FAIR TRADE

TUESDAY, APRIL 29, 1958

HOUSE OF REPRESENTATIVES,

COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,

SUBCOMMITTEE ON FINANCE AND COMMERCE,

Washington, D. C. The subcommittee met at 10 a. m., pursuant to notice, in room 1334, New House Office Building, Hon. Peter F. Mack, Jr. (chairman) presiding.

Mr. MACK. The committee will come to order.

These hearings have been scheduled this morning not because of any interest of private organizations, but because of the concern that Congress has had in regard to the problems of small business. When I say "small business" I am not talking about some giant corporation such as American Motors, which is considered as small business by today's standard; I am talking about the really small-business men. I would imagine that he could even be appropriately referred to today as the "country merchant."

In the last 50 years we have seen our economy grow. We have seen small business become big business; we have seen big business become bigger; and finally we have seen the unions organizing and growing to keep the big business under control or to at least permit the employees of the giant corporations to have some bargaining power so that they could improve their social standard, their living conditions, and bring that top level of our economy into balance.

We have the small merchants, small business, or as I referred to them and I think appropriately-the country merchants who operate in towns under 10,000 population without any true representation in the economy and without any legislation of any kind.

It gives them a break when they are competing with or perhaps caught in the squeeze between big business and big unions. I am hoping and I think that many members of this committee are hoping that we can enact some type of legislation which will be beneficial to this very important and wholesale segment of our economy. I do not know whether the proposed legislation would do the job. But that is the purpose of the hearings this morning. We are going to give everyone who is interested in any of the bills an opportunity to testify.

This morning we are going to start hearings on H. R. 10527, which was introduced by the chairman of this committee, the Honorable Oren Harris.

There are also several other bills: H. R. 10770, introduced by our colleague Mr. Tollefson; H. R. 10847, introduced by our colleague, Mr. Pelly; H. R. 11048, introduced by Mr. Miller of California;

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H. R. 11216, introduced by Mr. Friedel; and H. R. 11264 introduced by Mr. Macdonald.

The first of the 4 bills are identical, and the last 2 bills are identical and differ only slightly from the aforementioned bills.

All of these bills would amend the Federal Trade Commission Act so as to equalize rights in the distribution of identified merchandise. They are commonly referred to as fair-trade bills.

In the 82d Congress this committee reported favorably on H. R. 5767, which passed the House and Senate and became Public Law 542 of that Congress. This law is known as the McGuire Act, and it reaffirms the intent of Congress in the Miller-Tydings Act; that the application and enforcement of State fair-trade laws including the nonsigner provisions of such laws with regard to interstate transactions shall not constitute a violation of the Federal Trade Commission Act or the Sherman Act..

This reaffirmation was made necessary because of the decision of the United States Supreme Court in Schwegmann v. Calvert Distillers Corporation in 1951, in which the Court held that the MillerTydings Act did not exempt from these Federal laws the enforcement of State fair-trade laws with respect to nonsigners.

The McGuire Act makes it clear that the Congress meant to let State fair-trade laws apply to signers as well as nonsigners. The nonsigner clauses in the State laws require a retailer to maintain the price set by the manufacturer, even if the retailer did not sign an agreement do do so.

Since the enactment of the McGuire Act, a number of State supreme courts have declared the State fair-trade laws to be unconstitutional. The pending legislation is designed to overcome the difficulties brought about by the nullification of State fair-trade laws.

The purpose of H. R. 10527 and the other pending bills is to set up a Federal resale price maintenance system. This legislation would make it illegal for a distributor of trademarked or brand-named goods sold in commerce, which are in free and open competition with articles of the same general class produced by others, to sell, offer to sell, or advertise such goods below the stipulated or minimum resale prices established by the manufacturer if the manufacturer gives notice of such prices by mail, marking the goods, by advertising, or by other public notice.

A copy of these bills, together with the reports of the executive departments or agencies, will be made a part of the record at this point. (The bills referred to follow :)

[H. R. 10527, 85th Cong., 2d sess.]

A BILL To amend the Federal Trade Commission Act, as amended, so as to equalize rights in the distribution of identified merchandise

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That it is the purpose of this Act to recognize the legitimate interest of the manufacturer or wholesaler who identifies merchandise manufactured or distributed by him in stimulating demand for his identified merchandise through effective distribution to ultimate consumers; to equalize rights in the distribution of identified merchandise, by affording the small manufacturer or small wholesale distributor of identified merchandise in free and open competition with articles of the same general class produced by others an opportunity to compete on more nearly equal terms with the large manufacturer or distributor who can afford to control the distribution of his merchandise

through his employees and consignees, and by affording the small retailer an opportunity to compete on more equal terms with the large retailer, and to that end to permit manufacturers or wholesalers of identified merchandise in such free and open competition to maintain upon their merchandise prices which are adequate to enlist the active efforts of distributors, at all necessary or appropriate stages of distribution, and which are low enough to compete effectively with other goods adopted to serve the same needs of ultimate consumers.

SEC. 2. Section 5 (a) of the Federal Trade Commission Act, as amended, is hereby amended to read as follows:

"SEC. 5. (a) (1) Unfair methods of competition in commerce, and unfair or deceptive acts or practices in commerce, are hereby declared unlawful. The Commission is hereby empowered and directed to prevent persons, partnerships, or corporations, except banks, common carriers subject to the Acts to regulate commerce, air carriers, and foreign air carriers subject to the Civil Aeronautics Act of 1938, and persons, partnerships, or corporations subject to the Packers and Stockyards Act, 1921, except as provided in section 406 (b) of said Act, from using unfair methods of competition in commerce and unfair or deceptive acts or practices in commerce.

"(2) Nothing contained in this Act or in any of the Antitrust Acts shall render unlawful any notices provided in paragraph 5 of this subsection or any contracts or agreements prescribing minimum or stipulated prices, or requiring a vendee to enter into contracts or agreements prescribing minimum or stipulated prices, for the resale of a commodity which bears, or the label, dispenser, or container of which bears, the trademark, brand, or trade name of the proprietor, producer, or distributor of such commodity and which is in free and open competition with commodities of the same general class produced or distributed by others, when notices, contracts or agreements of that description are lawful or effective as applied in intrastate transactions under any statute, law, or public policy now or hereafter in effect in any State, Territory, or the District of Columbia in which such resale is to be made or to which the commodity is to be transported for such resale.

"(3) Nothing contained in this Act or in any of the Antitrust Acts shall render unlawful the exercise or the enforcement of any right or right of action created by any statute, law, or public policy now or hereafter in effect in any State, Territory, or the District of Columbia, which in substance provides that willfully and knowingly advertising, offering for sale, or selling any commodity at less than the price or prices prescribed in such notices, contracts or agreements, whether the person so advertising, offering for sale, or selling is or is not a party to such a contract or agreement is unfair competition and is actionable at the suit of any person damaged thereby.

"(4) Neither the giving of notices as provided in paragraph 5 of this subsection, the making of contracts or agreements, nor the exercise or enforcement of any right or right of action as described in paragraph (6) of this subsection shall constitute an unlawful burden or restraint upon, or interference with, commerce.

"(5) For the purpose of paragraphs 5 to 9 inclusive of this subsection, the word 'commerce' means all commerce that may be lawfully regulated by Congress, and a 'proprietor' is one who identifies merchandise manufactured or distributed by him by the use of his trademark or trade name. He 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 distribution to ultimate consumers, and by reason of his further interest in the trademark or trade name identifying his products. Merchandise bearing his trademark or trade name is accordingly herein designated as 'his merchandise' and distributors handling his merchandise are designated as 'his distributors': Provided, however, That a distributor of merchandise identified by the trademark or trade name of the manufacturer is not a proprietor within the meaning of this Act unless he is a distributor specifically authorized by the manufacturer to establish resale prices for such merchandise. It shall be lawful for a proprietor to establish and control by actual notice to his distributors stipulated or minimum resale prices of his merchandise in commerce which is in free and open competition with articles of the same general class produced by others. He may so establish schedules of resale prices differentiated with reference to any criteria not otherwise unlawful. Such schedules may be changed from time to time by actual notice to distributors having acquired his merchandise with actual notice of any established resale price. He may so establish such resale prices for his distributors, even though he sells in compe

tition with them, so long as he sells at the applicable prices he has established for his distributors making comparable sales. '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. Deposit in the United States mail, with postage prepaid of a letter properly addressed to a distributor and specifying resale prices established by a proprietor shall constitute prima facie evidence of actual notice of such prices. The acquisition of or dealing in merchandise clearly marked, or enclosed in containers, packages, or dispensers clearly marked, with resale prices established by a proprietor shall be conclusive evidence of actual notice of such prices. Actual notice may also be established by legally admissible evidence without limitation of manner or form. A person with actual notice of any applicable resale price is thereby charged with notice that such a price is subject to change. Except as provided in paragraph 8, it shall be unlawful for any person with actual notice of an applicable stipulated resale price duly established by a proprietor to sell, offer to sell, or advertise merchandise in commerce at a different price, or for any person with actual notice of any applicable minimum resale price so duly established to sell, offer to sell, or advertise merchandise in commerce at a lower price.

"(6) Any person suffering or reasonably anticipating damage by reason of anything forbidden in paragraph 5 may sue in any State or Federal court of competent jurisdiction without respect to the amount in controversy and shall be entitled to recover the amount of damages sustained, plus the costs of suit, including a reasonable attorney's fee and to obtain injunctive relief and recover such costs and fee whether or not specific monetary damages are established: Provided, however, That where no injunction lies, a Federal court shall not entertain a suit for damages, unless the amount in controversy, exclusive of interest and costs, exceeds the sum of $3,000.

"(7) If a substantial portion of the merchandise 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, whether or not some or most of such merchandise is entirely distributed in the State or district of origin. The provisions of paragraphs 5 to 9 inclusive shall not apply to the merchandise of proprietors no substantial part of whose merchandise crosses State lines at any stage of distribution.

"(8) It shall be a defense to an alleged violation of paragraph 5 for a defendant to sustain the burden of proving that merchandise has been advertised, offered for sale, or sold by him only in the following cases:

"(a) In closing out the stock on hand for the bona fide purpose of discontinuing dealing in any such merchandise: Provided, That plain notice of the fact is given to the public: And provided further, That the proprietor shall be given prompt and reasonable notice in writing of the intention so to close out and an opportunity to purchase such stock at the net price paid therefor by the defendant;

"(b) When the merchandise is damaged, defaced or deteriorated in quality and plain notice of the fact is given to the public in the advertisement and sale thereof, and when such notice is conspicuously displayed in all advertisements and affixed to the merchandise, or the container, package or dispenser in which it is offered for resale: Provided, That the proprietor shall be given prompt and reasonable notice in writing of the intention so to close out and an opportunity to purchase such stock at the net price paid therefor by the defendant; "(c) When the merchandise is advertised, offered for sale, or sold by any officer acting under the orders of any court;

"(d) In the sale of any quantity of the merchandise acquired prior to actual notice of any established resale prices;

"(e) In resales to charitable institutions or Government agencies, which acquire the merchandise not for resale to the consuming public.

"(9) Nothing contained in this subsection shall make lawful contracts, combinations or agreements, providing for the establishment or maintenance of minimum or stipulated resale prices on any merchandise between proprietors, or between manufacturers, or between producers, or between wholesalers, or between brokers, or between factors, or between retailers or between persons, firms, or corporations in competition with each other; nor shall anything in this subsection contained permit two or more proprietors or two or more distributors to take joint action in establishing resale prices for competing commodities