States have refused to adopt fair trade legislation. In 24 States the courts have outlawed those consumer price increase acts. In August of last year the American Bar Association condemned a similar bill.

I could not hope to put the case against the policy of this bill as eloquently as Congress has already done in the preamble to the Small Business Act, when it said:

The essence of the American economic system of private enterprise is free competition. Only through full and free competition can free markets, free entry into business, and opportunities for the expression and growth of personal initiative and individual judgment be assured. The preservation and expansion of such competition is basic not only to the economic well-being but to the security of this Nation. Such security and well-being cannot be realized unless the actual and potential capacity of small business is encouraged and developed.

There can be no greater erosion of States rights than this bill; there can be no more all-enveloping attempt to sanction nationwide price fixing; there could hardly be a more vaguely worded or more unnecessary bill. If you want to have Federal price control, vote for this bill. I earnestly urge that it be rejected.

This bill is a consumer price increase bill. This bill is an antifree enterprise bill. This bill is a bad bill. It should be defeated.

APPENDIX A

STATEMENTS FROM SEVERAL STATE COURT OPINIONS DECLARING STATE RESALE MAINTENANCE LAWS UNCONSTITUTIONAL

(1) The Supreme Court of Florida declared:

"As we have stated before, the real effect of the non-signer clause is anticompetitive price fixing; not the protecting of the good will of trade marked products as other courts have held. Good will, it has been said, should be determined by the price which the goods can command in a competitive market, and not by the ability of the manufacturer to sell at a pegged retail price which he himself selects. Corey, Fair Trade Pricing: A reappraisal, 30 Harv. Bus. Rev. 47, 60. Except in times of economic emergency such inflexible price arrangements which the act sanctions are not in line with our traditional concepts of free competition, which have traditionally been the 'yard stick' for protection of the consuming public. The real vice of the nonsigner clause is the absence of that standard, and the decisions of this Court stated herein so hold. * * (Miles Laboratories Inc. v. Eckerd, 73 So. 2d 680, 682 (Fla. Sup. Ct. 1954).)

(2) The Supreme Court of Colorado:

"The General Assembly may validate resale price maintenance contracts between contracting parties within constitutional limits but when the effect of the Act *** is to make such price schedule binding upon non-contracting parties, the Act is nothing more or less than price fixing by legislative mandate. An unwilling citizen cannot be thus bound.

"Any Act of the General Assembly which arbitrarily destroys or impairs the right of the individual to the free use and enjoyment of his property, lawfully acquired, and permits the fixing of prices for the benefit of a special group, is opposed to the constitutional concept of a free people and should not be allowed to stand. Legislation of this kind evidences the ability of organized minorities to induce legislation for their special benefit at the expense of the unorganized purchasing masses *** We have not yet arrived at the place in America where the many must yield to the few, so that the latter may make ever increasing profits at the expense of those who still believe in the principle of free and competitive trade and commerce, untrammeled by legislative fiats." (Olin Mathieson Chemical Corp. v. Francis, 134 Colo. 160, 186, 301 P. 2d 139, 152 (Colo. Sup. Ct. 1956).)

(3) The Court of Appeals in Kentucky (highest State court) held:

"This statute, we think, is a legislative invasion of the broad constitutional liberty of the people to acquire and protect their property and engage in free trade.

"What is wrong with a man selling his own property for what he pleases? We think the statute is the antitheses of 'fair trade.' It forces price fixing.

"On balance, the overwhelming public interest and welfare is the right of free people to engage freely in competitive trade in commodities that may not be injurious to the general safety and welfare, such as are within special regulation under a proper exercise of the police power. We agree *** that the overriding purpose of that statute is to sanction price fixing and that the protection of a brand name or symbol of the producer seems to have been incidental ***" (General Electric Co. v. American Buyers Cooperative (Ky.

Ct. of App. 1958), 316 S.W. 2d 354, 361.)

(4) The Supreme Court in Minnesota :

***The Unfair Practices Act (Sec. 325.04) is designed to protect the public from predatory or belowcost trade practices. On the other hand, under the apparent purpose of protecting the goodwill of the manufacturer of the brand commodity, the nonsigner provision (Sec. 325.12), in reality, eliminates competition in price honestly based on differences in selling costs as between merchants whose costs of business may differ as a result of normal and natural competitive practices.

"In examining the grant of authority to the trade-mark owner it must be conceded that he is given the privilege to place the law in effect and to amend or alter it at his will. He may do this without regard to the interest or welfare of nonsigners or the consumer who represents the public. The law does not provide for any standard or condition as to the necessity for the act. It gives to the trade-mark owners carte blanche authority to make that determination alone. He is not required to consult with anyone. There is no one to review his act.

"In considering the justification for reposing this authority in the trademark owner, the real character and purpose of the Fair Trade Act should be examined. Its ostensible justification is to compel adherence to fixed prices so as to protect against debasement the goodwill of tradename commodities. Although this property right may be constitutionally protected, as witness the Old Dearborn decision, an examination of the great number of authorities and the vast literature by way of reviews and reports dealing with the subject compels the conclusion that the real impact of the law is in the area of price fixing. The protection of the property right in trademarks and goodwill attendant to them is of interest to a limited number of persons and constitutes legislation for their exclusive benefit.

"*** The record in this case contains the testimony of a respected economist to the effect that resale price maintenance under the so-called Fair Trade Act is detrimental both to the consumer and to the economy. He was of the view that the producer of the commodity who invokes the act is usually a member of a monopoly or oligopoly, because if there were numerous producers of a competing commodity few would abide by the pricing practices of one or two. His opinion that the policy of the act makes possible a price monopoly inimical to the public welfare is clearly borne out by the record. There is in force a fair trade contract in respect to Remington shells produced by plaintiff. The major competing shells are manufactured by Olin Mathieson Chemical Corp. under the name of 'Winchester.' Olin Mathieson's shells are also fair traded. These two manufacturers control 87 to 90 percent of the production of shells in the United States. It appears from the record that for almost all types of shells produced by each of these manufacturers, in fact for every type

which is common to the production of both of them, the price is identical to the penny. This is significant considering that the elaborate price lists of both manufacturers were printed and published 3 days apart. It is apparent the record here establishes that the act, rather than regulating and controlling monopoly power, creates a climate where monopolies may flourish. These views are in accord with the thought of authorities who have written and reported on the subject of retail price maintenance in the past few years." (Remington Arms Company, Inc. v. G.E.M. of St. Louis, Inc. (Minn. Sup. Ct. 1960) Trade Cases 69,673.)

(5) The Supreme Court of Arkansas stated:

"It is a generalization, but not an overstatement, to say that the effort to fix prices is made by groups who desire to sell something for more than the sponsoring group believes that the purchasing public would pay for that something without an enforced fixed price. It would seem apparent that the principal objective of minimum price maintenance is the protection of profit margins for retailers and distributors unable or unwilling to meet the pressure of competition." Quoted with approval in Remington Arms Co., Inc. v. Skaggs (Wash. Sup. Ct. 1959) Trade Cases 69,520.

APPENDIX B

COMPARISON OF FAIR-TRADE AND NON-FAIR-TRADE PRICES

In Miami, Fla., a sick person could buy Achromycin V capsules for $6.40 instead of $7.65; Orinase for $5.25 instead of $6.75; Declomycin for $6.40 instead of $7.65; Unicaps for $1.79 instead of $3.11; Coricidin for 97 cents instead of $1.08; J. & J. baby powder for 54 instead of 59 cents; J. & J. cotton for 33 instead of 39 cents.

In Indianapolis, Ind., the sick could buy Orinase for $6.25 instead of $6.75; Serpasil for $6.50 instead of $7.50; Diuril for $7.65 instead of $9; Unicaps for $2.83 instead of $3.11; Ben-Gay for 79 instead of 89 cents; Anacin for 99 cents instead of $1.19. The parent could also obtain J. & J. baby oil for 89 instead of 98 cents.

In Louisville, Ky., a person could buy Unicaps for $2.39 instead of $3.11, and One-a-Day Multiple for $2.36 instead of $2.94; Coricidin for 79 cents instead of $1.08; Dristan for 63 instead of 98 cents; and Orinase for $6.25 instead of $6.75. Colgate dental cream could be obtained for 53 instead of 69 cents, and J. & J. baby powder for 47 instead of 59 cents.

Additional examples are found in St. Louis, Mo., where one could buy Serpasil for $6.50 instead of a fair trade price of $7.50; Orinase for $6.50 instead of $6.75; Madribon for $4.35 instead of $4.90; Unicaps for $2.19 instead of $3.11; Poly-vi-sol for $2.49 instead of $3.59; Similac for 89 instead of 99 cents; Bayer aspirin for 49 instead of 69 cents; Colgate dental cream for 55 instead of 69 cents.

In Seattle, Wash., a sick person could buy Declomycin for $7.20 instead of $7.65; Ilosone for $10.60 instead of $11.43; Madribon for $4.79 instead of $4.90; Bufferin for 99 cents rather than $1.23. He could also buy Colgate dental cream for 49 instead of 69 cents.

In Spokane, Wash., he could buy Unicaps for $2.63 instead of $3.11, and Theragram for $7.99 instead of $9.45.

In Huntington, W. Va., the hard-hit diabetic miner could buy Orinase for $6.25 instead of $6.75. A sick person could buy Serpasil for $6.75 instead of $7.50; Madribon for $4.50 instead of $4.90.

In Minneapolis, Minn., a sick person could buy Achromycin V capsules and Declomycin for $7.20 instead of $7.65; Orinase for $6.25 instead of $6.75; ChlorTrimeton Maleate for $4.50 instead of $5.58; Coricidin for 76 cents instead of $1.08 and Absorbine Junior for $1.25 instead of $1.45. He could also pay 54 for Colgate dental cream instead of 69 cents.

In Cleveland, Ohio, the sick could have the benefit of a price of $5.88 for both Achromycin V capsules and Declomycin instead of a $7.65 price. He could purchase Orinase for $4.99 instead of $6.75; Gantrisin for $3.97 instead of $4.90; Kynex for $2.70 instead of $3.55; Unicaps for $2.51 instead of $3.11; Dristan for 72 instead of 98 cents; and Ben-Gay for 70 instead of 89 cents.

99-685-63

APPENDIX C

PRICE QUALITY COMPARISONS

Frozen shrimp (raw breaded).—Two brands rated very good were less expensive than at least one brand rated as good, four rated as fair, and three rated as poor. Of eight brands of frozen raw peeled shrimp only the cheapest brand received a very good rating.

Upright freezers.-The three top-rated brands were comparable in price to most of those tested. Of the four highest priced none was top rated, one was in the third quality bracket, and one was rated not acceptable. There was also a considerable price range on identical models.

Kitchen scales.-The two best rated were the highest priced.

Twenty-three-inch TV consoles.-Two makes were top rated; one was priced at $350, the other $279.95. There were at least four other lower rated brands selling for $279.95 or higher.

Steam irons.-The six top rated models ranged from $10.88 to $19.95. The highest priced model, $27.95, was acceptable but not top rated.

Seat belts. The price range of seven top rated models was $10.95 to $14.95. Two models, one at $6.95, the other at $9.95, survived the highest speed crash test but showed incipient failure. Seven $12.95 and one $14.95 models failed the highest speed crash test. A number of $12.95 and $10.95 models failed all crash

tests.

Tank vacuum cleaners. $89.95 and the fourth at priced, $119.95 and $139.

Of the four rated very good, three were priced at $99.75. Of those rated good, two were the highest

Ninteen-inch portable TV.-The highest rated were priced at $199.95 and $209.95. A number of others not so rated were also priced at $199.95.

Transistorized electronic flash units.-Of 10 brands tested the only unacceptable one was the highest priced (along with one which was acceptable).

Dehumidifiers.-A number of the higher priced brands were not among the top rated.

Sun tan preparations.-The two top rated brands were among the lowest priced. Three of the highest priced were among the lowest rated.

Built-in electric ranges.-The three top rated were priced $89.95 to $114.95. Many lower rated were higher priced.

Black-and-white film.-The two brands rated very good and the three rated good were identically priced.

Mr. STAGGERS. Thank you for your presentation, Mr. Celler. The committee appreciates your appearance.

Mr. CELLER. Thank you, Mr. Chairman.

Mr. STAGGERS. We will now hear the distinguished Senator from Minnesota, the Honorable Hubert H. Humphrey. Senator, we are glad to welcome you to the committee.

STATEMENT OF HON. HUBERT H. HUMPHREY, A U.S. SENATOR FROM THE STATE OF MINNESOTA

Senator HUMPHREY. Mr. Chairman, I wish to express my appreciation for being afforded this opportunity to offer my views on H.R. 3669, the quality stabilization bill. As I see it, H.Ř. 3669 is one of the most important pieces of small business legislation to be considered in this session of Congress. At the outset, let me explain why the quality stabilization bill enjoys the enthusiastic endorsement of more than 70 business organizations representing almost 4 million private entrepreneurs from all States and towns across the country. I can best do this by reviewing what the quality stabilization bill is designed to accomplish in behalf of the competitive interests of the Nation's independent businessmen, and the ways and means by which such objectives will be met.

Simply stated, it strengthens our antitrust laws by outlawing certain unfair methods of competition that inevitably promote monopoly in distribution. The bill would let the owner of a product identified by his trademark or brand name stop distributors from, first, making misrepresentations about it; second, using it as bait merchandise; and, third, selling at other than the established resale price. This would allow the product owner to prevent damage to his mark or brand and the goodwill he may have taken years to build up.

Whenever a trademark or brand-name owner discovers his products being used by a distributor in any such scheme, he may revoke the offending distributor's right to use his mark or brand in resales. If the offending distributor disregards the notice of revocation and continues the challenged sales practices, the owner may get a court injunction to stop him.

Basically, no more is involved than recognition of, first the property values inhering in business goodwill and in the trademark or brand name adopted to maintain and extend such goodwill; and, second, the need to give trademark or brand-name owners a means of protecting their rights from injurious marketing practices. In this light, the bill is merely an extension of our historic trademark and copyright laws.

Surely, if we accept the right to own property and the corresponding right to protect such property, which are basic rights of every American citizen, then we must accept the objective of the quality stabilization bill-the protection of valuable investments in trademarks, brand names, and goodwill from ruinous marketing practices. It should be noted that nothing in the quality stabilization bill would bar a distributor from removing the trademark or brand name from the product-thus separating the physical property, which he owns, from the goodwill which is another's property-and then selling the commodity at his own price or in his own way, so long as he does so without making use of the goodwill of the latter to reach his end.

The quality stabilization bill is based upon the conviction that today's small businessman is not losing the battle to stay solvent as a result of inefficiency, but because he does not have the capital necessary to fight off predatory and deceptive price-cutting tactics of bigger competitors.

The predatory price cutter, with his superior capital resources, can, by slashing prices on national branded, fast-moving merchandise, prevent the family retailer from making a profit, and, thus, can doom him to bankruptcy. No question of business efficiency is involved. It is no more than "domination by the long purse."

So you can see that the quality stabilization bill would simply reestablish a system of economic fairplay in the marketplace.

In reviewing the nature and the purpose of the proposed legislation, I should like to stress the permissive character of its provisions. There is no obligation, for example, upon the trademark or brand-name owner to avail himself of the rights accorded under the proposed legislation.

In other words, this is not compulsory legislation; it is permissive. It is conceivable that the owner may not be interested in protecting his goodwill, trademark, or brand name from the unfair methods of competition defined in this bill. But whatever his decision, it will be his own.