 32 percent above the District price. In Virginia—in Richmond, for example—the same article, Lilly's insulin, was sold at $1.48. If you can tell me that the public is protected by fair trade, I would like to know why those differences in prices.
I purchased a BD Yale 26-gage 1-inch hypo needle, used to inject insulin into a sick person's body. In the District of Columbia the price was 15 cents. In
Virginia the price was 20 cents-33 percent higher in Virginia, In Maryland the price was 23 cents-53 percent more in Maryland.
I purchased 100 Bayer aspirin tablets in Virginia, Maryland, and the District of Columbia. In the District of Columbia the price is 46 cents. What was the price in Virginia? The price was 59 cents. I paid 28 percent more for the same article in Virginia. What was the price in Maryland? Fifty-nine cents. Again I paid 28 percent more for the same article in Maryland.
I purchased some 12-ounce bottles of Phillips milk of magnesia. Here are the bottles. In the District of Columbia the price was 34 cents. In Virginia it was 14 percent higher, or 39 cents. Similarly, in Maryland it was 14 percent higher, or 39 cents.
I purchased some large tubes of Ipana toothpaste. See the difference in these purchases. I paid 27 percent more for the I pana toothpaste in Virginia than I did in the District of Columbia. In the District of Columbia the price was 37 cents, In Virginia the price was 47 cents; and, likewise, in Maryland, it was 47 cents.
I purchased packages of 20 Gillette blue blades. In the District of Columbia the price was 87 cents, whereas in Virginia I paid 11 percent more, or 98 cents, and also 11 percent more in Maryland, namely, 98 cents.
There were other articles that I purchased and for which, under fair trade, I had to pay 20, 25, and 30 percent more for the identical articles.
I am told, moreover, that in 1960 there were striking differences between fair trade and nonfair trade prices as follows, in the following nonfair trade States:
In Columbia, S.C., a sick person could buy Achromycin V capsules and Declomycin for $7.20 instead of $7.65; Serpasil for $6.50 instead of $7.50; Orinase for $6.25 instead of $6.75; Coricidin for 75 cents instead of $1.08, and Neo-Synephrine for 65 cents instead of 90 cents.
In Houston, Tex., for example, an invalid could obtain Achromycin V capsules for $6.96 instead of $7.65; and similarly as to Declomycin. Premarin could be bought for $6.73 instead of $8.75; Orinase for $5.25 instead of $6.75; Unicaps for $2.69 instead of $3.11; Theragran for $8.19 instead of $9.45. At the hearings on H.R. 6245 before the Antitrust Subcommittee last year, Senator Kefauver noted that Merck charged the retail druggist $170 for 1,000 Prednisone tablets whereas the fair trade minimum retail price is $255. Senator Kefauver added that Ciba sells 1,000 Serpasil tablets to the druggist for $39.50, while the fair trade minimum is $65.83. The hearings of the Senate Antitrust and Monopoly Subcommittee on the drug industry, and of the House Antitrust Subcommittee on H.R. 6245 last year, abound with instances of the astronomical profits of drug manufacturers.?
As noted below, these very drug manufacturers would be empowered by this bill to soak the invalid by enforcing artificially inflated retail prices over and above the extortionate prices charged to the retail druggist.
In an appendix to this statement I have listed similar examples in other cities and States, including Miami, Fla.; Indianapolis, Ind.; Louisville, Ky.; St. Louis, Mo., Seattle, Wash.; Spokane, Wash; Huntington, W. Va.; Minneapolis, Minn.; and Cleveland, Ohio. Con. gressman Dingell, in his minority report on a similar bill in 1959, adduced many more instances of lower prices where fair trade did not prevail.
1 On Apr. 9. 1963, Senator Kefauver, on the floor of the Senate, noted that Ciba, the producer of Serpasil, had a markup of almost 1,500 percent.
» While H.R. 3669 would exempt sales of prescription drugs, it would be wholly unrealist's to expect this exemption to survive in view of the sponsorship of this legislation by the NARD. The Senate bill, S. 774, significantly has no such exemption.
In September of last year I engaged in another shopping excursion. What did I find? For 51 cents I was able to buy Coricidin (25's) in the nonfair trade District of Columbia, but I had to pay $1.08 in Maryland (fair trade). I paid $1.77 in the District for 100 Unicaps and $3.11 for the same amount in Maryland. Bayer aspirin cost me 99 cents in Washington, D.C., and $1.48 in Maryland. I paid 54 cents for Phillips milk of magnesia in the District of Columbia and 63 cents in Maryland. The economy size Ipana toothpaste cost me 60 cents in the District, 69 cents in Maryland, 10 cubic centimeter units 40 Protamine Zinc Lilly insulin cost me 99 cents in the District and $1.48 in Maryland.
Finally, I bought something dear to the heart and gullet of many of us. I purchased a pint of Old Crow (only 86 proof, I may add). In the District it cost me $2.30 (including 7 cents tax); in Maryland, $3.07 (including 9 cents tax).
Thus, the same items which could be bought in the nonfair trade District for $7.20 cost $10.89 in the fair trade State of Maryland. This means that if during the year I had paid $70 for these items in the District, in Maryland the cost would have been over $30 more for the same items.
Last year, at hearings on H.R. 6245 before the House Antitrust Subcommittee, there was a great deal of testimony to the adverse effect on ill and elderly persons of the high price of drugs. I think that each of us in Congress should hesitate to add to the burden of these people by enacting legislation which must have the necessary effect of increasing the price of drugs they buy. How can you justify this legislation to them, if it is passed?
We are told that the consumer need not worry since it is effective only when he can buy "goods usable for the same general purpose” as the price fixed item. But this is small comfort indeed when, as most often happens, both items are price fixed. And the Lord only knows to what extent even this vague limitation applies where a price is fixed on several items sold as a package.
These bills will increase prices to the consumer.
B. DETRIMENT TO THE MERCHANT
And what have these fair trade laws done for the small businessman? They promoted the use by big retailers of their own privatebrand goods which could be sold for less than the smaller retailers trade-name goods purchased from the manufacturers. They favored the inefficient retailer over the efficient retailer. They facilitated the rise of the discount house. They deprived the retailer who wanted to use price as a means to compete with his larger competitors of the right to do so. They made less service and less price an infraction of the law and insured that less service would not be accompanied by less price. They took away any incentive for retailers to urge manufacturers to lower high prices. And now the proponents of these bills, in the name of free enterprise, would impose upon businessmen and the public alike socialism in the form of federally supported and en forced price fixing.
Make no mistake, this bill is not only a consumer price increase bill, it is an anti-free-enterprise bill. The retailer cannot set a price on