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Street and see dozens and dozens of stores that are closed just on account of what we are complaining about here today, and, no doubt, maybe this same thing exists in his district. I do not know, but it does in mine. This legislation will help the small manufacturer, retailer, and consumer.
Mr. STAGGERS. Mr. Van Deerlin?
Mr. STAGGERS. The next witness will be our colleague from the Senate, the Honorable William Proxmire, Senator from the State of Wisconsin.
Senator, you are welcome to the committee.
STATEMENT OF HON. WILLIAM PROXMIRE, A U.S. SENATOR FROM
THE STATE OF WISCONSIN Senator PROXMIRE. Thank you very, very much, Mr. Chairman. I appreciate your letting me appear. I apologize for not having copies of my statement. Unfortunately, we had to put this together in a brief period, and I have one copy for the reporter.
In the first place, I have a short statement; it is only four pages, double spaced; but I would like to say, if I might, in reply to the distinguished Member of the House, Mr. Dingell, that I would agree with Mr. Madden wholeheartedly. Mr. Madden has been a great champion of this bill. I think he has done a marvelous job. I feel that in a real sense this is not price fixing, because page 2, lines 12 to 15, in the bill
Mr. Staggers. I would rather you give your statement, if you would, and then we will propound questions.
Senator PROXMIRE. All right, sir.
No measure before the Congress this year, or last year, or in the past 20 years will do more for the benefit of more small businesses than the quality stabilization bill which I support today.
This is a bill that helps small business not by weakening or destroying competition but by strengthening it; not by eliminating any area of competition between competing retail establishments, but by strengthening competition.
Of all the areas of American business, the retail stores have been the most characteristically small business. These retail stores are in trouble, and I mean serious trouble, today, as I am going to indicate. The overwhelming majority of stores and shops all over America are still small business, usually family business operations. The vast majority of American small businessmen are retail merchants.
Here in the retail business is where the backbone of American democracy really is; in American small cities, towns, and villages, he represents the social, political, and moral leadership. In most American communities he provides the community spirit that builds our towns, the chambers of commerce, Kiwanis Clubs, Lions Clubs. The leadership, the time, the energy, and the money come from him.
Behind this vital community leadership is the wonderful family life that the small store provides. Like the family farm, the family business offers an ideal moral climate for the development of the invaluable qualities of character and morality. The energy-demanding work of the family store virtually eliminates juvenile delinquency. The qualities of thrift, industry, business sense, are developed and nurtured in the family atmosphere. The family store is an immensely valuable American institution. If any economic institution can be said to deserve preservation, certainly the family store is it.
Even if it were an economically inefficient operation, the argument for preserving and protecting the family store would be a strong one. But like the family farm, it is not inefficient. It is efficient. It has proven itself repeatedly. It lacks one important survival asset in our competitive economy, however, and that is capital, just like the family farm lacks capital. This lack of capital means that the large competitor, the chainstore or massive supermarket or big discount house, even if less efficient, can engage in price-cutting operations until the little business is driven out.
Cutthroat competition for the small businessman is increasing. The trend is toward more and bigger discount chains. While the pricing policies of the discount houses have a deceptive attractiveness, the long-range result is almost certain to be reduced competition, greater economic concentration, and higher prices.
The Quality Stabilization Act protects the consumer against higher prices and poor service by encouraging independent retailers and strengthening fair competitive practices. Unfair practices increase the rate of failure of independent neighborhood stores and specialist shops.
The consumer, so far as service is concerned, would lose some convenience in the decline of these neighborhood stores. Also, he would have less of the specialized services he now enjoys from retailers. In particular, the service and repair facilities at present available for several makes at the same place, the store, or the independent repair shop, would be curtailed.
So far as prices are concerned, almost every study has shown that where fair competitive practices have been abandoned, it has not meant any reduction in the average level of retail prices. There are some indications that average prices decline when fair competitive practices are instituted.
One famous study by H. F. Ostlund and C. R. Vickland compared retail prices in a period of time (March to September 1939) when retail price maintenance was efl'ective in most States with a date immediately before it was introduced. Their research covered 50 wellknown brands sold in drugstores in 48 stores. The result was an average drop of 0.9 percent in the retail prices of those brands after fair competitive practices became effective. Chainstores tended to raise their prices and other stores to reduce theirs.
In addition to these economic considerations, there are some serious social questions involved. I do not believe that inefficient small businesses should be protected. I do feel very strongly, however, that
when we look around the world and see the revolutionary results which flow from these social practices which concentrate economic power in the hands of a few gigantic companies or corporations, that we should be thankful for our small business community.
I am sure every member of this committee is aware of the fact that in every small town you go, the backbone of the community, the people who really provide the community responsibility and the leadership in the community in every kind of drive and every kind of community effort, are the small business people--the local druggist, the local hardware merchant, the local photo dealer—the local people who own their stores. These are the people who take pride in their community and are so tremendously important in that community.
Today, we are concerned with the small business retailer, and I respectfully suggest that the Quality Stabilization Act is a sound way to insure that we will continue to have diversification and competition in retailing by strengthening the small business community.
Competition is much more than price competition. There is competition for location, competition for service, competition in all kinds of ways. But price competition can destroy other kinds of competition. This bill's purpose is to continue coinpetition on the basis of availability to the consumer of our honored brand-name products in the broadest possible, yet fair, way.
The New York Times, in its August 19 issue last year, reported that the New York metropolitan area, some 10 years ago, in 1950, had 153,000 shopkeepers; that is, 153,000 people who were classified as managers, corporate officials, and proprietors in retail trade. By 1960, 10 years later, although the population had increased substantially, and although sales had enormously increased, the number of retail merchants had dropped from 153,763 to only 66,474. In other words, there are now fewer than half as many small business retail operators in New York as there were 10 years ago. This is perhaps our greatest retailing area in the country.
It seems to me that this startling, stubborn fact--that small business simply is not surviving in the retail area-should be brought home to the American people and to the Congress.
This quality stabilization bill is not only designed to help eliminate pricing practices that so damage both the brand name owner and the ethical retailer, this bill is also designed for protection of the consumer.
Paragraph 8 is the heart and soul of this bill. Paragraph 8(A) deals with bait-merchandising practices and (C) deals with misrepresentation. Thus, two-thirds of the practices at which this bill is aimed are designed primarily to protect the consumer.
Add to this the further provision of paragraph 8, giving the consumer a right of action where he has been injured as the result of misrepresentations by the manufacturer as to the size, capacity, quality, condition, model, or age of the goods, and it should leave no doubt in anyone's mind that this quality stabilization bill is indeed consumer oriented.
I assure you I intend to work hard for the passage of this quality stabilization bill. I urge you to give it favorable consideration in your subcommittee at the earliest possible date.
I might say, Mr. Chairman, that last year the Senate subcommittee reported this bill to the overall committee by a unanimous vote, 4 to 0. It is my understanding that, as Mr. Madden said, Senate floor action was not taken because it was late in the session, and the bill never did reach the Senate floor. It never did come out of the committee.
Now, if I could be permitted to, I would like to make just one brief statement in answer to our distinguished colleague, Mr. Dingell, for whom I have the greatest respect. He is an outstandingly fine Congressman.
I want to call to your attention, Mr. Dingell, page 2, lines 12 to 15, which say:
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 therewiththen the price may be established.
Now, what this means, it seems to me, is this is not price fixing in the sense that any manufacturer is able to fix the price of all toothpaste or fix the price of one toothbrush or anything of that kind. He can establish his own price, but he can only do that when his commodity is in competition with other goods, and when he does that, it is at his own risk, and he recognizes that if he prices it too high, he is not going to have the market.
I want to thank you, Mr. Chairman, for this opportunity to appear. I appreciate it very much.
Mr. STAGGERS. Thank you, Senator.
Senator PROXMIRE. I think Senator Humphrey is the principal sponsor. I have introduced this bill, or a similar bill, in the last three sessions, along with Senator Humphrey and Senator Capehart, Senator Scott, and others.
Mr. STAGGERS. I notice that you say the chainstores are the ones who are driving small businesses out of business.
Senator PROXMIRE. Well I feel that in recent years it has been the huge discount houses that are, perhaps, responsible to some extent, although you cannot blame them. I think that they are doing a perfectly understandable job and a good job, and, after all, a business enterprise exists under our laws and people can go in and make honest money by competitive action—that is legal, they have every right to do it.
But I feel that in some cases these methods have been very deceptive and people have been lured into these stores with the notion that they are getting a bargain, and if they do very careful, responsible price comparison, they will find that the prices they pay are no lower in many cases than they pay elsewhere.
But you know the old system. There will be an item that is sold at $50 with $88 crossed off, the feeling that you get a big reduction in price, but actually a misunderstanding on the part of the purchaser.
Mr. Staggers. I would like to clear this up. In your direct pro
sentation you maintain that the chainstores and now you say, "the discount houses.” We do not have any discount houses in our area. We, however, have chainstores operating there. Yet we have a lot of small groups that are going out of business. Could we attribute that to the activities of the chainstores?
Senator PROXMIRE. I think that there are many reasons for it. I think that one of the principal reasons, however, is the fact that the manufacturer is not able to establish a price for his competitive product that will enable the little businessman to have an adequate margin so that he can live, so that he can continue to exist.
Mr. STAGGERS. Do not some of the chainstores do this: buy from the big producers and then resell under their own name many of these products, such as, for instance, Sears buys from one of the tire companies and sells the tire, then, under their own name?
Senator PROXMIRE. I have absolutely no objection to that. Under this bill they would be free, as long as they put their own name on merchandise, they can make any price they want to. But it is my
inderstanding that, by and large, when this is done, usually-if you study these very carefully-I am not an expert in this field, but I understand the price advantage is not great, the price advantage to the consumer, if there is any at all, indeed.
What I am talking about is when they sell under the established brand name, and they sell a few commodities, and usually they are very few, for less in some cases than the ordinary retailer can pay for them. But they sell enough to get people into the store.
Then, when they come into the store, it appears that everything is a bargain, because they have it marked down in a way that I do not think is responsible and in some cases not honest.
Mr. STAGGERS. I might say to you, Senator, I will listen to this committee, as other members will, and then make up my mind.
Senator PROXMIRE. Thank you very much, Mr. Chairman.
Mr. STAGGERS. When you say the chainstores, the big producers of this Nation sell to the large retailers, and the chainstores have a farreduced price as compared with the small businesses.
Is that not the practice—that they are sold to them at a greatly reduced price?
Senator PROXMIRE. Yes. I think this is a difficult area to make a completely fair judgment. I think that you can make a justification for their selling at a lower price if there is real economy in the quantity which they sell, but I think that there are many cases where this is because of the economic power of the particular chain operation.
In other words they drive a very hard bargain, so that some manufacturers might sell to the chain at a price which cannot be justified on an economic basis, but it is justified on the basis of simply the negotiating power of the chain.
Now, I do not say that this bill would solve all these problems. It would not.
Mr. STAGGERS. No.
Senator PROXMIRE. But it seems to me it would permit an opportunity for the small businessman to have a somewhat better chance to have a fair and honest break.