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This bill proposes exactly the same brand of minimum price fixing under the guise of "quality stabilization" that has been proposed previously under a similar euphemism, "fair trade." The new facade is no less infamous than the former, and the Cooperative League is as vigorously opposed to this bill as to its predecessors. We resent efforts to camouflage a legislative proposal which from the day of its enactment would suppress competition by permitting manufacturers to fix minimum retail prices and thus pick consumers' pockets of hundreds of millions of dollars every year.

The most heinous offense under the antitrust statutes of the United States is conspiracy to fix prices. This legislation not only winks at price fixing. Under it, the Government would endorse price fixing and use its full authority to enforce price fixing. We are unalterably opposed to any such efforts to legitimize monopolistic price fixing. If this bill is enacted, the Clayton Act and the Sherman Act are effectively repealed.

To bring such legislation to Congress under the cloak of quality stabilization not only insults the intelligence of Congressmen but makes a mockery of our laws and our private enterprise system.

We remember the Office of Price Administration. During wartime emergency, this agency fixed maximum prices. OPA was-like all Federal agencies-responsible to the people through their elected representatives in Congress. Though its purpose was to protect consumers by fixing maximum prices, OPA was barely tolerable, even in wartime.

Yet now you have before you a proposal to allow private interests who are entirely beyond the reach of popular control to fix minimum prices-not maximum prices, mind you, but minimum prices in peacetime. This, gentlemen, is absolutely intolerable.

The first victim of this legislation would be the consumer. The second would be the small businessman who has been hoodwinked into supporting it. If it is true as these misguided merchants insist-that their large-scale competitors enjoy lower operating costs per sales dollar, this legislation cannot save the small retailer. The large chain will simply offer more services with each purchase, offer more inducements to enter the store, or find ways to circumvent the fixed prices of, shall we say, quality stabilized merchandise.

Just as right-to-work proposals aggravate employer-employee relations, just as tax equality proposals would impose tax penalties on not-for-profit business, and just as fair trade begets trade that is remarkably unfair to consumers, so quality stabilization would stabilize neither quality nor service but only price. Quality stabilization is a semantic trick, and the Nation's 180 million consumers have a right to expect that this subcommittee will expose it.

This legislation should be disposed of with finality and dispatch so as to conserve the energies of Congress for more constructive purposes.

The Cooperative League is uncompromisingly opposed to H.R. 3669, and we welcome the opportunity to make our views known.

STATEMENT ON BEHALF OF THE PAINT & WALLPAPER ASSOCIATION OF AMERICA, INC., SUBMITTED BY ROBERT E. PETIT, EXECUTIVE VICE PRESIDENT

The officers and board of directors of the Paint & Wallpaper Association of America, Inc., on behalf of members throughout the United States, enthusiastically support the quality stabilization bill.

We feel that this legislation is imperative to the future well-being of the thousands of paint and wallpaper retailers who attempt to market quality merchandise at fair prices. We believe that the manufacturers and distributors of quality merchandise stand shoulder to shoulder in their attempt to market such products in an ethical, profitable manner.

Those who destroy precious reputations painstakingly built through years of fairness in dealing with the consuming public can and are destroying all incentive to make and market products of other than superficial quality. We believe this bill can restore some semblance of order in the marketplace, and will provide those who desire to make and market products through ethical channels the support they need to continue their efforts.

STATEMENT OF H. B SPEYER, VICE PRESIDENT AND TREASURER, CHAMPION SPARK PLUG Co.

We, as manufacturers of a trademarked quality product, namely, Champion spark plugs, are very much interested in seeing that subject legislation is pased. One of the main reasons, of course, is to preserve the traditional American system of distribution which is being rapidly destroyed by the evils of predatory cut pricing.

It will be optional with the manufacturers whether to use the Quality Stabilization Act in the marketing of his products. If the manufacturer elects to use the act, the reseller will receive notice of the conditions under which his right to use the trademark will be revoked.

Finally, this bill solves the problem of jungle pricing and permits the manufacturer to name the retail price at which his trademarked quality product must be sold. The manufacturer has the responsibility and must account to the public for the value received in the product according to the price.

STATEMENT BY JAMES A. HUESER, MANAGER, OF INDEPENDENT GARAGE OWNERS OF AMERICA, INC., TULSA, OKLA., APRIL 17, 1963

Comes now the Independent Garage Owners of America, Inc., a national federation of 6,000 owners of independent automotive repair shops in 40 States in the United States of America.

Independent automotive repair shop owners all over America are in favor of the enactment of the quality stabilization bill, because it will enable the independent automotive repair shops to stay in business by being able to compete on an equal basis for the sale of automotive repair parts and repair of automobiles.

For example, mass merchandisers (discount stores, supermarkets, drugstores, etc.) are able to sell brand name automobile parts such as spark plugs, headlamps, mufflers, tailpipes, oil filters, air cleaners, brake linings, brake shoes, and other parts at retail prices far below the wholesale cost the independent automotive parts wholesaler. The retail prices vary. But on brand name spark plugs for example, the retail price at the mass merchandisers is 10 to 20 cents less than the wholesale price which the independent automotive repair shop must pay. The manufacturers are unable to do anything about this because they do not have control over the retail distribution of their product.

As a result much of the motoring public buys automotive parts from the mass merchandisers, thereby making it more difficult for the independent automotive repair shops to compete for the parts and repair business. This in itself is bad enough. But the motoring public, because it can purchase parts at prices below wholesale, have turned themselves into amateur repairmen. This not only makes it difficult for the independent repair shop to compete for the repair business, but the amateur mechanics are endangering the lives of other people through faulty repairs.

Therefore, it is vital for the quality stabilization bill to be enacted without delay to protect the lives of the motoring public and the future of the independent automotive repair shops in America.

STATEMENT ON BEHALF OF THE PHILLIPS-VAN HEUSEN CORP., SUBMITTED BY LAWRENCE S. PHILLIPS, EXECUTIVE VICE PRESIDENT

The interests of our company are a direct reflection of the interests of our more than 6,000 independent retailers throughout the country. Innumerable conversations with many of our customers lead us to believe that they almost unanimously feel that the passage of a quality stabilization bill is vital to their future and to their existence.

The typical small retailer in the men's furnishings field cannot possibly compete with the sprawling, predatory, unscrupulous giants whose avowed publicly stated business procedures are in direct conflict with the tens of thousands of small independent retailers in this country.

The independent retailer's only competitive tool against the unprincipled and ruthless retail operator, are service and brands. To cripple the meaning of a brand for these people would be like taking away their right leg.

On behalf of our retail accounts and our more than 3,000 employees, we urge favorable consideration of the quality stabilization bill.

STATEMENT OF OSCAR KOLIN, VICE PRESIDENT OF HELENA RUBINSTEIN, INC., IN SUPPORT OF H.R. 3669

This statement is presented to the Subcommittee of the House Committee on Interstate and Foreign Commerce in support of the quality stabilization bill. I respectfully request that it be included in the record of the hearings held by your subcommittee.

I am a vice president and a director of Helena Rubinstein, Inc. (which I shall hereafter call Rubinstein). Rubinstein and its predecessor or predecessors in interest have been engaged in the manufacture, distribution, and sale of cosmetics, toiletries, and related products in the United States for almost 50 years.

My statement is devoted to the importance of this bill to the cosmetic manufacturer and distributor, as well as to all manufacturers of branded products. I am strongly in favor of legislation to protect brand names and trademarks. I am firmly opposed to predatory marketing practices which destroy the value of such brand names and marks. It is my belief that the continual rise of discount houses will eventually result in the destruction of American business and economy as we know it today. This trend, if it continues, may involve the disappearance of nationally advertised branded, quality, consumer products. To date fair trade laws have been our only means of combating these practices. I am convinced that the best answer to the problem lies in the quality stabilization bill and I sincerely hope that it will soon become law.

Here are my reasons. To explain, I will discuss the impact of the discount house on the manufacturer, the retailer and, most important of all, the consumer, the three categories of persons directly affected.

We are confronted today with two types of discount stores. The first feeds upon the hard-earned contributions of established businesses and makes no contribution of its own. Most often it is a small store located in the middle of the busiest commercial center of a large town or city among many longestablished retailers. This small cutrater frequently sells only very well-known branded merchandise and it sells this merchandise at reduced prices. In recent years, however, another type of cutrate operation has appeared on the scene. Very often this establishment is a large chain or department store which handles two types of merchandise: (a) Quality branded goods which are sold as bait at reduced prices to induce customers to enter the store, and (b) several kinds of obscure, often inferior, merchandise, to which it attempts to switch the customer as allegedly superior products, and which it sells at prices calculated to bring the highest profit. Such deceptive and misleading merchandising practices will, in the long run, prove harmful to the consumer.

1. The manufacturer.-A manufacturer of a trademarked or branded product, in open competition with similar products, has a recognized right to protect the goodwill of his product by establishing a minimum retail resale price for the product either through unilateral policy or under fair trade statutes. This right is recognized as a legitimate means of safeguarding the manufacturer's proprietary interest in the goodwill of his product, and of protecting that valuable property from destruction and impairment through predatory pricecutting, loss-leader selling, and other destructive marketing tactics.

A manufacturer of a branded product must create a product of quality. This involves extended research, product testing, and considerable financial investment. After years of hard work and continuing substantial expenditures, a goodwill is finally built up for the brand he has created, as well as a nucleus of loyal customers. As a result of careful cost calculations-the cost of the product itself, of its packaging, and of distribution (advertising, demonstration, sales promotion, sales representatives, etc.), the manufacturer establishes a price for these quality products. The price must be realistic and competitive with the prices of other manufacturers of branded cosmetic products-and the cosmetic industry is an extremely competitive one. Let me assure you that today the profit margin of a manufacturer of a quality cosmetic product is extremely narrow-with not one penny remaining for additional expenses.

Our traditional American system of distribution has been-and must continue to be based upon free, open and fair competition. Different manufac

turers produce the same or similar products for resale at various retail prices in accordance with their respective established patterns of doing business. These prices will vary on the basis of each manufacturer's basic investment in product research and promotional development. For example, there are colognes on the market for $0.50 and for $10; we can find lipsticks for $0.25 and $5.

A few years ago our company introduced a device involving an entirely new and more simple and efficient method of applying mascara and sold it under the trademark Mascaramatic, at the retail price of $2. This applicator was one of the greatest innovations in the makeup segment of the cosmetic industry and its influence was such as to revolutionize the entire method of mascara application and the expansion of the entire eyemakeup market. The product was copied by competitors and today similar items are being sold in the U.S. market at prices ranging from $0.79 all the way up to $5. These areas of research and risk investment resulting in new quality products could not be maintained without a minimum retail resale price structure. As long as there is free and open competition, why must there be recourse to the cut pricing of branded goods? 2. The retailer.-In order to make ends meet, the legitimate cosmetic retailer, whether a department store, chain or drugstore, must obtain its regular markup. When a discount house begins to cut resale prices, the retailers have several choices:

(a) To maintain prices and thereby lose a certain trade to the discounter. (b) To meet the cut prices and thereby lose money on its branded products. (c) To drop the line of the brand manufacturer.

It is apparent that the very existence of the small retailing units which comprise such an important part of this country's merchandising system will thus become prejudiced, with the very real possibility that hundreds of thousands of these small retailers will go out of business. It should be remembered that it was the depression of the 1930's which caused numerous States to pass legislation legalizing fair trade agreements. It is important to recall the situation that existed during these depression years. When a retailer started to meet cut prices, he had to turn to the manufacturer to obtain additional discounts. The manufacturer had little choice. He either had to acquiesce in the demands of the retailers, lose money and subsequently face bankruptcy or, even if he would not meet the demands of the retailer, he was out of business anyway.

And this pattern, reminiscent of the depression years, will repeat itself. If all retailers in the same community cut their prices to meet the competition of the cutrate house, with each price cut, a new community retail price for the same branded commodity will be established. As a consequence, every retailer, without exception, will lose money by selling branded merchandise. This is obviously a literal point of no return.

3. And now let's consider the final victim--the consumer. It is well recognized that nationally advertised and branded consumer commodities most easily lend themselves to loss leader and cut-rate merchandising. The cutrate price offered to bait a customer appears, at first, to look like a big bargain to the consumer, but if a manufacturer is forced to give additional discounts to resellers, or go out of business, one of the first economies he will have to effect will be on the quality of his product. Or else, and this is what I believe will happen, the manufacturer will have to increase the price in order to allow additional discounts to the retailer. And so finally, it will be the consumer who will pay the penalty, for he will either be purchasing products of inferior quality of paying higher prices as a result of this price pyramiding.

The manufacturer, confronted with a demand for additional discounts, could very well decide that he must preserve the quality of his product at all costs and that he will not be a party to an inflationary spiral by raising prices. However, he would still like to stay in business and thus he must find a means of allowing the additional discount. His costs have been calculated with great care and he must, therefore, substantially reduce or eliminate entirely distribution expenses such as advertising, sales promotion, sales representatives, cosmeticians, etc. The total effect of reductions and eliminations of this character upon the very heart of American economy is obvious. Thus, the overall picture is clear. The alternatives are on the one hand-inflation, pronounced economic displacement, a deceived consumer, the elimination of many retailers and manufacturers, the disappearance of quality commodities or, on the other hand, the means of protecting all segments of the community-quality stabilization. Our company is firmly in favor of the quality stabilization bill. We believe in it. We know that it is the only way for the cosmetic industry to survive. I therefore respectfully urge its favorable consideration.

STATEMENT OF THE NATIONAL SPORTING GOODS ASSOCIATION IN SUPPORT OF THE QUALITY STABILIZATION BILL (H.R. 3669)

The board of directors of the National Sporting Goods Association at its annual meeting voted unanimously to support the principles of the quality stabilization bill (H.R. 3669). The National Sporting Goods Association is an association of independent sporting goods retailers located throughout the country. The headquarters of the association is at 23 East Jackson Boulevard, Chicago 4, Ill.

Sporting goods retailers are primarily small business. The Census of Business in 1958 showed annual sales of only $58,328 per store. The need for this legislation is now. The NSGA board of directors considers this bill the most important single bill for sporting goods retailers of all bills being considered by the Congress in this session.

Distribution is the final important link between the manufacturer and the consumer. Price cutting and dishonest practices are destroying the distributive economy as we know it.

The bill is permissive and only those manufacturers who wish to have their trademarked goods covered will make use of it. Retailers and consumers will have a free choice as to whether or not they will purchase these products or competitive ones offered by other manufacturers.

The bill is of greatest value to the small businessman. If we are to make it possible for him to compete he needs this protection, and he needs it nowbefore it is too late.

STATEMENT OF AMERICAN PHARMACEUTICAL ASSOCIATION ON H.R. 3369

The American Pharmaceutical Association, organized in 1852, is the national society of individual pharmacists in the United States. It is completely representative of the pharmacists of this country, both by professional specialty and geographical distribution.

Although the American Pharmaceutical Association is not a trade association, we have an interest in legislative proposals which affect the distribution of products available to the people of our country. We believe the public deserves quality products and honest services at reasonable prices.

The purpose of H.R. 3669, the quality stabilization bill, is to stabilize the quality of "goods, wares, and merchandise" by allowing manufacturers to control retail practices which may encourage quality deterioration of their "goods, wares, and merchandise" which bear a nationally recognized brand, name, or trademark. The bill would permit the manufacturer-owner of a brand, name, or trademark to retain property rights in the name regardless of sale or transfer of the "goods, wares, and merchandise." The bill gives the manufacturer-owner the right to revoke the privilege of sale of such "goods, wares, and merchandise" for any of the following reasons:

A. Because the reseller has employed "goods, wares and merchandise" bearing the brand, name, or trademark, in furtherance of bait-merchandising practices. B. Because the reseller, with knowledge of the manufacturer-owners' currently established resale price, has advertised, offered for sale, or sold such "goods, wares, and merchandise" at prices other than those currently established by the manufacturer-owner.

C. Because the reseller, with attempt to deceive purchasers, has published a misrepresentation concerning such "goods, wares, and merchandise."

The bill is completely permissive in that the question of whether or not its provisions are employed is entirely left to the discretion of a manufacturer.

The American Pharmaceutical Association supports H.R. 3669, the quality stabilization bill, and we hasten to point out that our support is without selfinterest; the bill specifically exempts from its coverage: "Sale of drugs, medicines, and devices for which either Federal or State law or regulations require a prescription from a physician, dentist, or such other persons as the various States may authorize to prescribe such items."

When a pharmacist dispenses pursuant to a prescription order he performs professional services and has both the professional and legal responsibility to determine the charge for rendering such professional services. Prescription charges do not represent the price of "goods, wares, and merchandise" that are merely sold in commerce. Up to the point when a pharmacist takes an article

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