the total number of retail businesses, overall, increased and reached an alltime high of some 2,022,000 in 1962.

It has never before been so high.

Mr. KEITH. Mr. Chairman, may I interrupt at that point?

Mr. STAGGERS. Perhaps we should withhold questions until after the statement is completed. Go right ahead.

Mr. LOEVINGER. Thus, the actual facts available, as distinguished from the claims and emotional appeals, seem to point almost conclusively to the lesson that legislation of this type does not help small business, tends rather to handicap and therefore to hurt small business, and is not required because of the number or rate of business failures.

Small business itself seems to be aware of these facts, although many of the advocates of this legislation purport to speak in the name of small business. Our investigations suggest that, while opinion is divided, the majority of small businessmen do not desire such legislation. A survey reported in the Congressional Record in 1960 discloses that a national organization of small businessmen had polled the small business community and found that 52 percent opposed so-called fair trade laws whereas only 43 percent supported them, with 5 percent undecided. It also found that in New York State, which at that time had such a law, the percentage of small businessmen opposing such a law was even greater. Another organization of small businessmen, reputedly the largest in the country, made a survey in 1962 of some 179,000 small businessmen located in every State in the Union. This group voted 51 percent in opposition to quality stabilization legislation, 45 percent in favor and 4 percent undecided. This proposed legislation would also deprive the States of the right to decide whether or not price-fixing laws should prevail within their borders. Some States have never adopted such laws; some States have declared such laws to be unconstitutional either in whole or in part; some States have allowed only minimum resale prices to be set; and other variants have been adopted by other States. The proposed legislation would override the decision of every State on this subject, whether made by its legislature or its courts. As the Texas attorney general said with respect to a similar bill:

To sum up, this bill invades an area that has heretofore been reserved to the States. It would, in effect, preempt the area and nullify a large portion of the area covered by the Texas antitrust laws under which we have operated since the early 1880's.1

Finally, the Department of Justice has found by economic surveys that consumers in States with price maintenance, or so-called fair trade, laws pay from 19 percent to 27 percent higher prices than consumers in States without such laws. Projecting an average price increase of 20 percent for all sales that may be covered by the operation of a national price maintenance law shows that it would cost the American consumer billions of dollars and have a powerfully inflationary effect.

All of these points, as well as others, have been recognized and articulated in recent years by various State courts that have con

1 Hearings before the Committee on Interstate and Foreign Commerce, House of Representatives, 86th Cong., 1st sess. (1959), "Fair Trade," p. 494.

sidered such legislation. The statements of the State courts regarding price maintenance legislation express the experience of the States that have actually tried such laws and declare State policy on the issues involved.

I think that some of these statements, Mr. Chairman, are worthy of reference.

The Supreme Court of Wyoming said:

The (Fair Trade) Act leaves to the uncontrolled and uncertain discretion, option and whim of private parties the determination of a retail price suitable to their own interests and for their private benefit, without any regard for the welfare of the public and in derogation of the public's right to a voice in the matter or even to be represented by any public authority interested in the people's behalf (Bulova Watch Co. v. Zale Jewelry Co., Wyo., 371 P. 2d 409, 418 (1962)).

The Supreme Court of Pennsylvania said:

The very idea that a commercial entity may hold in one fettering price-fixing grasp all businessmen engaged in vending a certain product, just as a herdsman holds lassoed cattle on the plains, offends against the most elementary concept of a free and independent society. The Fair Trade Act is not only in derogation of the common law, it is in defiance of principles which the Federal Government has on countless occasions enunciated in its antitrust legislation and litigation. Hence, the Fair Trade Act must be construed strictly (Meade, Johnson & Co. v. Breggar, 1963, CCH Trade Regulation Reporter, par. 70, 721).

The Circuit Court of Alabama, in an opinion affirmed by the Supreme Court of Alabama, said:

*** said statutes are unconstitutional in that they purport to authorize an unlawful delegation of legislative power to purely private interests who may, at their discretion, by their unsupervised, independent, or perhaps selfish actions make unlawful certain business activities which were formerly entirely lawful and not subject to judicial restraint (Bulova Watch Co. v. Zale Jewelry Co., 1962, CCH Trade Cases, par, 70, 343, affirmed 147 So. 2d 797).

The Supreme Court of Arkansas said:

The history of the promulgation of fair trade acts justifies the inference they were thought to benefit a few manufacturers and not the general public. Nowhere has our attention been called to any demand by the public for the enactment of such legislation. On the contrary, it appears that special groups have been active in its support.

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 (Union Carbide and Carbon Corporation v. White River Distributors, Inc., 224 Ark. 558, 563, 568 (1955)). The Supreme Court of South Carolina said:

It is difficult to find any justification for this legislation based upon considerations of the public health, safety, morals, and general welfare. It applies to every product bearing the trademark, brand, or name of the producer. No distinction is made between commodities affected with a public interest and those that are not. Under the terms of the act, a nonsigner has no voice whatsoever in fixing the price at which he may sell his property. By entering into a contract with a single retailer, the trademark owner may fix the price for all retailers, without regard to their interests or welfare. The manufacturer is not required to take into consideration the cost of his article. He may change the retail prices at will, or even terminate the contract and remove

any article from the operation of the statute. It is solely up to him to say whether or not there shall be a law controlling the price at which his tradeinarked article shall be sold. There is no review of his acts (Rogers-Kent, Inc. v. General Electric Co., 1957, Trade Cases, par. 68, 810, 231 S.C. 636, 645 (1957)). The Supreme Court of Florida has said:

This court has expressed its views on fair trade and similar acts and has consistently and unequivocally rejected, on constitutional grounds, both the underlying theory and the economic facts on which they are sought to be predicated (Miles Laboratories, Inc. v. Eckerd, 73 So. 2d 680, 681 (1954)).

The Supreme Court of Colorado has said:

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. During a recent decade numerous attempts were made to regiment the general public and in each instance they were struck down as violative of constitutional rights of a free people. 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 Corporation v. Associated Consumers, 134 Colo. 160, 186 (1959)).

The Supreme Court of Georgia in an effective and poignant statement has said:

*** This is one of the few powers left to States to decide for themselves regardless of what the Supreme Court of the United States may or may not have decided ✶ ✶✶ The scheme described in the petition now under consideration permits a manufacturer, under the guise of protecting his property rights in a trade name and trademark to control the price of his product down through the channels of trade into the hands of the ultimate consumer, and into the hands of persons with whom he has no contractual relation whatever. This statute clearly violates the provisions of the due process clause of the constitution of the State of Georgia (Cox et al. v. General Electric Company, 211 Ga. 286, 291–292 (1955)).

Passage of this legislation would presumably involve the exertion of Federal power to achieve acts which the Supreme Court of Georgia has said violate the due process clause of the State of Georgia. I submit that this committee and this House should not do such a thing.

Similar statements and decisions may be found in the opinions of the courts of Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Michigan, Minnesota, Montana, Nebraska, New Mexico, Ohio, Oklahoma, Oregon, Utah, Washington, and West Virginia.

Mr. Chairman, the statements that I have given are not my own conclusions. These are the conclusions of the highest courts of the respective States, issued after full hearing and after full consideration of the issues presented by such legislation as this.

Without attempting any conclusive judgment, the logic and weight of these court opinions cast serious doubt on the constitutionality of legislation of this type. The principles of Schechter v. United States, 295 U.S. 495, seem to be more nearly apposite than those of Old Dearborn v. Seagrams, 299 U.S. 183.

Although the thrust of the proposed legislation is ostensibly at resale price maintenance, it would certainly facilitate horizontal price fixing. The fact that price movements are inhibited would tend to diminish the area of price competition. Furthermore, it is apparent that retailers will not readily accept competitive branded merchandise

at substantially disparate prices. Therefore, the strong tendency would be for retailers to insist upon manufacturers setting identical or substantially similar prices, to the extent that they set prices. It is unimportant now what particular mechanism may be adopted toward this end; but it can hardly be doubted that some devices, legal or illegal, will be found to insure that ostensibly competitive commodities subject to fixed resale pricing will be sold at the same prices in at least one, and therefore in all stores.

The proposed legislation is not only without a sound legal foundation but, on the contrary, is inconsistent with common law property concepts in that it permits a person to sell his property and still maintain substantial control over it. There are many years of common law history in which the courts have sought to establish the concept of private property free of such restraints on the rights of alienation. It is impossible to review in detail all of the economic, legal, historical, and social factors involved in the issues presented by this proposed legislation. However, it should be noted that the Department of Justice has had experience in combating unreasonable restraints on competition since 1890. The Department has been observing the operation of resale price maintenance laws for more than 25 years. The unanimous judgment of all those who have had responsibility in enforcing the antitrust laws has been that resale price maintenance legislation is unworkable and does not accomplish its objective. The proposed legislation would lead to the following undesirable consequences: (a) it would handicap small business in its competition with chainstores and big business by restricting its freedom to price; (b) it would lead to a higher rate of small business failures; (c) it would impose Federal supervision of pricing practices upon nearly all retail sellers; (d) it would prevent price reductions, encourage price increases and tend toward inflation; (e) it would destroy the right of the States to determine their own policy in this field; (ƒ) it would result in flooding the Federal courts with small cases and petty litigation; (g) it would reduce the incentive for higher quality, increased standards and better values; (h) it would create an advantage for big manufacturers who are able to pay for large scale enforcement and for big distributors who use private brands to the disadvantage of small manufacturers and distributors; (i) it would impose upon the consuming public the payment of a subsidy through artificially high prices to particular manufacturers and distributors; and (j) it would establish conditions and foster a climate conductive to agreements among competitors and destructive of a competitive economy. The Department of Justice, therefore, strongly recommends that this legislation should not be enacted.

(The tables referred to follow :)

QUALITY STABILIZATION-1963

TABLE 1.-Business failure rate for 10,000 listed concerns,1 1962

FAIR TRADE

2

Arizona_.

110

California_

120

Connecticut

64

Delaware

32

Idaho".

Illinois_

Pennsylvania__

Tennessee_

Virginia.
Wisconsin..

72 Average failure rate__

NONSIGNER INVALID 3

Rate State-Continued:

Rate

Minnesota--

33

New Mexico.

11

Oklahoma__.

25

138

South Carolina_.

79

Washington__

89

West Virginia.

34

Wyoming

9

30 Average failure rate.

51

1 Listed concerns represents the number of names listed in the July issue of the Dun & Bradstreet Reference Book.

2 Fair trade States include those States having valid fair trade laws with nonsigner provisions.

3 Nonsigner invalid States include those States where State fair trade laws have been held invalid only as applied to nonsigner provisions.

4 Free trade States include those States either having no fair trade laws or where the fair trade law has been declared invalid as to both signers and nonsigners.

5 The Alabama Supreme Court invalidated fair trade "especially as to nonsigners on Dec. 20, 1962.

An Idaho district court invalidated fair trade as applied to nonsigners on Oct. 16, 1962.

NOTE. Alaska and Hawaii are omitted because of lack of data.

Ohio is omitted because

of a split in lower court decisions concerning the validity of its 1959 fair trade law. The press reported that on Apr. 15, 1963, the Ohio Supreme Court upheld the lower court decision holding the Ohio fair trade law invalid.

Source: Dun & Bradstreet.