believe to be the unintended and burdensome result of subjecting railroads and other common carriers to fair trade restrictions in disposing of goods where delivery in accordance with the transportation contract and tariff cannot be made, irrespective of the fault of any party to the contract. Such restrictions would serve no useful purpose and would be burdensome in interstate commerce. The Interstate Commerce Act makes it the duty of common carriers to enforce just and reasonbale practices relating to or connected with receiving, handling, transporting, storing and delivering property subject to that act. The uniformity thus effected by the national transportation policy should not be impaired. STANLEY A. WEIGEL, Esq., CALIFORNIA PHARMACEUTICAL ASSOCIATION, Messrs. Landels, Weigel & Ripley, 275 Bush Street, San Francisco, Calif. DEAR MR. WEIGEL; At the request of our board of directors and president, we ask that you appear as a witness on our behalf at the hearings to be held on H. R. 10527 before the Subcommittee on Commerce and Finance of the House Committee on Interstate and Foreign Commerce commencing April 29 next in Washington, D. C. In asking that you be good enough to act for us in that capacity in connection with the measure (and in any other appropriate manner you deem advisable) you have in mind, of course, that our association comprises in its membership preponderantly more than a majority of the drugstores in our State and that, in addition, our membership includes hundreds of licentiates of pharmacy, who are not drugstore owners. I think it conservative to state that since 1868, to which year the roots of this organization go, and particularly since the creation of our more formal organization in 1906, our association has been recognized as the voice of pharmacy for the entire State of Califonria. There is no rival or competitive organization to ours in the State. We are delighted indeed that you have indicated to us your acceptance of this service in our behalf, the more so because of your nationwide recognition as an effctive champion of the preservation of the independent businessman in the American economy. Sincerely yours, CLERK OF THE COMMITTEE, CECIL A. STEWART, RAWLINGS PHARMACY, Commerce and Finance Subcommittee of the House Interstate and Foreign Commerce Committee, New House Office Building, Washington, D. C. DEAR SIR: I wish this statement to be included in the printed record of the hearings in lieu of a personal appearance at the hearings of H. R. 10527. I am speaking in support of this bill, because I live in a State in which portions of the fair-trade laws have been declared unconstitutional, which in effect, renders our whole bill ineffective. The results are, that my business as a very small-business man in a very small town has been noticeably lessened. I have observed, that without fair-trade laws, the large superstore or chainstore type of business has the advantage of buying in quantity at larger discounts and therefore can sell at prices lower than I can buy. Although there is no such competitive business in my town, I have also observed that if a small town lies within 20 miles of a city with such large store operations, the easy transportation facilities available today bring the small-town businesses within the scope of/or influence of such large store operations. If this is true in my business it must also be true in other businesses. In checking with a nearby large town, I find that the highly advertised merchandise has been cut to the bone (and sometimes even below cost) to attract trade. When a certain type of business must operate at a certain average gross profit to exist and some of its merchandise is cut below this figure it is obvious that other items must be raised in price to maintain this average gross profit. In the drugstore, could this increased price be on prescription medicine which has a hidden value in the eyes of the public? In the appliance business, could it be in installation fees and service charges, which are intangible values? In the auto sales business, could it be in the high finance charges, repairs, service, and parts? Every business has some phase which can readily pay for the reduced prices in hot items, by excessive charges for others. This causes people who are sick to have to pay the profit for someone else's purchase of cosmetics, toothpaste, etc., the man who can't afford a new car or radio to pay for part of someone else's new car or radio when he gets his old one fixed up. This is not the American way of life. Our economy is based on set prices which gives a fair degree of competition for all as well as a fair price for all. Without some form of fair-trade law or prices big business gets bigger and small business goes out of existence. From the manufacturer's point of view, his product is cheapened in the eyes of the consumer when the price of it is kicked around and constantly cheapened below the advertised price for the quality it is supposed to represent. Again I wish to say that I support the bill and do not want to go back to the market place haggling of the Middle East, the Ghetto, and the Orient. Respectfully, CHARLES T. RAWLINGS. Mr. MACK. The committee will stand adjourned until 10 o'clock Tuesday morning. (Whereupon, at 1:40 p. m., the committee adjourned to reconvene at 10 a. m., Tuesday, May 6, 1958.) FAIR TRADE TUESDAY, MAY 6, 1958 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON COMMERCE AND FINANCE OF THE COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE, Washington, D. C. The subcommittee met, pursuant to call, at 10 a. m., in room 1334 New House Office Building, Representative Peter F. Mack, Jr. (chairman of the subcommittee) presiding. Present: Representatives Mack, Dollinger, Avery, and Alger. We have several statements which will be included in the record at this point. (The statements referred to follow :) DISTRICT OF COLUMBIA PHARMACEUTICAL ASSOCIATION, INC., Hon. OREN HARRIS, Chairman, Subcommittee on Commerce and Finance, April 25, 1958. DEAR SIR: The District of Columbia Pharmaceutical Association desires to go on record as favorably endorsing H. R. 10527, the Harris bill. Very truly yours, HAROLD C. KINNER, STATEMENT ON H. R. 10527 ON BEHALF OF THE NATIONAL ASSOCIATION OF RETAIL CLOTHIERS AND FURNISHERS PRESENTED BY LOUIS ROTHSCHILD, EXECUTIVE DIRECTOR My name is Louis Rothschild and I am executive director of the National Association of Retail Clothiers & Furnishers. This is the national trade association, in existence over 45 years, of retailers of men's and boys' wear with headquarters at 1006-10 Munsey Building, Washington, D. C., with over 2,400 members throughout the country. Retailers of men's and boys' wear have historically been in favor of the principle of fair trade. As typical small retailers a great part of whose business is in national brands, they have a vital interest in protecting the harmonious relationship which has been built up over the years between manufacturers of brand name men's wear merchandise and their historic outlets, which are primarily independent, small men's wear stores. The latest Census Bureau reports show approximately 17,000 individual men's and boys' wear stores. Over half of these merchants do a total annual volume of under $100,000, demonstrating that this is truly small business. A survey several years ago by our Association indicated that of furnishings sales over 60 percent was in nationally known brand name goods generaly sold at either fair trade or manufacturer suggested resale prices. A large part of this distribution is on a franchise basis, with in many instances the merchant having an exclusive on the brand name either in his community or in his area. In many cases, there has been a virtual partnership between the manufacturer of recognized name men's wear and his regular retail outlets. The brand name has been built to present high public esteem through the close cooperation of the manufacturer and the historic retail outlet. Untold huge sums in the aggregate have been spent by both in advertising and promotion, in publicizing the name and making it desired and acceptable by the buying public. In past years there has been very little price cutting or unauthorized distribution of brand name men's wear, and the entire industry is to be congratulated on the way manufacturers and retailers have worked together in mutual interest. While we have historically been in favor of the principle of fair trade, because of the harmonious relationship which has existed, our interest in the past has been largely theoretical. As a matter of fact, in the past comparatively few manufacturers in our field have found it necessary to actually "fair trade" their lines. Our problem, in the past has not been as acute as have those of fellow merchants in the drug, cosmetic, food, appliance, and other fields. We are now threatened with a disruption of this ancient satisfactory relationship. We now have reason to take a stronger position in favor of the strengthening of fair trade and legislative relief from the Congress to plug up the holes in the dikes which have appeared. We now fear an encroachment of price cutting in brand name goods in the men's apparel field. Evidence is already apparent of widespread bootlegging of brand name goods into unauthorized retail outlets offered to the public at cut prices. The present primary culprits are the so-called discount houses. This type of merchandising distribution had its origin in so-called hard goods and particularly appliance selling. It is common knowledge that price competition started by discount sellers has resulted in a chaotic situation in this industry. In those fields manufacturers have been forced to disrupt their historic distributorretailer relationships. In many instances, hard goods manufacturers have admitted that they have abandoned fair trade and the retailers who helped them to their present prominance with extreme reluctances. They said they were forced to their present cutthroat selling by three elements: Competition, the inability to enforce fair trade, and the court decisions emasculating the law in many States. It can be argued that this price competition contributed to the present recession which is so emphasized in hard goods. The demand for hard goods on the part of the consumer was surfeited and saturated by the price competition begun by discount sellers and adopted by other distributors in an effort to meet competition. Now that hard goods are so difficult to sell, discount operators are casting envious eyes at soft goods including men's wear. They are looking to new fields to plunder for the sake of immediate profit regardless of how they affect ancient manufacturers and retailers who have devoted generations into the building of reputation and respect. Recently one almost national chain of discount houses announced that in the coming year they hope to do 40 percent of their growing volume in soft goods, which means apparel. The public will not buy no-name apparel except from a retail merchant in whom they have confidence. The only way discount houses and other cut-price outlets can attract consumers for apparel and particularly men's wear is if they can obtain nationally known brands. They themselves have no reputation to offer, but must trade on the reputation of others. Brand-name manufacturers in the men's wear field almost unanimously refuse to sell their goods to known price cutters. They recognize their responsibility to the recognized retailers who for years have been their source of growing distribution. They also recognize that price wars on their merchandise will kill their good name. Regular retailers will be unable to meet the price competition, thus they will be forced to stop handling brand names featured by competitors at discounts. This will cause discontinuance of advertising and promotion of the brand name at the retail level, which is the primary avenue by which these names became recognized and respected by the consumer. By and large, the brand-name men's wear merchandise which has appeared recently in cut-price outlets has been bootlegged. The manufacturer has not sold the retailer. The goods have been obtained by devious means. For example, in New York City, 400 name men's jackets appeared in a discount house. By tracing, it was found that these jackets were bought by a small regular retailer in a suburban area who for a small fee was acting as secret purchasing agent for the price cutter. He was selling his birthright for a small mess of pottage. To protect themselves and their friends, their regular retailers, recently a number of brand-name manufacturers in the men's wear field have gone into fair trade for the first time. This is the reverse of the trend in the appliance field. In those States where fair-trade laws are still effective, protection has been obtained, but as will appear abvious to this committee, legislation is needed to make fair trade nationally effective. Dis The men's wear field is threatened by other competitive encroachment. count houses are only setting the pace. Supermarkets and food chains are experimenting with soft goods, including men's wear, enticed by the hope of higher markups. The historic men's wear merchant, of course, has no inherent monopoly. But these new sellers of apparel to receive public recognition must handle brand names-names which have been built up through the blood, sweat, tears, and money of not only the manufacturer, but also of the oldtime merchant. And they must cut price the brand-name goods. This is contrary to the desires of the manufacturer who owns the brand. It presents not a case of a merchant desiring to extend the lines of goods he will sell, but a case of commercial sabotage which would result in the eventual ruination of the manufacturer and the merchant alike. Therefore, it is obvious that the National Association of Retail Clothiers and Furnishers favors H. R. 10527. We favor the principle of permitting manufacturers, who with the help of retailers have built up a recognized name, in protecting that name for the salvation of their partners-the merchant-and of themselves. It is for this reason that the following resolution was approved not only by our board of directors, but by our membership at the recent convention of this association in Chicago: The National Association of Retail Clothiers and Furnishers has historically been on record in favor of Federal fair-trade laws. We recognize that legal decisions have recently impaired the effectiveness of such laws. We go on record in favor of some legislative action to plug the holes in the dikes of Federal fairtrade laws. STATEMENT BY CHESTER INWALD, GENERAL COUNSEL, NATIONAL ASSOCIATION OF TOBACCO DISTRIBUTORS, INC. My name is Chester Inwald and I am general counsel to the National Association of Tobacco Distributors, Inc., whose members represent the wholesale trade which supplies in excess of $6 billion in cigarettes, tobacco, and related products annually to more than 1,400,000 retail outlets throughout the United States. I make this statement in behalf of Mr. Joseph Kolodny, the managing director of the association, as expressing the considered viewpoint of the officers, directors, and members of this significant distributive group. Since cigarette manufacturers, whose products represent the major source of our members' business, have not in the past subscribed to fair trade practices and there is no indication that, even with Federal sanction, they will do so in the future, the National Association of Tobacco Distributors has been able to approach the problem of resale price maintenance with calm and objective dispassion. Our approval of the purposes and intent of the bill introduced by Mr. Harris, H, R. 10527, is motivated not by a belief in economic gain that might inure to our members or their customers, but rather by considerations of equity and justice. No entity active in the field of distribution can fail to be aware of the harm done to society at large by unscrupulous selling below cost. It has been the consistent position of our association that a sale below cost is a form of commercial fraud practiced by unscrupulous merchants upon a gullible public. As so tellingly stated by Mr. Justice Brandeis in an article appearing more than half a century ago in Harper's: "Americans should be under no illusions as to the value or effect of price cutting. It has been the most potent weapon of monopoly-a means of killing the small rival to which the great trusts have resorted most frequently. It is so simple, so effective. Farseeing organized capital secures by this means the cooperation of the shortsighted, unorganized consumer to his own undoing. Thoughtless or weak, he yields to the temptation of trifling immediate gain; and selling his birthright for a mess of pottage, becomes himself an instrument of monopoly." |