chandise upon which a proprietor has established a particular stipulated or minimum resale price crosses State lines at any stage of distribution, these provisions shall apply to all his identified merchandise to which that price applies" and that, if "no substantial part" crosses State lines, they shall not apply. New paragraph (8) would provide for defenses to an alleged violation of proposed paragraph (5). New paragraph (9) of section 5 (a) would amend the existing paragraph (6) and would provide that "all distributors of the merchandise of the same proprietor sold under the same mark or name may cooperate with him in maintaining the stipulated or minimum prices established by him, or his sole distributor specifically authorized for that purpose, and no such cooperation shall constitute an unreasonable or unlawful contract or combination in restraint of trade." The apparent purpose of this proposed legislation is to greatly expand the present so-called Federal fair-trade laws, i. e., the Miller-Tydings and McGuire Acts, which are considered enabling legislation in that they merely exempt from the provisions of the Federal antitrust laws and the Federal Trade Commission Act under specified conditions fair-trade contracts and the exercise or enforcement of rights of action created by State law. However, the instant bill purports to grant a Federal right of action. Not only that, but any person damaged by a violation of paragraph (5) would be permitted to sue "in any State or Federal court of competent jurisdiction." Several States have not enacted fair-trade laws, and others have held the State fair-trade law to be unconstitutional. This bill seeks to enable persons to use the courts of these and other States to enforce resale price maintenance. This would appear to be an unwarranted encroachment on the sovereignty of such States, and the authority of Congress to confer such rights, we feel, is open to serious question. While the bill contains a number of ambiguities which would raise problems with respect to its application and enforcement, of serious concern to the Department of Justice is that part of paragraph (9) which seeks to exempt from the antitrust laws "cooperation" in maintaining stipulated or minimum prices by "all distributors of the merchandise of the same proprietor sold under the same mark or name." Since, by the terms of the bill, it would be lawful for a proprietor to establish and control resale prices on merchandise merely by the giving of actual notice, an exemption such as that provided for in paragraph (9) would, we feel, amount to practically an indirect repeal of the Sherman Antitrust Act. There would seem to be nothing except the vague requirement that merchandise be "in free and open competition with articles of the same general class produced by others" to prevent all manufacturers of merchandise from establishing resale prices for their products. Once established, they could obtain cooperation from all of their distributors in maintaining such prices and such cooperation would appear to include boycotts, intimidations, coercion, and the like. Furthermore, under section 5, schedules of resale prices "with reference to any criteria not otherwise unlawful" could be established. And this could be done, even though a manufacturer competed with his distributors, so long as he sells at the applicable prices he has established for distributors making "comparable sales." The Sherman Act has been called our charter of economic freedom. This proposed legislation, particularly in view of its exemption features, is totally inconsistent with the terms of the Sherman Act and this Nation's concept of free competition. Enactment would be an affirmative approval by Congress of the elimination of competition, and would result in a serious weakening of the Sherman Act. It is through the basic American principle of free competition that our economy has kept dynamic and vigorous. Absent competition in price, the substance of true competition is lost. The bill would suppress competition at the manufacturing level and at all levels of distribution. Obviously, competition would be eliminated at the retail level, since this is the apparent purpose of the bill. It would also be suppresed at the distribution level, even when the manufacturer himself is competing with his distributors. Although the bill, ostensibly, would prohibit other horizontal agreements, the same result could be achieved by competing proprietors establishing similar resale prices. This is particularly true when all distributors are authorized to cooperate with their proprietors in maintaining fixed resale prices. In summary, the language of H. R. 10527 is so broad that it would seem that virtually every item used by consumers in their day-to-day living could be the subject of resale price maintenance-prefabricated or mobile homes, automobiles, appliances, clothing, packaged foods, drugs, etc. This bill would enable price chandise upon which a proprietor has established a particular stipulated or minimum resale price crosses State lines at any stage of distribution, these provisions shall apply to all his identified merchandise to which that price applies" and that, if "no substantial part" crosses State lines, they shall not apply. New paragraph (8) would provide for defenses to an alleged violation of proposed paragraph (5). New paragraph (9) of section 5 (a) would amend the existing paragraph (6) and would provide that "all distributors of the merchandise of the same proprietor sold under the same mark or name may cooperate with him in maintaining the stipulated or minimum prices established by him, or his sole distributor specifically authorized for that purpose, and no such cooperation shall constitute an unreasonable or unlawful contract or combination in restraint of trade." The apparent purpose of this proposed legislation is to greatly expand the present so-called Federal fair-trade laws, i. e., the Miller-Tydings and McGuire Acts, which are considered enabling legislation in that they merely exempt from the provisions of the Federal antitrust laws and the Federal Trade Commission Act under specified conditions fair-trade contracts and the exercise or enforcement of rights of action created by State law. However, the instant bill purports to grant a Federal right of action. Not only that, but any person damaged by a violation of paragraph (5) would be permitted to sue "in any State or Federal court of competent jurisdiction." Several States have not enacted fair-trade laws, and others have held the State fair-trade law to be unconstitutional. This bill seeks to enable persons to use the courts of these and other States to enforce resale price maintenance. This would appear to be an unwarranted encroachment on the sovereignty of such States, and the authority of Congress to confer such rights, we feel, is open to serious question. While the bill contains a number of ambiguities which would raise problems with respect to its application and enforcement, of serious concern to the Department of Justice is that part of paragraph (9) which seeks to exempt from the antitrust laws "cooperation" in maintaining stipulated or minimum prices by "all distributors of the merchandise of the same proprietor sold under the same mark or name." Since, by the terms of the bill, it would be lawful for a proprietor to establish and control resale prices on merchandise merely by the giving of actual notice, an exemption such as that provided for in paragraph (9) would, we feel, amount to practically an indirect repeal of the Sherman Antitrust Act. There would seem to be nothing except the vague requirement that merchandise be "in free and open competition with articles of the same general class produced by others" to prevent all manufacturers of merchandise from establishing resale prices for their products. Once established, they could obtain cooperation from all of their distributors in maintaining such prices and such cooperation would appear to include boycotts, intimidations, coercion, and the like. Furthermore, under section 5, schedules of resale prices "with reference to any criteria not otherwise unlawful" could be established. And this could be done, even though a manufacturer competed with his distributors, so long as he sells at the applicable prices he has established for distributors making "comparable sales." The Sherman Act has been called our charter of economic freedom. This proposed legislation, particularly in view of its exemption features, is totally inconsistent with the terms of the Sherman Act and this Nation's concept of free competition. Enactment would be an affirmative approval by Congress of the elimination of competition, and would result in a serious weakening of the Sherman Act. It is through the basic American principle of free competition that our economy has kept dynamic and vigorous. Absent competition in price, the substance of true competition is lost. The bill would suppress competition at the manufacturing level and at all levels of distribution. Obviously, competition would be eliminated at the retail level, since this is the apparent purpose of the bill. It would also be suppresed at the distribution level, even when the manufacturer himself is competing with his distributors. Although the bill, ostensibly, would prohibit other horizontal agreements, the same result could be achieved by competing proprietors establishing similar resale prices. This is particularly true when all distributors are authorized to cooperate with their proprietors in maintaining fixed resale prices. In summary, the language of H. R. 10527 is so broad that it would seem that virtually every item used by consumers in their day-to-day living could be the subject of resale price maintenance-prefabricated or mobile homes, automobiles, appliances, clothing, packaged foods, drugs, etc. This bill would enable price rigidity by proprietors which would not necessarily take into account the changing economic conditions of a free competitive system. We feel Congress should give very serious consideration to whether it desires to enact legislation like H. R. 10527, which would, in effect, repeal, pro tanto, the Sherman Antitrust Act and drastically change the basic concepts of our competitive economy. In the light of the foregoing considerations, the Department of Justice is opposed to the enactment of the bill. The Bureau of the Budget has advised that there is no objection to the submission of this report. Sincerely yours, Hon. OREN HARRIS, LAWRENCE E. WALSH, THE SECRETARY OF COMMERCE, Chairman, Committee on Interstate and Foreign Commerce, House of Representatives, Washington, D. C. DEAR MR. CHAIRMAN: This letter is in reply to your request, dated February 7, 1958, for the views of this Department with respect to H. R. 10527, a bill to amend the Federal Trade Commission Act, as amended, so as to equalize rights in the distribution of identified merchandise. The subject bill would rewrite the McGuire Act (66 Stat. 632) along the following lines: Under this bill, a "proprietor" is one who identifies merchandise manufactured or distributed by him by the use of his trademark or trade name. A proprietor is deemed to retain a proprietary interest in such merchandise after he has sold it to distributors, by reason of his interest in stimulating demand for such merchandise through effective distrbution to ultimate consumers, and by reason of his further interest in the trademark or trade name identifying his products. A distributor is a proprietor of merchandise which he identifies, and of merchandise which the manufacturer identifies, when he is a “distributor specifically authorized by the manufacturer to establish resale prices for such merchandise." It would be lawful for a proprietor to establish and control, by actual notice to his distributors, stipulated or minimum prices of his merchandise which is in free and open competition with articles of the same general class produced by others. "Actual notice" of established resale prices includes notice imparted by mail, or through advertising, or through notice attached to merchandise, or containers, packages, or dispensers thereof, or imparted orally. It would be unlawful for any person with actual notice of any applicable minimum resale price to sell, offer to sell, or advertise merchandise in commerce at a lower price except: for closing out stock; damaged merchandise; under a court order; merchandise acquired prior to actual notice; or to charitable institutions or Government agencies, not for resale to the consuming public. Provision would be made against price fixing between proprietors, manufacturers, producers, wholesalers, brokers, or others in competition with each other; and against two or more proprietors or distributors taking joint action in establishing resale prices for competing commodities sold under different trademarks or trade names. All distributors of the merchandise of the same proprietor sold under the same mark or name could lawfully cooperate in maintaining the stipulated or minimum prices. In brief, the enactment of H. R. 10527 would amend section 5 (a) of the Federal Trade Commission Act in such a way as to constitute a Federal fair trade law effective throughout the United States, save and except those States or Territories which do not sanction resale price maintenance. The Department of Commerce recommends against enactment of H. R. 10527. In our view, the proposed enactment would constitute an endorsement by the Federal Government of price fixing by the manufacturer through the entire distribution process, rather than acquiescence by deference to State authority (as under present legislation) in those States which authorize fair trade. Further, it would specifically establish a retention of a proprietary interest by the manufacturer after outright sale of his goods and during a succession of changes of ownership at all levels of trade. In our opinion this would be a dangerous precedent, contrary to current concepts of property rights. The Bureau of the Budget has advised that it would interpose no objection to the submission of this report to your committee. Sincerely yours, SINCLAIR WEEKS. Secretary of Commerce. EXECUTIVE OFFICE OF THE PRESIDENT, Hon. OREN HARRIS, BUREAU OF THE BUDGET, Washington, D. C. May 13, 1958. Chairman, Committee on Interstate and Foreign Commerce, House of Representatives, Washington, D. C. MY DEAR MR. CHAIRMAN: This is in reply to your letter of February 7, 1958, requesting the views of this office with respect to H. R. 10527, a bill to amend the Federal Trade Commission Act, as amended, so as to equalize rights in the distribution of identified merchandise. The Departments of Commerce, Justice, and Agriculture, and the Federal Trade Commission have raised important objections to H. R. 10527. The Bureau of Budget is in general agreement with the views of these agencies and recommends against enactment of the legislation. DEAR CONGRESSMAN HARRIS: Your letter of February 7 asked for our comments on H. R. 10527, a bill to amend the Federal Trade Commission Act, as amended, so as to equalize rights in the distribution of identified merchandise. As we understand it, the present Federal Trade Commission Act recognizes the right of manufacturers to prescribe minimum or stipulated prices for identified products as long as such right is recognized by the State, but the act does not affirmatively establish such right regardless of State legislation in the field. H. R. 10527 would provide for notice by a "proprietor" to his distributors specifying stipulated or minimum resale prices on his merchandise and would make it unlawful for any person with actual notice of such a stipulated or minimum price to fail to observe it. This would have the effect of establishing a Federal policy concerning the legality of such resale price arrangements which would prevail regardless of State legislation, with affirmative provision being made for actions for damages and injunctive relief for violation thereof. The Department of Agriculture does not favor passage of this bill. In general, the Department of Agriculture has opposed various efforts to fix minimum retail prices. The Department believes that competition, including price competition, is healthy throughout the distributive system and should be encouraged rather than prevented. Most farm products are not identified by trademark or brand name. It would not be practicable for the producer or distributor to enforce resale price arrangements for such unidentified products. On the other hand, many of the commodities farmers buy are identified by trademark or brand name. Farmers would like to see more price competition in the markets for the goods they buy. The Bureau of the Budget advises that there is no objection to the submission of this report. Sincerely yours, E. T. BENSON, Secretary. Mr. MACK. I would like at this time to permit our colleague, Mr. Friedel, who is a member of this committee the opportunity of testifying first this morning. I understand that his statement is rather short. Mr. Friedel has given a lot of study to this subject. He has introduced one of the bills and we would like to hear from him. The Honorable Sam Friedel. |