Mr. LOEVINGER. Let me say this:

It is always difficult for a small businessman to sue one or more big businesses. The sheer psychological barriers, as well as financial, economic, procedural barriers to this suit are far greater than people normally assume. Nevertheless, it can, in fact, be done, and I have, myself, on behalf of small business done it and done it successfully. So I do not want to say that it cannot be done.

Mr. DINGELL. But it is difficult?

Mr. LOEVINGER. It is very difficult.

Mr. DINGELL. And costly?

Mr. LOEVINGER. You have to find a very good lawyer.

Mr. DINGELL. Now, I would like to discuss with you page 8, line 14, section 15, the section on forcing a brand-name owner to initiate a lawsuit, or, rather, to initiate a program of fixing prices for wholesalers and retailers with whom he is also in competition.

I would like to have your comments on that particular section. Mr. LOEVINGER. This section is designed to reverse the opinion of the U.S. Supreme Court in the McKesson-Robbins case (U.S. v. McKesson & Robbins, Inc. 351 U.S. 305, 1956). Actually, despite the incredulity of, I believe, Congressman Friedel, there are, in fact, many, many instances in our contemporary economy of producers who are engaged in distribution in competition with distributors who are independent of them. Indeed, I believe that the Small Business Committee of the House is conducting hearings on the problems of so-called dual distribution.

Mr. DINGELL. And Friday next.

Mr. LOEVINGER. I am not sure when they are set, sir.

Mr. DINGELL. I happen to be a member of that subcommittee. Mr. LOEVINGER. The problem is serious enough to have occasioned some legislative concern both in the House and in the other body. In the McKesson-Robbins case, McKesson-Robbins set prices under fair trade, but also competed with its distributors who are selling the same goods. The Court said that this amounted to horizontal price fixing, and that this was forbidden under the fair trade laws.

Mr. DINGELL. The antitrust laws?

Mr. LOEVINGER. No, it was specifically forbidden under, I believe, the Miller-Tydings and the McGuire Acts, not under the fair trade laws, you are quite right. When I said a moment ago that this act does not ostensibly legalize horizontal price fixing, as a matter of fact, in this section, it does legalize horizontal price fixing because it reverses the rule of McKesson-Robbins.

Mr. George Burger, for example, who may be known to the inembers of this committee as being very active in the National Federation of Independent Businesses, has for years been complaining about the action of the large rubber companies and tire companies in establishing retail outlets competitive with the independent tire dealers.

He will be prepared. I am sure, to give the committee literally dozens and hundreds of instances of such competition. Such competition does, in fact, exist in the very fields in which the demand for legislation of this type is most often heard, so that this provision would legalize horizontal price fixing between a brand-name owner who had his own distributive outlets and the distributors who were otherwise independent of them.

Mr. DINGELL. This would also repeal legislatively the impact of Esso v. Secatore before the Federal Trade Commission, if I am correct, in a similar case?

Mr. LOEVINGER. Yes, I believe so.

Mr. DINGELL. Now, you indicated some of the vices that are inherent. I would like to turn, if I could, to the language appearing on page 2, line 12:

If goods usable for the same general purpose are available to the public from sources other than the owner of such brand, name, or trademark, and are in free and open competition therewith

This authorizes the fixing of prices under these particular circumstances, and I am wondering if you could give us any comments on the meaning of this language in the light of recent decisions of the courts dealing with free and open competition. I believe there was a case recently in Pennsylvania on this particular point wherein the court held that the manufacturer who marketed an unduly large share of commodities of a particular type sold, did not have available to him then the right to fair trade

Mr. LOEVINGER. Yes, sir.

Mr. DINGELL. Would you care to give us some comment on that? Mr. LOEVINGER. Well, I do not know what I can usefully say about this, Congressman Dingell. I would hope that if legislation of this kind is passed, that such phrase would be most rigorously and strictly construed by the courts. I would hope that if in the case even where there were a number of sources of a particular kind of goods, if these sources all took advantage of the law to fix their prices and if they fixed the same or substantially the same price, that this would be construed to be not that kind of competition which the public is entitled to, and which Congress sought to encourage, and that, therefore, this would invalidate all of such prices.

Mr. DINGELL. You submitted last year for the record a list of particular commodities wherein certain manufacturers or small numbers of manufacturers, in effect, dominated the industry. I was wondering if you would care to bring them up to date and to make such comments as you feel would be appropriate in the light of your last statement with regard to the language on lines 12 through 15 of the bill on page age 2.

I think that would be particularly helpful.

I would also like to have from you, if you find it possible, Judge Loevinger, some updating of the comments which you so capably gave during the last session of Congress with regard to the use of fair trade, the various price-fixing statutes and devices that are available on_the market for purposes of evasion or evading the antitrust laws. I am sure you probably have some more recent information to give the committee on this point.

Thank you very much, Mr. Chairman.

Judge Loevinger, I would like to commend you for what I regard

as a very splendid refutation here this morning.

Mr. STAGGERS. Mr. Van Deerlin?

respect

Mr. VAN DEERLIN. Mr. Chairman, I, of course, have great r for the number of veteran members who have sponsored this legislation.

I did, however, send copies of the proposed bill and some information concerning it to a number of businessmen in my home district, including some discount house owners, one of whom wrote to me rather strongly on the subject, including this opening gambit:

"Quality stabilization is the same old prostitute decked out in bright new party dress."

I cleaned that up a little, Mr. Chairman. I think what he was telling me was that there was no essential difference between this and earlier fair trade legislation which has gone by the boards.

Would this be your summary of the legislation, Mr. Loevinger? Mr. LOEVINGER. I do not think there is the slightest question about it, Congressman Van Deerlin. In fact, I was a little bit confused by Congressman Madden's disclaimer on this point. Congressman Madden testified to this committee that the present bill was simply a means of carrying out legislatively the principles that were expounded in the Old Dearborn case. Then he went on and said that this has nothing to do with fair trade.

However, the Old Dearborn case is the case in which the Supreme Court upheld the Illinois Fair Trade Act. It is concerned with nothing but fair trade, and if this bill has any relation to the Old Dearborn case, it must be fair trade, because that is all that the Old Dearborn case is concerned with.

Mr. VAN DEERLIN. Thank you.

Mr. STAGGERS. Thank you very kindly, Mr. Loevinger, for your testimony. I was going to suggest, since there are three members of the committee who have not had a chance to ask you questions and who do have some questions, I am wondering if you could come back tomorrow at 10 o'clock?

Mr. LOEVINGER. Yes, sir.
Mr. STAGGERS. Thank you.

The committee will adjourn until I might say this before we do adjourn. If there are any witnesses here who care to insert in the record their prepared statement who, perhaps, cannot come back tomorrow, we will be glad to have them do so now. If they have any prepared statement that they would like to insert in the record in lieu of presenting it themselves, they may do so.

Thank you very kindly. We will expect you back tomorrow at 10 o'clock.

(Whereupon, at 12 noon, the hearing was adjourned, to reconvene at 10 a.m., Wednesday, April 24, 1963.)

QUALITY STABILIZATION-1963

WEDNESDAY, APRIL 24, 1963

HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON COMMERCE AND FINANCE OF THE
COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,

Washington, D.C.

The subcommittee met, pursuant to recess, at 10 a.m., in room 1334, Longworth House Office Building, Hon. Harley O. Staggers (chairman of the subcommittee) presiding.

Mr. STAGGERS. The committee will come to order. Yesterday, when the committee adjourned, we were having testimony on H.R. 3669, and Assistant Attorney General Lee Loevinger is here to answer questions on behalf of the Attorney General this morning. I think we can finish up shortly with you, sir, if you would like.

STATEMENT OF HON. LEE LOEVINGER, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF JUSTICE-Resumed

Mr. LOEVINGER. Yes, sir.

Mr. STAGGERS. At this time, Mr. Loevinger, I believe Mr. Glenn has some questions that he would like to ask you. So we will start with Mr. Glenn.

Mr. GLENN. Thank you, Mr. Chairman.

Mr. Loevinger, in your statement on page 4, you mentioned that the survey reported in the Congressional Record in 1960 disclosed that a national organization of small businessmen had polled the small business community and found that 52 percent opposed the so-called trade laws, whereas 43 percent supported them, 5 percent undecided. Now, of course, we know that nothing gets into the Record unless it is put in there.

Mr. LOEVINGER. Yes, sir.

Mr. GLENN. Other than the testimony of what was said on the floor. Can you tell us who put this in the Record?

Mr. LOEVINGER. Yes, sir. Senator Javits.

Mr. GLENN. And can you tell us the name of this organization? Mr. LOEVINGER. I am sorry, Congressman, I cannot recollect it at the moment. One of my assistants has the clipping, but I do not think they have it here. I think it was the National Federation of Small Business, but I am not sure.

Mr. GLENN. How do you reconcile that report of this one organization with the endorsement of this bill by 70 nationally recognized trade and professional organizations which were itemized by Mr. Madden in his statement of yesterday?

91

Mr. LOEVINGER. My inquiries indicate that there is a division of opinion among small businessmen, as indeed these poll results will show. I believe that there are some organizations the leadership of which is very much convinced that legislation of this sort is desirable, and which, year after year, support it.

I am equally convinced that a majority of small businessmen themselves are opposed to it. This is reinforced by the other survey of the National Federation of Independent Businessmen referred to in my statement, which, as far as I know, is far and away the most extensive survey that has ever been taken.

Incidentally, the National Federation that took this survey was a fair trade advocate. It has carried the term "Fair Trade" on its masthead as an indication of its advocacy of this approach.

However, when it polled approximately 200,000 small businessmen in every one of the 50 States, it found that a slight majority was opposed.

I have spoken to the leaders of some of the larger organizations, and also to a number of businessmen, and I am persuaded that small businessmen themselves do not uniformly support this by any means.

It is, of course, very difficult to say that there is a majority one way or the other. This would require a very careful and rigorous survey; and so far as I know, this sort of thing has not been done. I doubt that anyone except the U.S. Government has the resources to do it.

Mr. GLENN. In the recitation yesterday, you also said that you were going to limit your statement to the facts rather than citation of legal principles and cases, and yet, reading your statement, it seems to me that rather than a recitation of fact it is conclusions. Do you not think that these are your conclusions after considering what facts you wanted to consider in the preparation of this very fine brief?

Mr. LOEVINGER. No, sir, I do not. I think that this is the most factual statement that has been presented to this committee on the subject.

I know of no other presentation to this committee on this subject in which a similar effort has been made to examine the hard-core figures. There is a good deal of talk, particularly among the advocates of the legislation, about the plight of small business, about the necessity for helping small business, about the value of small business to the country. With all of those statements the Department of Justice and I completely concur. We agree with all of the encomiums about small business that have been given. We agree that small business needs help and should be helped.

What is notable in those statements is a complete absence of any careful analysis of the operation of the proposed legislation, of the means by which it would affect small business, and finally of any pragmatic attempt to investigate what the actual effect of such legislation has been where it has been in operation.

We have undertaken to examine the actual operation of this proposed legislation. And this can be ascertained; this is not speculative or hypothetical, because such legislation has been in operation in many States and over relatively long periods of time.

We have also examined the results of that operation. Our examination wholly persuades us that, far from helping small business, what this proposed legislation does is handicap small business and result