We therefore urge, for these stated reasons, and for many other reasons concerned with the economic well-being of small business and the well-being of the consumer and small farmers, that you use your prestige and influence in bringing -out the facts in this trading-stamp matter, during the study you are conducting -or, should I say, being held under your chairmanship.

There is no doubt in my mind that the future of thousands of small businesses may depend upon some kind of drastic action to curb or halt the operation of stamp plans in this country.

I am attaching an open letter to the Federal Trade Commission, and a reprint of my column containing excerpts from a 1915 decision of the United States Supreme Court, giving State legislatures the power to outlaw stamp plans, in the public interest.

Again I say that any study of stamp plans should concentrate on determining to what extent the farmer has been harmed, and to what extent have the plans .contributed to our present inflation in prices.

ED. WIMMER,
Vice President, Public Relations Division.

AN OPEN LETTER TO THE FEDERAL TRADE COMMISSION

CINCINNATI, OHIO, August 27, 1957.

Subject: FTC investigation of trading-stamp plans.
Hon. JOHN W. GWYNNE,

Federal Trade Commission, Washington, D. C.

MY DEAR JUDGE: You would know, of course, that we have been anxiously awaiting the Commission report on trading stamps, and it has been a job to convince the businessmen and organizations with whom we have contact that FTC may come to the rescue.

My primary reason for writing you at this time is to report on the convention of gasoline dealers held here in Cincinnati, at which time I spoke on the subject of trading stamps and other problems.

This convention, like most others I have attended, was notable for the fact that delegates were unanimously agreed that, if nothing is done to curb the operations of the stamp companies, thousands of small businesses which might otherwise survive are doomed.

A Georgia delegate who spoke to the convention accused the big gasoline suppliers of forcing dealers to take on stamps, just as they are doing here, and of which you have sworn testimony taken in our office. This same delegate told the convention that, in any area where the stamps are widely given out, no dealer can stay in business without cheating his customers in one way or another.

This is admitted by leaders in the petroleum industry and I say that a big percentage of the service-station operators who have gone out of business these past 2 years are out because of stamps. Look at the appliance business, which the stamp companies are affecting so disastrously, and consider the utter breakdown in consumer resistance to the false promises of something for nothing, which stamp companies and their biggest customers emphasize.

I know that the Commission cannot put these people out of business, but if their stamp plans create monopolistic conditions within an industry, by limiting the most popular stamps to the biggest and best customers, enabling the chosen few to take a competitor's trade with false promises, it falls within the power of FTC to end such a condition.

One of the biggest weapons of the stamp companies is the claim that "premiums are free," when the records show that, in one way or another, the consumer pays for whatever is offered as free. It has been hard for me to understand these many past years, why the Commission has not halted all offers of something "free" wherever the prize is attached to a purchase of anything. In the case of trading stamps, there is no chance for any chain or individual to maintain sufficient volume to pay their cost once a number of tradesmen are offering the stamps, and this is admitted by officials of the biggest chains and proven in research by leading authorities on the subject.

We are faced with a dangerous situation in America, the continued liquidation of the independent retailer and his smaller suppliers, and adding to this danger is the ever-increasing merger of both large and small corporations upon which he must depend for supplies. This threat to the freedom of all of us is widely recognized, and recently called America's No. 1 curse by John Knight,

the great newspaper publisher, yet the economic murder continues unabated. We recognize the increasing activities of the Federal Trade Commission in its many attempts to protect small business and the consumer, and I think we understand the larger burdens placed upon your own shoulders and those of your fellow Commissioners, but, judge, the very life of countless enterprises is now dependent upon what the Commission does about the stamp issue, and I hope there will be no further delay.

The president of the Kroger Co. called the stamps a disease. The president of Grand Union said they are a form of "squirrel food." The giant Safeway chain, after spending millions to brand them a gigantic racket, finally took them on, and the Dominion Stores in Canada went so far as to run a doublepage newspaper spread, headed: "Go Home, Yankee Stamp Racketeers, and Take Your Canadian Cousins With You."

I watched the stamp companies spend huge sums to destroy efforts to get State legislation, and it is said over the country that FTC delay in reaching conclusions on the problem is due to pressure at the national level. It is not a good situation, and needs to be remedied at the earliest possible date. Thanking you for the fine cooperation we have already received on so many other matters, and with very best wishes,

Sincerely,

ED. WIMMER,

Vice President, National Federation of Independent Business, Inc.

PLEASE POST

SAFEWAY

SAYS

2nd LARGEST FOOD CHAIN

YOU ARE ENTITLED TO THE FACTS

"IT'S EASY FOR A FOOD SHOPPER TO BE MISLED ABOUT TRADING STAMPS. ON THE SURFACE THEY APPEAR TO BE SOMETHING 'FREE' WITH FOOD PURCHASES.

THIS ILLUSION IS CREATED BY THE STAMP MERCHANT WHO ADVERTISES A FEW ITEMS
AT LOW PRICES TO GIVE THE IMPRESSION THAT ALL HIS PRICES ARE LOW.
BUT STAMPS ARE NOT 'FREE'. FAR FROM IT. THE MERCHANT HAS TO BUY FROM THE
STAMP PROMOTER EVERY STAMP HE 'GIVES'. AND, AS WITH ANY OTHER BUSINESS EX-
PENSE, HE MUST PASS THE COST OF STAMPS ALONG TO HIS CUSTOMERS IN HIGHER
PRICES. THESE HIGHER PRICES USUALLY SHOW UP PRINCIPALLY IN THE SELDOM, OR
NEVER, ADVERTISED ITEMS. AND IT IS THESE ITEMS WHICH REPRESENT THE BIGGEST
PART OF THE FOOD SHOPPER'S BUDGET.

MOST SHOPPERS ARE NOT IN A POSITION TO KNOW THE EFFECT OF TRADING STAMPS
ON FOOD PRICES. SAFEWAY IS IN THAT POSITION. IT IS OUR RESPONSIBILITY TO STUDY
ALL THE FACTS-IN ORDER TO PROTECT OURSELVES. AND OUR CUSTOMERS... THE
FACTS ARE THAT STAMPS ADD FROM 2 TO 3% TO A MERCHANT'S COST OF DOING
BUSINESS.... AND THE ONLY WAY HE CAN RECOVER THAT COST IS BY CHARGING
HIGHER PRICES FOR THE FOOD HE SELLS.

THE RESULT OF TRADING STAMPS IS ALWAYS A HIGHER FOOD BILL FOR THE CUSTOMER."

ATTENTION:

The above statement is reprinted from an advertirement of the SAFEWAY CORPORATION, second largest Food Chain in the United States. It has been reproduced as a public service, and an answer to the claims of some advertisers that Stamp Plan costs are NOT passed on to the consumer.

(Signed), ED. WIMMER, Vice President

National Federation of Independent Busiasts, Inc.
Cincinnati 2, Ohio

Mr. ANFUSO. We will first hear from Harold Unterberg.
Mr. Unterberg, will you please identify yourself for the record?

STATEMENT OF HAROLD UNTERBERG, GENERAL COUNSEL AND SECRETARY FOR THE ASSOCIATED FOOD STORES; ALSO REPRESENTING THE FOOD INDUSTRY ALLIANCE

Mr. UNTERBERG. I am Harold Unterberg. I am with the law firm of Unterberg & Unterberg, and, also, general counsel and secretary for the Associated Food Stores. We have also been retained by the Food Industry Alliance in this matter. Food Industry Alliance is an organization composed of some of the large leading independent chain and cooperative retail food merchants in the city of New York, and that includes Long Island and part of New Jersey.

Both organizations, I do not have to add, are strong opponents to the trading-stamp plan and what it represents as an impact on the increase of cost of food to the consumer and an added expense to retailers which is not normal to the general food-distribution cost.

I would like just briefly to begin to summarize what the tradingstamp plans are, because we have found a lot of people discussing trading stamps and frequently they do not have exact knowledge of what it is. So far as we are concerned in this case, and I am going to stick primarily to the impact on the retail store and then the retailers, trading stamps, the basic features of the trading-stamp scheme, varies very little.

One company may have a little variation, but, basically, these are features that are parts of all, and, incidentally, it has changed very little through the years. Trading stamps are purchased in advance by retailers from the trading-stamp companies, using pads of 5,000 for $10 or $15. The prices charged the retailers range from $2 to $3 per thousand stamps. In other words, this is an added cost to the retailer of about 212 percent of the merchant's sales.

If we try to link it in a factual presentation to weekly sales, in other words, if a food retailer's average weekly business is $20,000, he is required to have in his possession for distribution 200,000 stamps for which he must pay in advance. The trading-stamp people don't deal on credit. So that he has an advance cost of anywhere between $1,400 to $1,600 each week before he opens his door for business.

Of course, we know the retailer does not give these trading stamps to their customers in a common ratio, it being 1 stamp for each 10 cents of purchase.

These stamps are then accumulated by the customers in books, having spaces for 12 to 1,500 stamps, and the customer, normally, to fill such a book, has to make $130 worth of purchases.

This, basically, is the stamp plan, the advanced cost to the retailer. What is the impact of it, nationwide?

Surprisingly, now, the stamp problem has not become localized. It has grown to such an extent that it streatches from the west coast to the east coast, north and south, to the extent today

Mr. ANFUSO. Before you leave that point, to clarify your first point, do you mean that the retailers who deal or accept these stamps must make a payment for them?