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has been set by the manufacturer does or does not include the price at which the sale was made. But there is nothing in this bill that provides that a price range must be at, above, or below the cost of acquisition of any particular retailer. It is perfectly possible that a manufacturer may set the price range for a whole line of trademarked goods at a level that will permit a profit by large purchasers, such as chainstores, but that will not permit a profit by small retailers.
Mr. GLENN. Well then, sir, can you suggest an amendment to this bill which would remedy the situation and tie it in so that the problem which you just mentioned would be covered!
Mr. LOEVINGER. Congressman, in all candor, I do not think that I can suggest an amendment to this bill that will make it achieve the objectives that are sought. However I can make a suggestion which is a personal suggestion and not one on the part of the Department.
That is this—that if, in fact, the concern is with loss leaders, it seems to me that it would be much more rational on the part of Congress to pass a law that in effect prohibited loss leaders as a matter of general legal principle, and that did not leave it to the unfettered discretion of a number of large businesses as to whether or not they would, in their beneficence, protect various retailers against this kind of thing. Such legislation has been proposed, has been offered, and, as I have remarked, I think it is a measure of the lack of sincerity in many of the advocates of this legislation that they are not only unenthusiastic, they are downright disinterested in genuine loss leader legislation. They do not want it. What they want is this gimmick.
Mr. GLENN. What would your legal opinion be on the constitutionality of this legislation of which you speak?
Mr. LOEVINGER. I think that the means that it seeks and the ends that it attempts to achieve are much, much more defensible on a legal basis than the ends sought to be achieved by this legislation.
I think that there is little doubt that such legislation is far more clearly defensible, and therefore more likely to be constitutional than price legislation of this type.
Mr. GLENN. But do you thing that it could be properly attacked as unconstitutional ?
Mr. LOEVINGER. I think that any legislation of this type will be attacked as unconstitutional and that, as you say, the final decision will have to be made by the Supreme Court.
Mr. GLENN. Thank you very much.
Mr. Loevinger, I listened yesterday, as a lawyer, with much appreciation to your marshaling of precedents to set forth your position on this proposed legislation. I am also very much interested in what you have just said on loss leader legislation as being one of the answers to this problem. Do you think that this Congress could pass legislation so as to effect this type of activity in purely intrastate business?
Mr. LOEVINGER. No. So far as the scope of legislation is concerned with respect to intrastate transactions, neither this legislation nor loss deader legislation could reach purely intrastate transactions.
The scope of both kinds of bills would be precisely the same in that respect, however. This legislation cannot reach purely intrastate transactions either.
Mr. CURTIN. That I agree with. However, when we have a bill to reach the manufacturer who sends his product into interstate business, I would think that it probably would affect a lot more of the business outlets than perhaps just pure loss leader legislation would be likely to do, because of the intrastate type of business of so many of these stores.
Mr. LOEVINGER. I do not believe so, sir; because the "affecting commerce” concept is sufficiently broad so that I believe it is immaterial which approach is adopted.
I might say also that the loss leader legislation which has been enacted in many States—I cannot give you the precise count nowunder the title of "unfair practices” legislation is, I believe, in effect in more States today than the retail price maintenance legislation. Should Congress undertake to adopt loss leader legislation, I think there is relatively little doubt that the States would follow this lead and that you would get a pretty good coverage of such legislation.
Mr. CURTIN. Now, sir, as I understand it, one of the purposes of the legislation presently being considered by us is to insure to the small retailer that he will not be substantially undersold by a large competitor on these famous name or brand name products. Do I understand from you that you do not think that this will be the result should this legislation be enacted into law!
Mr. LOEVINGER. I think the result will be that the small retailer will not be undersold on many highly advertised brand name products, but that what will happen
is that he will simply lose his patronage for these products altogether. There will be no longer any competitive price advertising with respect to the price-fixed products.
However, this is not going to stop the chainstores and the big stores from competitive price advertising. They will have their private brands; they will have unbranded products. They have a wide choice as to the kind of merchandise they can get. Frequently it is the identical merchandise as the brand merchandise but without the brand. This will continue to be offered and continue to be offered at competitive prices. This will attract customers into the stores of the discount houses and the chainstores. Once in those stores the customers are going to do all of their buying, because they will buy the bargainrate goods that they came there to get, and they will know that the other goods are being sold at exactly the same price as they are being sold in the independent stores.
Consequently there is no inducement for them to leave the discount house or the chainstore in order to buy at the store of the independent. And the independents will therefore lose their patronage on both branded and unbranded merchandise. And this is, in fact, what actually has happened in those States with such resale price maintenance laws.
Mr. CURTIN. Do you think that perhaps the price range feature of proposed legislation is one of the parts of it that will negate what we are trying to accomplish?
Mr. LOEVINGER. I do not think this makes any difference. I think that the effect will be the same. The big stores, the chainstores and
the discount houses, are going to sell at the bottom of the price range. And it is immaterial whether or not the fixed price is in terms of a range or of a minimum. The customer is going to know that he cannot buy it any cheaper at an independent store and that there is no reason to go to an independent store to do his purchasing. There are going to be very few customers who are going to take the trouble to leave one store and get back in their car and drive to another store that happens to be an independent, just because they want to preserve independent retailing.
Mr. CURTIN. Thank you, sir. That is all. .
Judge Loevinger, I have been very interested in your comments, and I was wondering if we could return to the discussion we had yesterday with regard to free and open competition.
I have last year's hearings before me, with the list of items which you were kind enough to give the committee last year with regard to the percentage of shipments accounted for by the 4 largest chains and 20 largest companies. I was wondering if you wanted to make any discussion with regard to the free and open competition in the language of the bill relating to the table of information that you submitted on the economic comments of a few of the manufacturers controlling a very large portion of the market?
Mr. LOEVINGER. Congressman Dingell, this calls either for a relatively brief negative answer or for a long dissertation on economics and law.
The concept of free and open competition is, of course, a very complex one, and it gets into all kinds of bypaths as to whether or not limited numbers of suppliers indicate that there is not free and open competition.
I can, I think, usefully say, without boring this committee with a long dissertation, only that I would hope that if any legislation of this type at all is passed, that this phrase would be very strictly construed and that the legislative history would make it apparent that Congress meant it to be most rigorously construed.
Mr. DINGELL. Where you have, for example, cigarettes, in which the four largest companies marketed 80 percent of that particular commodity, does there appear to be free and open competition there?
Mr. LOEVINGER. Well, as I say, this depends upon a number of factors. I am not referring to cigarettes particularly, because I dislike to discuss concrete cases; every time I do some newspaper, says that the Antitrust Division has got something or other in mindwhich is not the case.
But if you had four manufacturers, you might have each one of them supplying a particular section of the country and virtually a monopolist in one section of the country. You might, on the other hand, have four of them competing nationally at disparate prices, actually engaged in genuine price competition, or you might have
four of them engaged nationally in distribution at very sticky oligopolistic prices, and with no genuine price competition.
I think that these are all different situations, and I do not think you can lay down a categorical rule.
Mr. DINGELL. Under this particular provision, you might have a situation where you would have geographical application of this free and open competition, allowing the price fixing by a manufacturer. For example, there might be competition in one area; whereas, in other parts of the country or in limited parts of the country, there might be no competition because of an undue control by one particular company or two companies, or something of this kind. Am I correct?
Mr. LOEVINGER. Yes, sir, that might well be the situation.
Now, we discussed yesterday the question of venue, in regard to the rather unique language that appears in this bill. I am wondering if you had any further comments you would like to make today in regard to that?
As I read the bill dealing with this particular section, the provisions for suit against the small businessman are rather extraordinary. Am I correct? Mr. LOEVINGER. I think they are extreme, Mr. Dingell. I do not
I know of any venue statute of the United States today that permits suit in any district in which the defendant resides, is found, or has an agent. The language of the antitrust statutes is that a defendant may be sued in any district in which he resides, is found, or transacts business. Now, this is quite a different concept.
If having an agent is meant to be the same thing as transacts business, it seems to me it is most unwise to use a different phrase and create a lot of unnecessary litigation. If it is meant to be something different, I think it goes far beyond any normal rule that we have applied.
And I certainly recommend that that phrase be modified. I think it would cause a great deal of difficulty and a lot of unnecessary litigation.
Mr. DINGELL. Would this authorize a suit against an individual who, let us say, lives in Michigan, engages in business in Michigan principally, but who happens to be traveling in California and is served in California by a process from a U.S. district court of California; would this authorize a suit against that individual in California ?
Mr. LOEVINGER. I suppose it conceivably could. I hate to engage in any pronouncements as to what this language might or might not do. I hope that it will not find its way into the law.
Mr. DINGELL. It is possible, though, under this language, that that situation could arise ?
Mr. LOEVINGER. Well, since this is new language, it could mean almost anything.
Mr. ÞINGELL. This is an extreme imposition to place upon the small businessman, is it not?
Mr. LOEVINGER. Clearly, this would be an imposition upon the small businessman. And having engaged in some litigation with some large businessmen, I can tell you that they would claim it was an imposition on them.
Mr. DINGELL. Now, over and above this, I note you have some comments with regard to the McKesson-Robbins decision in this bill. I wondered if you had anything further you would like to add in the discussion made with regard to those two in the exception made from the antitrust laws and the decision in those two cases that is supported by the legislation that is before us.
Mr. LOEVINGER. Well, my two points, sir, are simply this: One, that the section on page 8 that begins with the number-15—ať line 14 clearly legalizes horizontal price fixing. The present Federal permissive legislation and most of the State fair trade laws do not go so far as to legalize horizontal price fixing, which is price fixing between competitors.
In that sense, this bill is certainly a price-fixing bill in every manner in which that term “price fixing” is used. This provision legalizes price fixing in the broadest and most opprobrious use of that term in antitrust law.
For this reason, I think it is bad from the antitrust viewpoint. From the viewpoint of small business, it seems to me to be most anomalous that one should attempt to help small business by putting within the power of its big business competitors the right to dictate the prices at which small business must sell.
I do not see how you can possibly help small business by subjecting it to the power of its big business competitors with respect to pricing practices.
Mr. DINGELL. Thank you very much. Your statement has been most helpful.
Mr. STAGGERS. Mr. Harris, do you have any questions?
Mr. Harris (chairman of the full committee). No, Mr. Chairman, I do not believe I would engage in any questions at this time.
Let me say that I am glad to be here during this part of the hearing, when Judge Loevinger is here. I have heard the judge's discussion on this type of legislation in the past, over the years. I am quite familiar with his consistent position. We have had some meetings at which he and I have participated. On occasion I thought it might be possible to come to an understanding, but it did not work out
I thoroughly respect the views of the judge on this matter, as I do the views of the Federal Trade Commission. I just do not agree with them. Before our visitors leave, I might say, Mr. Chairman-will you
wait just a little bit ?
I want to extend a cordial welcome to a group of students from Paul Junior High School here in the District of Columbia. These students came by my office, and I had occasion to meet them. I have an affection for Paul Junior High School, because my daughter graduated from there, and our son also a year ago graduated from Paul Junior High School; and I do want to take this occasion to say to these students that we are honored that they would come to this committee and observe some of its operations today.
Now, coming back to the subject, I just do not believe that any department of Government is capable—and this is no reflection—is capable of formulating the broad general policies which will take care of every aspect of the complex economy that we have under our free