Would H.R. 3669 add to the consumers' cost of shopping? We have appeared here many times before and presented price surveys one after the other that have demonstrated conclusively in our judgment that there is no increase in the price to the consumer, that the overall bill that the consumer pays in the non-fair-trade States of the country is no different than in the fair trade States of the country.

Whatever variations there are in margins in different types of stores in various sections of the country do not reflect the absence or presence of fair trade. In other words, the selective shopping surveys that have been done have consisted of going into certain stores to buy certain items at certain times at then bargain prices for those items. By then taking the figures and projecting them to a total national volume, the surveyors have come up with ideas that fair trade has cost the American people as much as $12 billion a year. We know this is impossible because fair trade merchandise at its peak didn't account for more than $20 billion of the Nation's sales and the total net profit from these sales was vastly less than $2 billion.

It is a fair statement that the overwhelming majority of independent retailers are firmly and fully convinced that enactment of the Harris quality stabilization bill would promote the advancement of independent retailing by providing the opportunity to compete on the basis of skills, devotion, and energy rather than, as at present, almost exclusively on the basis of dollar power.

The independents, by and large, do not have the kind of reputation that permits them to establish their own private brands-as the giant retailers can and do. Consequently, they must rely for their bread and butter on their ability to sell the presold national brands-the very brands that the price jugglers are price cutting in order to get a reputation for being the consumer's best friend.

The enactment of H.R. 3669 would give the independents new hope and renewed courage.

You have deep interest in the welfare of the producer; you have deep interest in the welfare of small business. We happen to live in an age where there is wide concern over bigness. Certainly part of that concern arises from the fact that large numbers of independent proprietors in America are not earning a living wage. There are may reasons for this state of affairs. I would not suggest that the quality stabilization bill would solve all their problems, but Congress has it in its power to eliminate one of these reasons, the most cogent one, the independents believe. It can curb the unfair competitive practices to which H.R. 3669 addresses itself by enacting the HarrisHumphrey bill.

I hope the subcommittee will take the first step toward what the independent proprietors of this country hope will be passage by the 88th Congress of the Quality Stabilization Act.

Mr. DINGELL. Mr. Long.

Mr. LONG. Mr. Mermey, on page 5 of your prepared statement you make the point that no reputable store would ask a person in, say, Northwest Washington to pay a higher price for a given article than another outlet located in another part of Washington, D.C., would ask the same lady to pay for the same article at the same time. Mr. MERMEY. That is right.

Mr. LONG. To carry that situation further in separated points from points in Washington, D.C., to an illustration we were using here yesterday, from Washington, D.C., to Richmond, Va., would this bill allow that same reputable chain to charge this same lady a different price?

Mr. MERMEY. Let's forget the bill for a moment. As I understand it today, without reference to the bill, chains in various marketing areas of the country, as they define them, will on occasion find it necessary to charge a different price for the same article but I am sure that no chain in its right mind and no manufacturer in his right mind would create a price variation in the same marketing area. Whether Richmond, Va., is in this marketing area, I could not say, but if you want me to answer your question, I will say to you, sir, that "on the basis of the principle that nothing is eternally impossible, certainly it is possible for a manufacturer with or without this bill to do that. By "with or without this bill" I mean the manufacturers who today own or control their systems of distribution can do that without reference to anything, and under this bill he would likewise be permitted to do that. Whether he would do that is quite another question.

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Mr. LONG. Yes; but under the bill he would have more of a legal basis then he does now, merely on the basis of competition.

Mr. MERMEY. He has a complete legal basis right now, assuming that he owns or controls the means of distribution. This bill is offering manufacturers not a single thing that he can't do now if he will only own or control that means of distribution. There is not a single thing in this bill that gives the manufacturer a greater right in pricing than Sears already has on its own private brands.

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Mr. LONG. I don't argue that, but you are imposing another condition in this with respect to ownership of outlets.

Mr. MERMEY. That is right.

Mr. LONG. This is one I am not including in my question. If you care to change my question around

Mr. MERMEY. I am sorry. I have tried to answer your question, but I am also trying to say to you that the Congress is not being asked to enact anything that is unique or alien to the marketplace.

Mr. LONG. That is all, Mr. Chairman.

Mr. DINGELL. Mr. Curtin.

Mr. CURTIN. No questions.

Mr. DINGELL. Mr. Van Deerlin.

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Mr. VAN DEERLIN. The statement that you had in regard to surveys on the effect of this legislation, of this type of legislation on retail prices, is somewhat at variance with previous testimony from Lee Loevinger, from the Attorney General's Office. He said here on Tuesday that the Department of Justice has found by economic surveys that consumers in States with so-called fair trade laws pay from 19 to 27 percent higher prices than in States without such laws.

Do you have reference to these Government surveys?

Mr. MERMEY. Yes, I am familiar with the study. I am saying to you, sir, that that consists in selecting certain items that are advertised or sold at certain prices in certain stores at certain times. This is selective shopping. This may have been done, I don't know the techniques that were used. I am sure that the techniques used by

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the Department of Justice were perfectly proper techniques, but you cannot assume a declaration of cost or lack of cost to the American people as a whole on the basis of that type of one-shop buying. On that basis I can come here and show you that the discount houses of America have overpriced the American people by billions of dollars. I myself have made surveys of discount houses for not their best bargains but their worst bargains and I have bought items that represented a 300 percent markup on the delivered cost to the discount house. One cannot develop a sound conclusion on that basis.

Mr. VAN DEERLIN. Do you think there might be more reliable statistics available from the Bureau of Labor Statistics!

Mr. MERMEY. No, sir, I don't think so. I don't believe the subject has been studied that way. I have indicated that we have ourselves in times past introduced to this distinguished committee and to the comparable committee in the Senate, the Senate Commerce Committee, a mass of statistics.

We have done many surveys. We have had A. C. Nielsen & Co., the largest independent marketing agency in the country.

Mr. DINGELL. If the gentleman will yield, I recall Nielsen is in some slight difficulty.

Mr. MERMEY. I am glad you mentioned that, Mr. Chairman. What I assume you were referring to is radio and TV ratings.

Mr. DINGELL. What you are telling us then is when they perform surveys for you they are indisputably correct, but when they perform surveys for radio and TV they might err.

Mr. MERMEY. This concept I hope I am not projecting. What I am trying to say to you is that Nielsen for many years has had what they call the Nielsen Index. That is a straight marketing survey covering 50 classifications of drug and food products. This survey is paid for by the clients that get it. A. C. Nielsen has a great number of researchers in the field who cover a presumably accurate sample of drugstores and foodstores. Every 2 months the Nielsen survey on analgesics for example is presented to the various clients, the manufacturers who buy that particular index.

Now there is a little difference between that index and the ratings to which the chairman refers; namely, that every single manufacturer has his own check on the reliability of that index because his own products are included in the study.

Let us take Anacin as an illustration if by chance the survey reports certain sales for Anacin in a 2-month period that are sharply at variance with what Anacin knows its sales to have been, I am sure that Nielsen would lose a client.

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We had A. C. Nielsen on three different occasions take the figures that it developed for its own index and put those figures back into the IBM machine in order to draw information that they had not required in the index. We wanted to know the weighted average price of each of those famous brands of analgesics or whatever other categories we had.

We had analgesics, we had laxative, dentifrices, and I think shaving creams. I am not sure of the four, the first two I am.

They put their data back in the IBM machine to find the weighted average price of each item in a 6-month period, and covering the entire United States rather than a half dozen or a dozen stores.

Mr. DINGELL. The Chair would very much like to hear a discussion of A. C. Nielsen & Co., but another subcommittee has held rather extensive discussions about the Nielsen methods and I believe this subcommittee has to take notice that Nielsen's methods have been tried and found wanting. So if you will address yourself to something more pertinent, it would be appreciated by the Chair.

Mr. MERMEY. Mr. Chairman, you are familiar with all the studies we have presented and I would be glad to present this committee with a complete statement of all the studies we have done.

Mr. DINGELL. I think we would like to dedicate ourselves to a study of this and with a more responsible source of information than the Nielsen people. If you will please address yourself to that, I will very much appreciate it. We have a number of other people. I have tried to be courteous to you, but I am frankly not interested in the Nielsen people surveys. If you address yourself to other phases of this bill, it would be much appreciated.

Mr. MERMEY. Without reference to Nielsen, we have three or four studies that have taken the price of drug products over a long period of years and shown the increase of the prices of those products as against the increase of the Consumer Price Index, and so on.

Mr. DINGELL. Are these Nielsen surveys?

Mr. MERMEY. No, sir, not Nielsen, or the three I have told you about. I would be glad to get all that material together and sent it to the committee. It would be a pleasure.

Mr. VAN DEERLIN. I just wanted to ascertain that the subcommittee as yet has no reliable statistics in your opinion as to the effect of this type of legislation on retail prices.

Mr. MERMEY. Dun & Bradstreet some years ago made the statement that is a rather difficult thing to do. In the first place you don't know how much quality stabilization or fair trading there has been, the total volume; you can only guess at it at the very best, knowing that you still would have great problems. For example, it is virtually impossible to determine the effect of fair trade pricing on all other prices in a given store.

I don't mean to try to impeach anybody's figures; I merely say that so far the job has not been done.

Mr. VAN DEERLIN. Thank you, Mr. Mermey.

Mr. DINGELL. Last year you submitted to the committee a list of contributors to the Bureau of Education and Fair Trade which was the predecessor organization of your organization.

Mr. MERMEY. That is right.

Mr. DINGELL. The Chair would very much like to have for this hearing not just a list of contributors, which I assume you can give to us, but also the amounts that were given by these contributors to your organization.

Mr. MERMEY. They have varied from year to year.

Mr. DINGELL. Well, I would like to have that information.

Mr. MERMEY. We would be pleased to do so.

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(The following material was subsequently received for the record :)

BUREAU FOR THE ADVANCEMENT OF INDEPENDENT RETAILING,

New York, N.Y., May 17, 1963. Hon. HARLEY ON STAGGERS, Chairman, Subcommittee on Commerce and Finance, Interstate and Foreign Commerce Committee, House of Representatives, Washington, D.C.

DEAR CONGRESSMAN: At the request of your subcommittee, made during the course of my testimony in respect of H.R. 3669, the Harris quality stabilization, bill, I am sending you herewith a statement of consumer price studies made by, or for, or compiled by the Bureau for the Advancement of Independent Retailing, formerly the Bureau of Education on Fair Trade.

I was also asked to furnish a list of contributors to the bureau. No such list is available for the fiscal year beginning July 1, 1962, for there has been no solicitation of contributions nor have any contributions been made to the bureau. In the previous fiscal year, July 1, 1961, to June 30, 1962, contributions were solicited from a limited group, who contributed a total of some $66,000. Those who contributed toward this total are: Abbott Laboratories; Bauer & Black, division of the Kendall Co.; Becton, Dickinson & Co.; Bristol-Myers Products Division; Burroughs Wellcome & Co., Inc.; Carter Products, Inc.; the Chattanooga Medicine Co.; Chesebrough-Pond's, Inc.; the Gillette Co.; HoffmanLaRoche, Inc.; Johnson & Johnson; Lederle Laboratories; Eli Lily & Co.; Mead. Johnson & Co.; the Mentholatum Co.; Merck & Co., Inc.; the Murine Co., Inc.; Parke, Davis & Co.; Chas. Pfizer & Co., Inc.; Plough, Inc.; A. H. Robins Co., Inc.; Schering Corp.; G. D. Searle & Co.; Smith, Kline & French Laboratories; E. R. Squibb & Sons; Sterling Drug, Inc.; Vick Chemical Co.; Warner-Chilcott Laboratories.

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I should add that the bureau made no solicitation of funds in the previous fiscal year, July 1, 1960, to June 30, 1961. In this period, contributions in the sum of $568 were received.

Sincerely,

:

MAURICE MERMEY, Director,

CONSUMER PRICE STUDIES, BUREAU FOR THE ADVANCEMENT OF INDEPENDENT

RETAILING

What the American consumer in general pays for the brands she buys is determined by a complex of factors. The Harris bill, if enacted, would, prevent some shoppers from buying certain brands in some stores at some times at less than the retail price established by the manufacturer under H.R. 3669. But there is no scientific basis for concluding that the American consumer in general, as distinguished from individual shoppers, will pay more for all the brands she buys because the products identified by some of them are sold at uniform prices established by the brand owner through resale or direct price

maintenance.

In this connection, it is of course a fact that the American people are very much worried about inflation. The Bureau of Education on Fair Trade-now the Bureau for the Advancement of Independent Retailing-has made a study to determine the relationship, if any, between fair trade prices and inflation.

In this study, fair trade prices, as available, were examined primarily for a 10-year period, 1949-58. The behavior of these prices was compared with that of non-fair-trade prices of similar products and with total price behavior as reflected in the Consumer Price Index of the U.S. Bureau of Labor Statistics. The study also incorporates findings of previous studies, notably in the drug and hardware fields, which go back to 1931 and 1942, respectively.

For the purposes of this study, individual companies whose products were fair traded were approached at random and asked to furnish appropriate price data covering their own products. It is recognized that, in many cases, true price comparisons between 1949 and 1958 could not be made because of the changes which many products underwent during this 10-year period. It is noted, however, that in all cases where changes took place, the products available to consumers in 1958 were substantially improved over 1949.

The study also examined the Consumer Price Index of the U.S. Bureau of Labor Statistics for 20 individual cities over the period 1947-58 to determine whether any difference could be noted in the index pattern for cities in fair trade States from that for cities in non-fair-trade States.