TABLE 2.-Distribution of business failures per 10,000 listed concerns within fair trade, nonsigner invalid,3 and free trade States, 1946

through 1962

Mr. STAGGERS. Thank you very much, Mr. Loevinger.

I have just one or two questions. I noticed, although I may be wrong, that you referred to this, or by implication, rather, to the Supreme Court decision that this is a price-fixing bill. I do not say that you said that.

Mr. LOEVINGER. Yes, sir.

Mr. STAGGERS. But by implication I think you did. your interpretation, that it is a price-fixing bill?

Would that be

Mr. LOEVINGER. Well, of course, price fixing is essentially an epithet, and I suppose the witnesses who have been reluctant to admit the term have been correct in saying that you simply should not use names of

this sort.

In antitrust litigation we distinguish between vertical and horizontal price fixing. Vertical price fixing is price fixing by the imposition of control from one level of distribution to another. Clearly this is vertical price fixing. It is the imposition of control by the manufacturer on down through the various distributive levels.

There is nothing in the bill that ostensibly legalizes horizontal price fixing.

For the reasons I have suggested, as well as numerous others, we think that it would facilitate and tend to encourage horizontal price fixing. It will make prices less flexible. It will make the comparison of nationally established vertical price lines easier. It will eliminate the possibility of competition at the various distributive levels beyond that of the brand-name owner, and, therefore, it will tend to horizontal price administration and price fixing, although it does not ostensibly legalize that phenomenon.

Mr. STAGGERS. I noticed that you have given several rulings of the Supreme Court and you mentioned my own State of West Virginia here. Do you think that this committee ought to be influenced by the supreme court of any State or by the United States when we legislate-I mean from the fact that they are only there to interpret the laws after we make them? I do not think they are legislators in any sense of the word, only to interpret what has been passed. Do you think that they should influence our thinking here today only from what has been done in the States, not as to Federal legislation?

Mr. LOEVINGER. There are two respects in which I think these things are significant, Mr. Chairman.

To begin with, legislation of this type, this general type, is passed usually under the so-called police power. Certainly State legislation of this type is passed under the police power. There is no Federal police power, and, therefore, the attempt is made to bring it under the commerce power. However, it is perfectly clear that legislation of this type and there have been many, many cases brought to the U.S. Supreme Court-legislation of this type is legitimate only if the laws have a reasonable relation to a proper legislative purpose.

This, I believe, is the test stated by the U.S. Supreme Court in the famous Nebbia case (Nebbia v. New York, 291 U.S. 502, (1934)). Now, the courts, therefore, do not examine legislative policy, but they do examine the underlying factual background and the ostensible purpose of legislation.

Now, the State court opinions that I have cited are opinions that have passed not on a Federal law, but on State laws that are in their principal provisions of essentially the same type as the legislation before this committee now. The State courts have remarked that the underlying factual foundation simply is not there. The State courts have said that these bills do not accomplish their ostensible public objective and that they have the various bad features that I have mentioned.

It seems to me that with the number of State courts that have reached this conclusion, that there is some evidence of the fact that this is not the proper means to achieve the objective sought.

As I have suggested, if you want to attack loss-leader selling, there are legislative devices and proposals for doing it. This bill does not do it and the fair trade laws do not do it and the courts have remarked on this.

Beyond this, it seems to me that the expressions of the State courts that I have referred to and of many other State courts show a very strong public policy among the States on this subject. It seems to me that the Congress should not undertake to override the strong public policy of these States unless there is some compelling reason for doing so.

I know of no such compelling reason, and I suggest that many of the Congressmen who support this legislation, and whom I respect, have indicated in many ways in other fields that they do not believe that the Federal power should override State policy.

I submit that it is a bad precedent to override State policy by Federal power for the kind of reason that has been urged in support of this legislation.

Mr. STAGGERS. Mr. Loevinger, I was just wondering this, and this is the only reason I bring this up. I know that you are opposed to the bill and you have so stated and you bring this up to support your argument.

The other side could possibly bring up court decisions to support their side, too, that would be in favor of the bill, and I do not believe that any court could tell what this Congress or what this committee is thinking about until it comes out of the committee.

They could not be against any bill, wholesale, until they know what is going to be in the bill.

Mr. LOEVINGER. Surely.

Mr. STAGGERS. I mean especially the courts. I do not believe they have the power and should not be in this thing in any way. Their job is to interpret the laws after the Congress and the State legislatures have made them. That is my only point in bringing it up. I have no further questions.

Congressman Dingell?

Mr. DINGELL. Thank you, Mr. Chairman.

Do you have any idea of the number of items of litigation which would be brought if the Congress in its wisdom or lack of it were to enact H.R. 3669?

Mr. LOEVINGER. The number of items that might be subject

Mr. DINGELL. The number of cases which would be brought in the Federal courts if H.R. 3669 were to be enacted by the Congress?

Mr. LOEVINGER. No, sir, I do not suppose that there is any method of estimating that. However, it would be considerably greater than all of the cases that have been brought in all of the State courts under so-called fair trade legislation, for a number of reasons.

For one reason, this legislation is broader in the scope of its application than many fair trade statutes. For another reason, this legislation, in effect, virtually requires-it does require the brand owner who sets his resale price to police his resale price maintenance scheme or lose his right to set retail prices.

In other words, if he is going to bring any cases, he has apparently got to sue virtually everybody. It is a defense to any single suit that he has not sued others, so that the provision of this proposed bill which would give Federal courts cognizance of such suits without regard to the amount in litigation undoubtedly would result in a tremendous number of cases.

Mr. DINGELL. Do you have available to you sources whereby you could report to this committee a rough idea of the number of cases which are brought-I am not asking you to do this, Judge Loevinger. I am just asking, whether you have available to you sources which would make it possible for you to give us an idea of the number of cases which are brought in the State courts with regard to fair trade in any given year? Would you do that for the committee without an undue amount of trouble for yourself?

Mr. LOEVINGER. We would be happy to take a look and see if those statistics are available, Mr. Dingell. I am somewhat dubious that we can get too reliable statistics. I have occasionally tried this sort of thing before. You see, the difficulty is that usually the cases that reach only the trial court level in State courts are not reported either in the reports of descisions or in the statistics.

Occasionally the looseleaf reporters pick them up, but there are many, many cases at the trial court level and State courts that are never reported and never get into the statistics.

Mr. DINGELL. There is another item on page 6 of the bill which concerns me. If you were to turn to page 6, line 3, you will note the following language:

Any injunction granted under clause (ii) of this paragraph shall remain in effect for 1 year from the date it is granted unless it is the second or a subsequent such injunction issued against the same defendant in favor of the same plaintiff in which case it will be a permanent injunction; except that any such injunction, upon petition of such plaintiff, may be vacated unconditionally by the court granting it.

Now, as I read this, I find it is a rather unusual piece of legislation in that it extends a particular direction to a court of equity.

I was wondering if you would like to comment on this section in view, at least, of my understanding that where injunctive power is given to the courts, it is generally given with a rather wide range of discretion to issue an injunction or to fail to issue an injunction, or to issue it according to such time and circumstances as appear best to the court.

Mr. LOEVINGER. I believe that is correct, sir.

I know of no other comparable provision in any other law. nor is there any comparable provision in any law seeking to enforce the provisions of the antitrust laws.

Mr. DINGELL. This is, then, a unique provision in the law, in your experience?

Mr. LOEVINGER. So far as I know, yes, sir.

Mr. DINGELL. Now, I am interested to note other sections and other comments which appear in the bill in section 10 on page 5 and following.

I would like to refer particularly to the section dealing with authorization to initiate suits in the Federal courts without regard to the amount in controversy.

I was wondering if you would like to make a comment on that, in view of the fact that the courts just recently have had the jurisdietional amount increased by the Congress.

Mr. LOEVINGER. I am sorry, which section are you referring to now! Mr. DINGELL. I am referring to page 5, section 10, line 18:

Such owner may sue in any district court of the United States in the district in which defendant resides or is found or has an agent without respect to the amount in controversy, and shall be entitled,

and so on and so forth.

This is rather unique, in view of the fact that the Congress just raised the jurisdictional amount of Federal courts very substantially. Am I correct, Judge?

Mr. LOEVINGER. Yes, sir.

The jurisdictional amount in Federal courts formerly was $3,000: now it is $10,000; and the whole effort of recent legislation, recent congressional action, has been to insure that the Federal courts shall deal only with cases of substantial significance, even though they may arise under Federal laws.

The direction of evolution has been in the other direction, and it strikes me, also, Congressman Dingell, that in some respects this is somewhat inconsistent with another provision in this same proposal. There is on page 3 a provision in this proposal saying that—

The owner of a brand, name, or trademark

who avails himself of the provisions of this act―

shall thereby subject himself without respect to the amount in controversy to the jurisdiction of the district court

in case he has misrepresented in his own advertisement.

But this is subject to the limitation that the Federal courts have jurisdiction only if the owner of the brand, name, or trademark is not subject to process in the courts of the State.

In other words, the right of an injured purchaser, which is purportedly given by this proposal, is limited to the State courts unless he State courts are unable to secure jurisdiction. But the right given to the trademark owner is very much broader.

Mr. DINGELL. Now, I note also that the defendant is subject to suit, on line 20, in any district court of the United States in which the defendant resides, or is found, or has an agent.

Now, this is rather more broad than the venue provisions and the more or less common law provisions which are generally applied with regard to Federal jurisdiction as to venue. Is that correct?

Mr. LOEVINGER. Yes.