is the meaning of the term, "price fixing." It's been mentioned before.

Mr. MACK. This is not part of your statement. You certainly can proceed.

Father McEwEN. I am departing.

I think the real meaning of the word "price fixing" is this: (a) When one person is able to compel another to sell an article at the price established by the first man, that is the first meaning of "price fixing."

Secondly, when one seller is so immune from real competition that he can set his price for what the traffic will bear. Refusal to buy on the part of consumers is his only deterrent.

Now to try to say that all prices are fixed is a semantic trap. All prices are not fixed, in my estimation, unless some element of compulsion or collusion is involved. In the first case, I gave you, one person compels another seller to sell at a price fixed by the first man, and in the second case, the seller can compel the consumer to buy at the price the producer sells because there is no real competition to threaten him, or because he has entered into a collusive agreement with his competition.

Those are the only two mentioned, I think you will find, defensible meanings to the term "price fixing."

Any other type of price, provided there is some market mechanism, live, existing, and not killed, any other type of market mechanism is not a "fixed" price, because there is still enough element of free voting, free bargaining between consumers and producers.

Mr. MACK. I think that is very interesting. You would not object to being interrupted at any time; would you?

Father MCEWEN. Not at all, Mr. Mack.

Mr. MACK. Then I wonder if you would cover such areas as the steel companies and the major oil companies and many other giant corporations that set the prices?

What I would like for you to do is explain how those circumstances come about, if it is not price fixing by industry?

Father McEWEN. I would include those under the second definition of "price fixing." In many of those instances, the sellers are so immune from real ocmpetition that they can set their prices without fear of interference and refusal to buy is the only deterrent.

I will give you an example that occurred in the surveys and discussions I conducted. One manufacturer dropped his price-no, one manufacturer raised his price a penny on a very low-price article.

I asked his competitor, who immediately followed suit, "Why did you follow suit?"

And his competitor said, "If I didn't, he would have dropped his price back in a short time." And I said, "Why didn't you keep your price down and try to take some business away from him?"

He said, "Well, he wouldn't have let me. He would have come down later."

That is an example of what the economists call "price leadership" in an industry with few sellers.

There were only three people, equally big sellers.

Mr. Moss. I know they don't call it price fixing, but as a matter of fact, it is price fixing.

Father McEWEN. That is correct.

Now, my theory on the fair trade vehicle or the fair trade aspect of that problem is that if you allow the retail price to be also fixed, you will forever eliminate any impetus backward in the economic system, back from consumers to retailers to wholesalers or to the producers.

I think it is totally unrealistic to think that you can break down these big industries, such as the one I was talking about, to a lot of small producers. The cost of entry into this industry I was talking about, due to machinery, was prohibitive.

There is no real possibility of another new man entering there. So the only real hope of getting a realistic fair price to consumers is to have retailers putting pressure on wholesalers for lower prices, putting pressure on jobbers and manufacturers, and if you stifle that push backward through the distributive system, as this bill will do-as you know, under the terms of this bill, the manufacturer can set a price at any stage in the distributive process.

That means the manufacturer can tell the jobber, the wholesaler, and retailer, and anyone else who touches it, what price to charge. That is disastrous in my eyes in view of the situation that has grown up in the United States, that the only hope of any type of fair pricing is a backward push from consumers through retailers through wholesalers to manufacturers.

Mr. MACK. That has failed to materialize.

Father McEWEN. Pardon me.

Mr. MACK. I say that has failed to materialize up to this point in the situation and it appears to me that we are saying it is all right for industry to set prices, but it is not all right for the retailers to set prices.

Father MCEWEN. Mr. Chairman, may I differ with the chairman in view of a New York Times dispatch which has caught my eye, from which, if I may, I will quote a paragraph or two.

Mr. MACK. I am very much interested in this.

Father MCEWEN. This is from the Times of Sunday, April 13, and the heading is, "Retailers Battle To Keep Sales Up."

This says:

In stores that have tried price promotions, there have been floods of customers. The recent price slashes on small appliances released from price protection drew bargain hunters by the thousands. Customers waited for stores to open, even though they were pelted by heavy rain.

Admiral Corp. recently cut prices * * *. The result was a rush of orders so heavy that it cannot fill them all for nearly 2 months. The company last week cut its 17-inch TV from

so and so.

Mr. MACK. These are wholesale prices?

Father McEWEN. No, these are retail. It cut its 17-inch television from $169.95 to $129.95.

General Electric also has cut the price of its 17-inch portable video sets. The Sunbeam Corp. failed to draw customer response last week when it attempted in San Francisco to restore fair-trade prices.

So, I would respectfully submit that there can be some effective. pressure back from retailers on the producers.

Mr. MACK. I would argue this with you, but I will recognize the gentleman from California.

Mr. Moss. Father, you take television, you cited GE and Admiral. As long as I can remember, there have been reductions, rather sharp

reductions, at sometime during a model year for television under fair trade.

It has always brought about some stimulus to sales; I don't think it is a sustained increase in sales.

Some people sort of sit back and wait for the reductions that occur periodically. But that can occur under fair trade just as readily.

Don't you think that whatever or not you have fair trade the retailer, faced with a loss of turnover of a commodity, is going to start immediately pressuring his wholesaler, and his wholesaler, faced with the same lack of turnover, is going to pressure the manufacturer to reduce the price whenever it reaches the point where it encounters

consumer resistance?

Father MCEWEN. I think there may be some tendency, but I think it would be much greater if you had the possibility of the consumers influencing one retailer who had differentiated his price. (The article referred to is as follows:)

[New York Times, April 13, 1955]

RETAILERS BATTLE TO KEEP SALES UP

PROMOTIONAL EVENTS AIMED AT INDUCING CUSTOMERS TO PURCHASE GOODS

(By William M. Freeman)

The country's retailers are fighting a two-front battle to keep sales volume up in the face of a recession.

They are putting on promotional events of many types to persuade customers to buy. They also are working on suppliers to deliver attractive merchandise at prices that permit special sales.

Clearance and special selling events that include the happy feature of low prices have been few, and customers have not responded in the numbers that the stores would like to see.

In stores that have tried price promotions there have been floods of customers. The recent price slashes on small appliances released from price protection drew bargain hunters by the thousands. Customers waited for stores to open even though they were pelted by heavy rain.

The Admiral Corp. recently cut prices on its most popular radio from $15.95 to $12.95. The result was a rush for orders-so heavy that it cannot fill them all for nearly 2 months. The company last week cut its 17-inch television receiver from $169.95 to $129.95. General Electric also has cut the price of its 17-inch portable video sets. The Sunbeam Corp. failed to draw customer response last week when it attempted in San Francisco to restore fair-trade prices.

Stores are pressing vigorously for more price cuts. Last week the Davega Stores Corp. began a month-long special selling event at its 28 retail stores. To obtain specially priced merchandise for the sale, the concern called on representatives of its suppliers to offer better values. Assurances of cooperation were obtained. The chain is starting an advertising campaign on the theme, Buy Your Way to Prosperity, to call attention to the bargains offered.

A clearance sale, described as the first ever put on in the 28 years that the Masters discount house chain has been in existence, ended a 3-day run yesterday in the company's outlets. The merchandise offered, all described as selling below wholesale cost, was valued at more than $1 million by the concern.

This event, as at Davega, consisted chiefly of television sets, refrigerators, and other appliances.

MACY PROMOTIONS

Macy's New York, now entering the second part of its centenary celebration, will put on a series of special promotions on the general theme, Thank You, America.

First in the series will be a program linked to the Celanese Corporation of America with the heading, "Thank You, America, for Celanese." Macy's Herald Square and its branch stores will join forces to present celanese fabrics with

special Macy-Celanese tags. There will be fashion shows daily for a week with some big-name stars making appearances.

Best & Co. is reducing suits and coats in spring styles. Arnold Constable is running a half-price sale on millinery. Gimbels put on a Founders Day sale yesterday with price cuts featured in every department. Saks Fifth Avenue is making a special purchase promotion of spring coats for misses and juniors. Vim, appliance chain, is featuring a sale with no downpayment required. Lanes is running spring sales with savings of 30 to 70 percent.

Other stores are putting on clearances and special promotions, although the rather unspringlike weather has been holding back the volume of store traffic that had been expected.

The National Retail Merchants Association called on its member stores a few days ago to avoid cutting advertising budgets. Howard F. Engle, manager of the sales promotion division, said response to advertised merchandise had been excellent except in areas with unusually severe weather.

RETAILER SUGGESTIONS

He said he had made a spot telephone survey of stores in several areas, and offered these suggestions as a result:

Review your items to see if you are advertising enough traffic-building as well as volume-producing items.

Check your advertising to make sure you are repeating items which are proved winners by past performance. Stop advertising items which show no promise.

Make sure that your display windows and departmental interiors fully back up your advertising.

Analyze your vendor cooperative advertising. There is no point in advertising an item which wil not produce volume just because it's partly vendorpaid.

The stores are looking to fashion items such as the chemise, tricked up in a variety of garments from evening gown to sleepwear, and tinted hosiery to help volume in apparel departments. They also count on selling related accessories and hope that a customer, once in the store, will visit other departments to look at advertised merchandise.

To help this effort, some stores are spreading their business hours. Bloomingdale's, long open on Thursday evening, is adding a Monday evening opening in the parent store and the three branches.

Mr. DOLLINGER. May I ask a question at that point, Father? Doesn't it indicate clearly then that the wholesaler can sell his item for less money, but he does not want to do so unless he is forced to do so by a decline in business?

Father McEwEN. I think nobody in business is selling at a lesser price unless he is forced to.

Mr. DOLLINGER. That is right. The manufacturer is not losing money at this point. This is not a lead item with him.

Father MCEWEN. That is right.

Mr. DOLLINGER. I gather, then, from what you have said, you don't think this bill would be the cure-all for the small-business man? It won't help him at all to stay in business?

Father MCEWEN. Mr. Dollinger, you asked a question a little while ago that you would like to do something to help the small-business

man and the consumer.

Mr. DOLLINGER. What I can do to help him?

Father McEwEN. I have said time and again and I repeat with you, I have as an objective, the encouragement of as much true independent small business in this country as is possible without damaging unjustly any other segment of the economy.

My sincere appreciation or evaluation of this type of legislation is that it will be disastrous in the long run for both the small-business man and the consumer, and I will give you one reason why I say

that: it would be interesting for you to inquire whether chains of any sort are against this legislation. I should think that they would be totally in favor of it, because their high volume of turnover, plus a high fixed margin, is guaranteed to make them tremendously profitable, and I submit for your consideration a further aspect.

I have developed it at much length in another place. The high profit on the health and drug items which are primarily price fixedand I have got a clipping, a quotation which I can give to you for the record, to show you even the drug magazines themselves are beginning to get worried about the supermarkets taking over these high-profit items at any rate, the high profit they make on these health and drug items, enables them to put terrifically increased pressure on the little grocers, the meatman, the fruit-and-vegetable man, because they can afford to take a lower percentage of profit on those because of the high percentage they get out of the health and drug items.

So I say, we may be attempting to help one segment of small business and hurting a whole lot of others.

Yes, Mr. Moss.

Mr. Moss. Now, about the question Mr. Dollinger put to you a moment ago regarding this cutting which had occurred in New YorkI think the assumption has indicated that the wholesaler could stand to cut his price-I assume you meant the manufacturer.

Mr. DOLLINGER. Manufacturer.

Mr. Moss. Isn't it true that frequently the manufacturer, faced with unfavorable inventory position, will be forced to liquidate his inventory to perhaps meet some notes or other financial obligations that he has and so it is not an indication per se that he was at any point getting more than a normal profit, but he may have been forced to retrench and, therefore, to liquidate inventory, that this has been characteristic in times of recession. Isn't it true that when inventory doesn't move and you have too much of it on your shelves, in your distributor's warehouses, that you are going to liquidate and get out and improve your financial position, if you can, for the next effort, whatever it may be?

So we should not conclude from this that there was ever any inordinate profit involved just because a cut followed.

Mr. DOLLINGER. May I say at this point, both theories are correct, both yours and mine. I think both can happen.

Mr. Moss. They both can happen? I think in this case it was probably a case of too much inventory.

Father MCEWEN. As a matter of fact, this fair-trade problem is complicated by the differences between the electrical and drug industry.

You don't find too much cut-rate pricing in the drug industry, even now when fair trade is so badly damaged.

Mr. Moss. I think we discussed that the other day-that there probably is a better qualified merchant represented in the drugs, because in most States he must be a licensed pharmacist to engage in the business. He knows more about his business than, we will say, a man who might go into a half dozen other independent activities. He thinks he knows something about it and then discovers he does not. So your rate of failures would be greater there than in the drugs,

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