encouraging, horizontal and vertical price fixing. Even in those areas where price competition still persists, this bill would countenance its abolishment. What lip service then could the proponents of this bill pay at their annual conventions to our vaunted free enterprise system which has served this great Republic so well since its foundation? I would suggest that the proponents of this bill should practice what they so piously preach. Let them compete in a free market rather than destroy it.

If the Congress is now to abolish price competition by Federal fiat, let it at least be candid about it, without resorting to hypocritical phrases about "quality stabilization."

As the Supreme Court of Oregon has noted:

In substance, what is the real purpose of the Fair Trade Act? Regardless of how its true nature may be camouflaged by high sounding terms such as "free and open competition," "unfair competition," "protection of good will," etc., it is a matter of common knowledge that it is a price-fixing statute designed principally to destroy competition at the retail level. Protection of the "good will" of the trademark owner is simply an excuse and not a reason for the law. * * *"

The sure losers in any such precipitate flight from free enterprise will be the consumers, the sick, the poor who cannot afford the extortionate prices which fair trade fosters. The working man, too, will be hard hit, but he at least may enjoy a measure of protection because so many collective bargaining agreements today are geared to the cost of living. Yet, this in turn, would beget new dangers to the public interest. The creeping inflation which successive administrations, both Republican and Democratic, have been trying to rein in since World War II, would break into a gallop if this pernicious bill should become law.

C. VENDOR'S POWER AFTER SALE

This bill's reservation of property rights, even after a resale, would replace modern principles of law by the precepts of the Middle Ages. No principle and policy of the common law has been more widely and uniformly accepted and approved by courts and legislatures, by commentators and by the people than the rule against restraints on the alienation of property. This is true of goods as well as of real estate. More than 50 years ago the Supreme Court in the celebrated Dr. Miles case held that the seller of a trade name product could not fix its resale price. The product in question, I might note, was a drug. Concern for the trader and for the consumer, under our competitive free enterprise system, has denied any such reserved "right" to the patent and copyright holder. Is a "trade name" now to be deemed of such greater significance as to override this traditional concern, or is the next step to propose price-fixing powers for patentees and copyrightees?

Mr. Lowell Mason, a former member of the Federal Trade Commission, testifying in support of a similar bill pending in the Senate last year, made the frank admission that the aim is to reverse a number of Supreme Court decisions and restore the old Colgate doctrine in all its vigor, namely, to deprive the retailer of supplies if he uses his own judgment in determining the price to sell to the consumer. To me it is quite strange to find Mr. Mason, on the one hand, supporting these bills in the name of private property rights, and on the other hand, arguing that a person who has paid for an article should have something much less than private property rights.

This bill gives the owner of a brand name the right to compel a reseller to sell at a price or within a price range determined by the brand-name owner. Apparently there is no limitation upon the power of the owner to make as many price changes as he desires. The reseller is a puppet subject to the pull of a remote string puller.

The reseller who sells at a price he thinks is fair is subject to having his right to resell the product revoked, no mater how much good will he has developed regarding the product by his own efforts. If he persists in selling at a fair price he is subject to a suit for damages, injunctive relief, attorneys' fees and the costs of suit.

The deterrent imposed under the antitrust laws against the collusive price fixer is now to be imposed against the independent retailer who may mistakenly believe in free enterprise.

This bill also grants a right of revocation where misrepresentation has been used in the resale of goods.

The Federal Trade Commission has been attacking deceptive merchandising practices, with ever-increasing vigor. Furthermore, there can be few States indeed which do not have their own laws dealing with deceptive practices.

H.R. 3669 would utterly confuse adequate, existing Federal and State laws dealing with unfair trade practices by superimposing upon them a loosely worded, probably preemptive, Federal law.

The bill provides that:

Each such currently established resale price and resale price range shall be uniform at each level of distribution within each marketing area determined by the owner of the brand, name, or trademark (par. 14).

The above quoted provision appears to give the brand owner the right to determine what is the "marketing area" for the purpose of having uniform prices. Apparently, at his will, it may be small or large. It is not clear whether the trademark owner is limited to including in such marketing area only an area in the United States.

D. BAIT MERCHANDISING

Section 8 of the bill gives the trade-name owner the right to prevent a retailer from selling the trade-named article, if it is used "in furtherance of bait merchandising." This might give the tradename owner the power, even without a price-fixing provision, to prevent the retailer from having a special on an item in order to draw people to his store in the hope they might buy something else as well. This would be so even if the special price was one on which the retainer made a profit.

The bill does not define bait merchandising practices, and thus invites litigation as to the meaning of this term. It might include any unusual advertising device.

Those States which have seen fit to prohibit or limit bait advertising-like my own State of New York-have devised appropriate remedies, Other States have not chosen to do so. Both those States which have acted in their own ways, and those which have not, would now have this amorphous, probably preemptive, provision thrust upon

them.

E. ENFORCEMENT

The proposed statute would be applicable to "all acts and transactions in or affecting commerce which Congress may lawfully regulate." The rights given under the bill are also available to owners of a brand, name, or trademark, competing at any level of distribution, with the reseller.

The bill expressly provides that such suits may be brought in a Federal district court, without regard to the amount in controversy. As chairman of the Committee on the Judiciary, I am sorely troubled by this provision which would engulf our already congested Federal courts in a torrent of penny ante price-fixing enforcement cases. I understand the American Bar Association is also dismayed at this prospect.

Furthermore, H.R. 3669 provides that :

No action pursuant hereto shall preclude remedial action otherwise available for wrongful use of a brand, name, or trademark (par. "(12)").

Thus, this bill, aside from the fault of its basic premise that from price fixing all blessings flow, creates a Mycenacan maze for businessmen, lawyers and judges.

While creating a compulsory national fair trade law, it also seeks to preserve State fair trade laws. The merchant who sells below the price fixed by the manufacturer may find himself sued in a Federal court on one ground and in a State court on another ground. The courts may be widely separated, even in different States. What may be legal under State law may be illegal under this proposed Federal law, and vice versa.

The bill gives a right of action to the consumer against the price fixer for any misrepresentation by the latter as to "size, capacity, quality, condition, model or age." This right of action in the Federal courts exists only if the price fixer is not subject to process "in the courts of the State in which such purchaser acquired such goods.” This could readily give rise to extensive small claims litigation in the Federal courts. It also raises troublesome conflicts of law questions since the test seems to be the law where the article is purchased and not the law of the domicile of the purchaser.

F. EXEMPTIONS

The bill exempts sales to Government or Government agencies. This means that there is to be one standard of business conduct in dealing with Government agencies and another in dealing with the public. Price fixing at the expense of the public is to be permittedin fact, promoted-but price fixing at the expense of the Government is not sanctioned, and if the cost of a high price to most of us is a lower price to the Government, we may console ourselves by reflecting that such indirect form of taxation has not come about without representation, since it would be embodied in an act of Congress. There are other exceptions which have no logic except that of expediency, namely, avoiding the opposition of organizations capable of strong, organized opposition, while leaving the many unorganized to the notso-tender mercies of the price fixers.

G. OTHER PROVISIONS

The bill does not say whether knowledge of the required selling price has to be actual or may be constructive. It permits those holding a monopolistic position to price fix resale items, since unlike prior fair trade acts, it protects the price fixer "if there are goods usable for the same general purpose." What that phrase means is anyone's guess but it would seem to be broader than goods of the same general class-the language generally used in State fair trade laws.

As to the right to return of goods by a nonconformer, as provided in this bill, the manufacturer may well find himself astride a Trojan horse, since he can never be sure that he has made a final sale. It is said that in 1954 the Sheaffer Co. spent $400,000 in buying back stocks of its own pens from price-cutting retailers.

III. THIS BILL IS AN ATTACK ON OUR CAPITALISTIC, FREE ENTERPRISE SYSTEM

I think it cannot be gainsaid that a free market is essential to our capitalistic, free enterprise system. And most certainly a free market does not exist when the seller is free but the buyer is not, when the seller determines not only the price which the buyer must pay him but also the price at which the buyer may sell what he has purchased.

The concept of a free market also envisages a market where the consumer is not confronted with a network of price-fixing agreements sanctioned by law.

Increasingly State courts have found fair trade price-fixing laws an affront to those constitutional provisions of their respective States which condemn market control.

Legal rulings, moreover, have not been the primary causes that have led to the abandonment of fair trade in many areas. Consumer resistance to high prices, warehouses stocked with unsold merchandise and the relentless pressure of substitute merchandise from competitive distribution channels have been just as important. Fair trade simply doesn't work. The enormous costs involved in comparison shopping, legal fees, and policing fair trade enforcement, alone, have been major causes for its abandonment by many manufacturers.

The background of this bill makes it clear that it is intended to overturn two Supreme Court decisions, one decided in 1911, the other in 1956; two court of appeals decisions,10 and one New Jersey Supreme Court decision. In addition, as noted last year by the head of the Antitrust Division of the Department of Justice in reference to a similar bill, such a bill might also overrule the Supreme Court's decision in the Parke, Davis case. 12 I suggest that this alone should give this committee pause before recommending legislation of this sort.

Small wonder that similar bills have been disapproved by the Department of Justice, the Federal Trade Commission, and the Department of Commerce. The Attorney General's National Committee to Study the Antitrust Laws was opposed to fair trade legislation. Five

$ Dr. Miles Medical Co. v. Park & Sons Co., 220 U.S. 373.

United States v. McKesson & Robbins, Inc., 351 U.S. 305.

10 Sunbeam Corp. v. Wentling. 185 F. 2d 903 (C.A. 3, 1950); General Electric Co. v. Masters Mail Order Co., 244 F. 2d 681 (C.A. 2, 1957).

11 Gillette Co. v. Two Guys from Harrison, Inc., CCH Trade Reg. Cases, par. 70,223 (N.J. Sup. Ct. 1962).

12 United States v. Parke, Davis & Co., 362 U.S. 29.

States have refused to adopt fair trade legislation. In 24 States the courts have outlawed those consumer price increase acts. In August of last year the American Bar Association condemned a similar bill.

I could not hope to put the case against the policy of this bill as eloquently as Congress has already done in the preamble to the Small Business Act, when it said:

The essence of the American economic system of private enterprise is free competition. Only through full and free competition can free markets, free entry into business, and opportunities for the expression and growth of personal initiative and individual judgment be assured. The preservation and expansion of such competition is basic not only to the economic well-being but to the security of this Nation. Such security and well-being cannot be realized unless the actual and potential capacity of small business is encouraged and developed.

There can be no greater erosion of States rights than this bill; there can be no more all-enveloping attempt to sanction nationwide price fixing; there could hardly be a more vaguely worded or more unnecessary bill. If you want to have Federal price control, vote for this bill. I earnestly urge that it be rejected.

This bill is a consumer price increase bill. This bill is an antifree enterprise bill. This bill is a bad bill. It should be defeated.

APPENDIX A

STATEMENTS FROM SEVERAL STATE COURT OPINIONS DECLARING STATE RESALE MAINTENANCE LAWS UNCONSTITUTIONAL

(1) The Supreme Court of Florida declared :

"As we have stated before, the real effect of the non-signer clause is anticompetitive price fixing; not the protecting of the good will of trade marked products as other courts have held. Good will, it has been said, should be determined by the price which the goods can command in a competitive market, and not by the ability of the manufacturer to sell at a pegged retail price which he himself selects. Corey, Fair Trade Pricing: A reappraisal, 30 Harv. Bus. Rev. 47, 60. Except in times of economic emergency such inflexible price arrangements which the act sanctions are not in line with our traditional concepts of free competition, which have traditionally been the 'yard stick' for protection of the consuming public. The real vice of the nonsigner clause is the absence of that standard, and the decisions of this Court stated herein so hold. * * *" (Miles Laboratories Inc. v. Eckerd, 73 So. 2d 680, 682 (Fla. Sup. Ct. 1954).)

(2) The Supreme Court of Colorado:

"The General Assembly may validate resale price maintenance contracts between contracting parties within constitutional limits but when the effect of the Act *** is to make such price schedule binding upon non-contracting parties, the Act is nothing more or less than price fixing by legislative mandate. An unwilling citizen cannot be thus bound.

"Any Act of the General Assembly which arbitrarily destroys or impairs the right of the individual to the free use and enjoyment of his property, lawfully acquired, and permits the fixing of prices for the benefit of a special group, is opposed to the constitutional concept of a free people and should not be allowed to stand. Legislation of this kind evidences the ability of organized minorities to induce legislation for their special benefit at the expense of the unorganized purchasing masses * * * We have not yet arrived at the place in America where the many must yield to the few, so that the latter may make ever increasing profits at the expense of those who still believe in the principle of free and competitive trade and commerce, untrammeled by legislative fiats." (Olin Mathicson Chemical Corp. v. Francis, 134 Colo. 160, 186, 301 P. 2d 139, 152 (Colo. Sup. Ct. 1956).)