never examined. The apparent chaos is the result of the organization of the most complete conceivable defense against any risk, disturbance, or necessity for adaptation. "In the preponderance of the administrative function over that of the entrepreneur, of group solidarity over the principle of competition, of tradition over initiative, and in the loyalty to established routine and the respect for all situations acquises regarded as positions of licensed privilege, the way of life of an ancient state has survived in that of contemporary France. "From top to bottom this national economy has got into such a state of congealment, and has grown so used to it, that, though everyone complains about it in general, in every concrete instance the phalanx of those involved immediately closes its ranks to protect its situations acquises from the slightest disturbing innovation. It has indeed so nearly approached a situation in which all existing situations have been transformed into permanent rights, privileges, and sources of revenue that all risks have been practically eliminated and bankruptcies practically never occur. "But all progress has also been eliminated." Many observers attribute the extraordinary resurgence of the German economy since World War II to the wartime destruction of the many institutional arrangements to restrict competition and the steadfast opposition of the political leadership of the German Government to the reinstatement of such institutional arrangements. We do not believe that so-called fair-trade legislation is helpful to small independent retailers. We submit to the contrary that fair-trade programs will be harmful to many small retailers. If margins are held high on some items by fair-trade practices, efficient retailers will be enabled to compete more vigorously in the distribution of non-fair-traded items or with respect to merchandising, display, advertising, or trade-ins. Many small concerns are necessarily quartered in less desirable locations, have less expensive facilities, and less adequate delivery, credit, and other services. If they are not permitted to compete pricewise to offset these disadvantages, their chances of losing out in the competitive struggle are increased. We know of no convincing evidence to indicate that those retail trades which have generally resorted to fair-trade price practices have been more profitable than those retail trades which have not, nor do we know of any evidence to indicate that retail trade has been more profitable in those States having retail price maintenance legislation than in those States which do not. We believe that any retailer who is able to serve the public more efficiently than other retailers, whether due to managerial ability, volume, location, less expensive services and facilities, or for any other reason, should be encouraged to reflect such reduced costs of operations in his price to consumers. A consumer who is willing to shop in less exclusive stores or who is willing to accept less service than is available elsewhere, should have the opportunity of sharing in the savings thus made. The precedent, practice, and custom of fair-trade pricing creates an environment which facilitates undertakings and agreements contrary to the letter and spirit of antitrust legislation and beyond the limitation contemplated by Congress. A few years ago the United States Department of Justice concluded, as a result of its experience with fair-trade legislation, that "The Tydings-Miller Act does not serve the purposes which were urged upon Congress as a reason for its passage, in that it sanctions arrangements inconsistent with the purpose of the antitrust laws and programs and becomes a cloak for many conspiracies in restraint of trade, which go far beyond the limits established in the amendment." For these reasons the American Farm Bureau Federation respectfully recommends that legislation to authorize a national fair-trade program, such as proposed in H. R. 10526, 11216, and 11264, not be approved. STATEMENT OF THE ASSOCIATION OF AMERICAN RAILROADS The railroad industry takes no position on H. R. 10527 because its members are not primarily engaged in the manufacture, purchase, or sale of merchandise. As an incident to the railroads' business of transportation, however, they regularly find it necessary to sell quantities of merchandise. This necessity arises in many situations while goods are in railroad possession. This possession ordinarily arises from provisions of the railroads' transportation contracts and tariffs on file with the Interstate Commerce Commission. The principal situations in which railroads must sell goods thus coming into their possession are the following: 1. Sale of goods pursuant to common-law obligations, as where delivery by the railroad is refused by the consignee because of damage, whether or not the carrier is liable therefor, or for any other reason. 2. Sale of goods to enforce liens, such as liens for unpaid freight and storage charges, as required by tariffs on file with the Interstate Commerce Commission. 3. Sales authorized by the Federal Bills of Lading Act, such as those provided for in section 26 thereof including the sale of unclaimed freight and perishable or hazardous goods. Sales of these kinds are in the interest of shippers, carriers, and the public alike, being for the most part required by law. Although sales in these categories occur only when delivery is not made in accordance with the bill of lading, whether or not the failure to deliver was caused by the fault of the railroads, they involve fairly substantial transactions in the aggregate. Therefore, although we do not take any position on the merits of H. R. 10527 as such, we wish to suggest that if the bill is enacted it be clarified so as to exclude from the terms of the new portion of the bill common carriers that are obliged to sell goods for the reasons outlined above. As the bill now stands, it could be argued that such carriers are "persons" forbidden to do the acts therein enumerated. We recognize that paragraph (1) of the bill exempts common carriers subject to the Interstate Commerce Act from its terms in substantially the same language contained in the statute today. We think that this exemption was probably intended to apply to paragraphs (2) to (9), the remainder of the proposed amendment. We believe, however, that this is not altogether clear under the present language of the bill, since paragraph (1) of the bill, in which the exemption is contained, refers expressly only to the Commission's power to prevent "unfair methods of competition in commerce, and unfair and deceptive actions or practices in commerce." The new portion of the bill, paragraphs (2) to (9), does not in terms relate back to these definitions but instead makes certain specified acts and practices unlawful. We therefore suggest that the seeming intention to exempt common carriers subject to the act to regulate commerce be expressed in the bill with respect to the new provisions in the same manner in which exemption is made in existing law with respect to the Commission's power to prevent unlawful practices. An amendment of this kind would not detract in any way from the purposes of the bill and would conform to existing law. Moreover, since railroads and other common carriers are closely regulated by other Government agencies in respect of their methods of competition, the amendment would fully protect the public interest. This could be achieved by amending subparagraph (c) of paragraph (8) of the proposed bill by striking out the semicolon after the word "court" in line 13 on page 8 and adding the following: ", or by any person in mitigation of damages or enforcement of a lien or other secured interest therein, or when the advertising, offering for sale, or sale is made by any person not primarily engaged in the business of buying and selling merchandise." You will note that we have included in this proposed amendment sales of damaged goods, even though a similar exception appears in subparagraph (b) of the same paragraph. This is because we believe the exception of subparagraph (b) could be interpreted to apply only to persons who have purchased goods for resale, since it contains a proviso that the exception shall be unavailing unless the proprietor of the goods is given notice of intention to sell and an opportunity to purchase the merchandise in question "at the net price paid therefor by the defendant." Since goods damaged in transit are not purchased by the selling railroads, it seems to us that the proviso of subparagraph (b) might not be interpreted so as to be available to common carriers selling damaged goods pursuant to their duty to mitigate damages suffered by shippers, whether or not the damage resulted from a cause for which the railroad was liable. For these reasons we submit that the bill, if recommended by this subcommittee for passage, should include the amendments we have suggested in order to preserve the existing scheme of regulation of unfair competition by the Federal Trade Commission and other agencies of the Government and to avoid what we 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 325 |