Reporting a day earlier on the situation in Milwaukee, the paper noted that

after an initial surge when fair trade was ended, sales at most stores have dropped ✶ ✶✶ the big momentum is also over on sales of electric shavers on which Milwaukee stores broke fair trade prices early in February.

A veteran department store buyer in Philadelphia was quoted by this paper:

I wouldn't be surprised if electrical appliances were dropped.

The reporter who interviewed this buyer did a little checking on his own, with this result:

Sale cards-in one department store-offered only private label fans, shown in an aisle exhibit ***. A thorough check of Sunday newspaper advertisements, when most of the area home goods stores, especially department stores, promote heavily, failed to disclose one electric housewares advertisement, cut price or otherwise.

WHERE PROFIT MARGIN DOLLARS GO

These market place developments, which symbolize what does happen rather than what theoreticians believe should happen, comes as no surprise. The retailer, be he large, medium, or small, wants a living wage for his services. And he performs a considerable service. He adds a time and place utility to goods by making them available to consumers where and when they want them. He further adds to the ease of shopping by carrying wide assortments of goods from which the customer may choose.

Without a farflung network of retailers, shopping would indeed be an arduous task; and without such a network, the average manufacturer simply could not build sales adequate to absorb his plant's productive capacity.

But the retailer's function goes beyond time and place utility. He serves the manufacturer by helping to build a mass market for his products. He helps to create consumer wants. He helps the consumer to make up her mind to buy. He can, and does, influence consumer selection. In fact, he does his utmost to influence consumers away from buying those goods which are, to him, profitless. He does this simply because he cannot afford to do otherwise. And by "he" I mean any retailer, large, medium, or small.

The retailer's wage for his services is his profit margin. This is the difference between what he paid for the goods he sells and what he gets when he sells the goods. When the profit margin disappears for the smaller retailer this means, primarily, the profit margin on popular brand goods-the retailer's wages disappear.

This is not only the retailer's misfortune. The economy suffers, too, because it loses the value of the retailer's purchasing power, as well as of his selling power. What retailers and their families can spend as consumers is determined by the dollars remaining from their profit margin after they have paid rent, salaries, and all the other expenses incident to business operation. These remaining dollars are put to work by the distributors-retailers and wholesalers. They pay rent and personal income taxes. They contribute to community institutions and to charity. They may even gladden the heart of the resort owner by taking the family on a vacation.

In short, distributors' profit margin dollars go back into circulation to work for the economy. Dollars that are not circulating are unemployed. Unemployed dollars mean unemployed people.

DEAD CENTER: PROFITLESS PRICES

In the American market place, no retailer can afford to be undersold on identified merchandise which has come to have a specific value in the consumer's mind. Giant retailers—although, unfortunately, not small retailers have the means to maintain their competitive position against any and all dealers who select such merchandise for price cutting in order to gain competitive advantage.

Moreover, the giants will not hesitate to join in a price war to guard their reputations and their sales volume. For this reason, the prices of such identified merchandise-under the pressure of a price warsink to the rock bottom equilibrium. The more popular the merchandise, the sooner this profitless dead center is reached.

The effect of profitless prices on the movement of goods and on dealers has long been recognized. Mr. Justice Brandeis, a distinguished opponent of monopoly, wrote 45 years ago:

If a dealer is selling unknown goods or goods under his own name, he alone should set the price; but when a dealer has to use somebody else's name or brand in order to sell goods, then the owner of that name or brand has an interest which should be respected. The transaction is essentially one between the two principals the maker and the user. All others are middlemen or agents; for the product is not really sold until it has been bought by the consumer.

Why should one middleman have the power to depreciate in the public mind the value of the maker's brand and render it unprofitable not only for the maker but for other middlemen? Why should one middleman be allowed to indulge in a practice of price cutting which tends to drive the maker's goods out of the market, and in the end interferes with people getting the goods at all? (Cutthroat Prices, Harper's Weekly, November 15, 1913).

POWER OVER PRICE

There are those who hold that manufacturers will fare better by vesting with the retailer sole power over the price of their identified merchandise. H. R. 10527 does not require manufacturers who share this view to withdraw that power from the retailer.

They need not embrace any of the rights provided in the bill.

On the other hand, many manufacturers are satisfied that their longterm interest, as well as that of their distributors and of the public, is better served when the retail price of their identified merchandise is established at a level attractive enough to win customers and sufficiently adequate to provide a selling incentive for distributors across the land. These manufacturers today have the legal right to establish the resale price of their identified merchandise, provided it is distributed through such means as consignment selling, exclusive franchises, or forward integration.

H. R. 10527, therefore, only equalizes rights in the distribution of identified merchandise. It merely extends the right already enjoyed by some to those manufacturers who distribute their identified merchandise largely through wholesalers and retailers who comprise the majority of small-business men in America. H. R. 10527 would permit, but not require, manufacturers under specified circumstances to

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establish the minimum, or stipulated, resale price of merchandise identified by their trademark, brand, or name.

THE CONSUMER'S INTEREST

The consumer is properly concerned about the effect, if any, on him of such a grant to the manufacturer. But the American citizen is not only a consumer; he is also a producer of income in the form of wages, salary, or profit. In any conflict between the two roles, the citizen will always decide in favor of his continuing role as earner. Whatever the consequences on the prices of the things they buy, the worker will fight for higher wages, the farmer demands more for his produce, and the Congress has recognized that demand.

The manufacturer and his employees urge the Government to increase prices, through tariff, on imports which threaten his market and their jobs.

The Congress has determined that the public interest is better served by serving these groups.

The consumer's concern about prices is skillfully exploited by the retailer who seeks the sole right to establish prices on goods identified by marks or names he does not own. This retailer offers bargain bait prices which, figuratively, show the consumer the one-ninth of the iceberg visible above water. The retailer does not let the consumer see the hidden eight-ninths-the relatively high profit margin merchandise which he must sell if he is to stay in business. That retailer may have dazzled the consumer; but he proved only the need for H. R. 10527.

I have been directly associated with the fair trade movement for 9 years. For more years than I care to relate I have been associated with retailing. I have yet to see a single bit of scientific evidence which supports the assertion, frequently made, that manufacturermaintained resale prices adversely affect the consumer interest of the American population.

Back in 1952, Dun & Bradstreet challenged this assertion in testimony before the House Committee on the Judiciary, as follows:

Our position is that it is virtually impossible, through a survey, to establish the precise effect of fair trade laws on the consumer's pocketbook *** the first phase of the job-that of determining how much of the consumer's dollar is spent for fair-traded items-is in itself a stupendous task. Even if it were feasible to complete that phase, it would mean little unless we could then establish what effect the pricing of fair-traded items has on the prices of non-fairtraded items. We see no way to do that (Study of Monopoly Power. Hearings before the Antitrust Subcommittee of the Committee on the Judiciary. House of Representatives, 82d Cong., 2d sess., 1952. P. 774).

The American people are dismayed at the continuing rise in the cost of living, as reflected in the Consumer Price Index of the United States Bureau of the Census. The least contribution to this unhappy performance has been made by merchandise whose retail prices have been established by manufacturers. Of the 300 different goods and services which make up the Consumer Price Index, only 8.67 percent represented fields in which resale price maintenance, in the form of fair trade, was used. In at least one-quarter of these fields, the estimated proportion of products that were fair-traded is less than 10 percent. All the price evidence I have seen indicates that fair-trade

merchandise has held the line against inflation more effectively than other merchandise and services available to the American consumer.

PRICE COMPETITION

Competition and the inherent price stability of identified merchandise which are chosen by their manufacturers for resale price maintenance are two of the reasons for their salutary price performance. As to competition, Mr. Justice Brandeis, in his Harper's Weekly article, observed:

The independent producer is engaged in a business open to competition. He establishes his price at his peril-the peril that if he sets it too high, either the consumer will not buy, or, if the article is, nevertheless, popular, the high profits will invite even more competition.

There is certainly enough price competition in resale-price-maintained merchandise to reassure the American consumer that the marketplace offers her plenty of price alternatives. There is sharp competition not only between such merchandise but also with articles of similar class the prices of which are established solely by retailers. Here are a number of illustrations of the scope of price competition taken from Consumer Reports' Buying Guides for 1957 and 1958:

Toilet goods and cosmetics-Perfumes: 77 brands, ranging from 40 cents to $45 per ounce. Lipsticks: 29 brands, 29 cents to $1.50 in ordinary swivel case. Hair shampoos: 36 brands, 3.9 cents to 16.3 cents per ounce. Cleansing creams: 34 brands, 5 cents to 71 cents per ounce. Facial tissues: 19 brands, 12 cents to 41.7 cents per 100 tissues.

Electrical appliances-Electric frying pans, immersible: 7 brands, $17.95 to $29.95. Nonimmersible: 9 brands, $12.95 to $24.95. Electric fans, oscillating type: 21 brands, $12.95 to $29.95. Electric toasters: 17 brands, $12.95 to $39.50. Electric irons, automatic dry: 13 brands, $7.95 to $14.75. Electric food blenders: 15 brands, $18.95 to $47.95. Vacuum cleaners, tank type: 27 brands, $47.95 to $150.

Wearing apparel-Women's nylon hosiery: 68 brands, 69 cents to $1.35. Men's socks, fabric mixture: 24 brands, 68 cents to $1. Men's socks, cotton: 10 brands, 49 cents to $1. Men's shirts, broadcloth: 12 brands, $2.96 to $5.95. Men's summer suits: 78 brands, $29.50 to $85.

Watches, luggage, etc.-Watches, jeweled: 40 brands, $25 to $500. Airplane hand luggage, women's weekend cases, 14 brands, $14.95 to $55. Men's 2-suiters, airplane hand luggage, 10 brands, $25 to $79.50. Portable typewriters: $59.50 to $209.35.

Household products-Floor waxes: 12 brands, 54 cents to $1.59. Stainless-steel flatware: 42 brands, 94 cents to $10.75 per place setting. Photographic equipment-Box and folding cameras under $30: 27 brands, $4.75 to $26.50; 8-millimeter movie cameras: 28 brands, $46.50 to $164.95.

Sporting goods-.22 caliber rifles: 14 brands, $29.75 to $182.20. Baitcasting rods: 37 brands, $6.57 to $24.95.

BAIT-PRICING TACTICS

A shopper in a non-fair-trade area can purchase selected identified merchandise in high demand at some stores at some prices well below

fair-trade prices. Were the fair-trade prices, then, too high? Of course they were not; for, if they were, the identified merchandise would not have attained wide popularity. It is this very popularity which has made it useful as customer bait. Yet it is selective purchasing of such items that is used as evidence to indict the principle of resale price maintenance, which is embodied in the State fair-trade laws and in the Harris bill.

Selective shopping does not disclose whether the quantity of merchandise offered for sale was ample or too limited to satisfy the hopes of shoppers lured by the promise of bargains. It says nothing about the number of shoppers who may have been switched by clerks to substitute merchandise which gives the price-bait retailer a healthy profit. It makes no effort to uncover the facts about the pricing policies of price cutters. One of these facts is that the prices they put on some of their merchandise yield them profit margins which are substantially higher than the profit margins on virtually all fair-traded products.

So far as the selective shopper is concerned, she is understandably pleased that she found a bargain. Yet commonsense compels the conclusion that the bargains she found would be available to no one if everybody insisted on buying only the bargains; for no retailer could afford this kind of business. The retailers' experience tells them, however, that most shoppers looking for bargains simply cannot restrain their impulses to buy other merchandise in the belief that they, too, are low priced

In reality, this other merchandise is priced high enough to make consumer-baiting practices profitable for those dealers who want you to believe that they are champions of the consumer.

In short, the bargain which a Mrs. Jones can find by alert shopping will be unwittingly subsidized over and over again by the many Mrs. Browns.

I would like to talk for one moment, if I may, about free enterprise. Resale price maintenance as envisaged by the Harris bill is attacked by its opponents as being alien to our free-enterprise system, which, they argue, is founded upon free competition. "Free" in its pure sense does not exist today in the United States or anywhere else. Given the stubborn imperfections of human nature, "free" competition or "free" enterprise simply does not exist in any organized society. Interest of the good society, the freedom of the individual to do as he pleases in the marketplace as in any other area of life-is tempered by the restraints which society itself imposes in its own

interest.

In his book, The Law of Free Enterprise, Lee Loevinger defines competition as follows:

Competition is, to begin with, the striving of conflict between different individuals to gain the same thing or somehow to exceed the other. But the struggle must be conducted according to some rules, or standards, whether imposed or agreed upon; otherwise, it is not competition but anarchy and warefare. Yet within the rules, each individual must be perfectly free to act according to his own judgment of his own interest, unfettered either by the power of government or by the strength of economic superiors.

The American people, acting through their elected representatives in State and Federal legislative bodies, have not hesitated to put restraints upon competition to prevent its deterioration into unbridled,