sales gimmicks of little value to the art of medicine or the ultimate welfare & sick patients. Reforms are clearly called for in behalf of the consuming public. A second highly important issue is the need for remedial legislation in the installment lending field. Public controls over the vending of installment credit are still lacking or inadequate in many States, debt poolers flourish, legal protections for consumers are inadequate, and harsh garnishment and wage assignment laws remain the rule rather than the exception. Confusion reigns as to what credit actually costs the borrower or buyer on the installment plan and as to what sources offer credit on the most reasonable terms.

These two problems, important as they are, by no means exhaust the cosumer interest issues which should command the attention and best efforts of individual citizens, unions, consumer interest groups, and government. Mis leading advertising and deceptive practices continue to be inadequately regi lated. Recent hearings before a special Senate subcommittee have documented widespread confusion techniques in the packaging of consumer products so as to mislead buyers as to quantity and price, quite apart from the perennial problem presented by short weights and measures. Inadequate legal powers still prevent the Food and Drug Administration from assuring maximum safety and wholesomeness of products regulated by the Food, Drugs, and Cosmetics Act. On the price front, proponents of so-called fair trade continue to press for a Federal law, which would permit manufacturers including those in the drug industry to fix the prices that consumers must pay at retail on branded items, thereby assuring further increases in the cost of living.

Finally there remains the problem of better representation of the consumer interest in Government. The wide range of consumer interests and problems receive the attention of no one coordinating agency or office of the Federal Goverment and no special committee of the Congress. Now, therefore, be it Resolved:

1. This convention pledges its support to the cause of the consumer and calls upon affiliates to cooperate in efforts for consumer education activities and to lend their support to consumer interest programs in both State and Federal Governments. Further, we commend and support the consumer cooperative movement and favor widespread extension of its principles.

2. We call upon the National Congress to enact legislation that will bring down the high price of prescription drugs, combat misleading advertising by drug companies, and improve the safety and usefulness of drug products generally. To this end we endorse the provisions of S. 1552 and H.R. 6245, pending in the current Congress.

3. We call upon the Congress to enact a Federal "truth-in-lending" law which will require a full disclosure of all finance charges on consumer installment purchases and loans, both in dollars and cents and in terms of a true annual interest rate. States should act to improve existing consumer credit laws and to enact laws where they do not now exist. States should act also to curb debt poolers, repeal wage-assignment laws, and reform unreasonable wage-garnishment laws. We call upon our affiliates to give aid and support to the further establishment of credit unions, as a proven means of encouraging thrift and as a source of personal loans at a low rate of interest.

4. Greater authority and appropriations should be accorded to the Federal Trade Commission to strengthen its activities in policing misleading advertising and deceptive merchandising practices. In particular, it should be given power to issue temporary injunctions in flagrant cases of abuse. We endorse pending legislation to require truthful labeling of imitation hardwood products. We commend the congressional investigation of deceptive packaging techniques and urge the development of appropriate remedies to curb these practices.

5. We urge new amendments to the Food, Drug, and Cosmeties Act to strengthen the powers of the Food and Drug Administration in behalf of the consuming public, including these provided by S. 1552. In addition, power is needed to require manufacturers to pretest therapeutic devices and cosmetic products for safety before putting them on the market. In the field of food protection, amendment is needed to the Federal Meat Inspection Act, administered by the Department of Agriculture, to expand the scope of the law.

6. We urge defeat of all proposals to permit the fixing of retail prices under so-called fair trade laws, whether State or Federal.

7. Finally we call upon both Federal and State Governments to give greater representation to the consumer in the machinery of government such as has been done in some States through a department of consumer protection or an office

of consumer counsel. We specifically endorse a Department of Consumers in the Federal Government and the creation of select committees in the House and Senate to investigate and study consumer problems.

Mr. STAGGERS. You may proceed.

Mr. FAIR. Thank you, sir.

These policy statements cover the general subject of resale price maintenance of which fair trade was the principal form under consideration at the time.

In addition, the AFL-CIO presented testimony in opposition specifically to the quality stabilization bill in last year's hearings before the Fair Trade Subcommittee of the Senate Commerce Committee.

This year's quality stabilization bill contains certain changes and refinements in the bills introduced in 1962. These include several exemptions designed to meet some of the more specific complaints made against the bill last year, such as the almost certain effect it. would have in raising the price of prescription drugs to the public. Prescription drugs would be excluded from the House bill, as would sales to Government agencies and to charitable and certain other nonprofit organizations.

While we appreciate this effort to mitigate some of the most objectionable features of the bill, this in no way alters our opposition to it on general grounds.

H.R. 3669 is a broadly applicable price-fixing bill, allowing private manufacturers absolute power over prices on branded or trademarked articles at all levels of distribution, with no participation by any governmental agency in the price-determination process.

Although the price-setting powers of the bill are vested exclusively in manufacturers, the principal argument, the most appealing argument made in behalf of its provisions, is that it is needed for the preservation of small business, especially small retail business.

In the past, almost every witness on resale price maintenance, whether for or against the legislation in question, has deplored and noted with sympathy the plight of small business in whose behalf this type of legislation is offered, whether in the form of fair trade, fair competitive practices, or the current quality stabilization version. We ourselves share this concern.

The basic argument presented by proponents is that unless retail prices on branded items can be protected from competitive price cuts on the part of large retailers and by discounters, the small independent store will simply have to go out of business. Such price cuts are described as predatory, cut-throat, and unfair, and present remedies under law are claimed to be inadequate.

The manufacturer's interest in the bill is described as dual in nature. It is based on (1) the desire to preserve a large number of distributive outlets and (2) the desire to protect quality name-brand merchandise from debasement and deterioration which is alleged to inevitably accompany lower prices.

Low prices are equated with inferior products and high prices are said to furnish the only incentive and means of producing superior products. Therefore, if we can establish a system under which a manufacturer may, if he chooses, establish a protected resale price on any or all of his branded or trademarked merchandise, small business will be preserved, an orderly distribution system will be assured,

the manufacturer's investment in his brand name will be protected, and the public will be benefited by a reliable flow of superior quality merchandise.

Serious flaws, however, have been shown to exist in this picture of what would happen if Federal resale price maintenance were to become law. Indeed, Judge Lee Loevinger of the Department of Justice flatly predicted in testimony before the House subcommittee last year that this bill would "ultimately eliminate small business."

Surely, testimony of so grave a nature from so responsible a source suggests the need for the most serious appraisal of the theory on which the bill is based.

The dangers to small business pointed out by Judge Loevinger and by others rest on two main points:

1. Small retail business would stand in danger of being delivered lock, stock, and barrel into the hands of the manufacturers. The manufacturers will have the power to enforce any price and any profit margin they wish for all resellers on any product they wish without regard to the interest of any particular reseller. The reseller is wholly deprived of making his own price decisions based on his own costs and his own competitive needs with respect to such products. He cannot, under this bill, move his price up or down from the single price or price range fixed by the manufacturer. If, for example, he wishes to compensate for some special disadvantage, such as poor location or lack of credit facilities, by a price cut on name merchandise, he is prevented by this bill from doing so.

2. Small sellers dependent on sales of name merchandise will be faced with accelerated competition from the large retailers, mail-order houses, and chainstores which can afford to buy and promote unbranded merchandise at lower prices under their own labels, the so-called house brands or private labels. These products are frequently identical to the name merchandise and are even made by the very same manufacturer. The advantage of the high-priced names on particular articles is thus often entirely fictional, as far as the product itself is concerned.

During the 1959 hearings on the fair trade bill in the Senate, Mr. Wilfred I. Meyer, a partner in Schwegmann Bros. Giant Super Markets in New Orleans, gave a very detailed description of Schwegmann purchases of unbranded soap powder from Colgate-PalmolivePeet Co. This soap was sold under the Schwegmann label as "Miracle" soap and it was exactly the same soap as the well-known brand "Fab," also manufactured by Colgate, but "Miracle" carried a much lower price to the consumer.

Chairman Paul Rand Dixon, of the Federal Trade Commission, has testified to the widespread use of private labels in chain grocery stores. In his testimony last year, for example, he cited a study that showed that 64 percent of the frozen food products sold in the 10 largest grocery chains were sold under private labels.

The large retailers and chains are, of course, capable of handling both name brand and private brand merchandise. To the extent that they might choose to increase their stocks of price-fixed name brand items carrying high retail markup margins, their already strong competitive position would simply be further strengthened by the unneeded windfalls they would get.

We are particularly impressed by the statistical study offered by the Department of Justice at last year's hearings which produced prima facie evidence of the inefficacy of resale price maintenance as a means of preventing business failures. In fact the very opposite relationship was shown to prevail, through a comparison of the rate of business failures in States with and without price maintenance laws and in States where the laws had been partially invalidated by elimination of the "nonsigner" clause to fair trade agreements. For each year, 1946 through 1961, business failures were consistently higher in States with fair trade laws than in States with no fair trade laws or with defective fair trade laws. Those with no fair trade laws all showed the lowest rate of business failures.

Finally we are impressed with evidence that small business itself is by no means solidly behind the proposed legislation, despite the impressive list of business organizations that have officially endorsed it. Again citing the Assistant Attorney General, we refer to a study which he described as follows:

A recent survey made by an impartial private organization which is experienced in the field of small business and which polled 179,000 small businessmen located in every State shows that a slight majority of such businessmen are opposed to this particular legislation. The vote was 51 percent opposed to this legislation, 45 percent in favor and 4 percent undecided.

For these reasons, we believe the case has not been made that a universally available resale price maintenance system is the key to the preservation of small business. We urge that other measures be developed to help small business survive-measures that hold less danger to the public and to the general economy.

Turning briefly to the allegation that manufacturers need price protection in order to prevent deterioration of their products: we simply cannot put much stock in it. Our general view is that good quality in a product is its own best salesman. Under free competition a genuinely good product will command a sufficient volume of sales at a price adequate to insure its production. Good products, which consumers want, do not need artificial price supports. Our credence of the argument is further stretched by the practice already referred to of selling identical products at high prices with brand names and at low prices under private labels. In such instances the lowering of prices has clearly not altered the product.

Mrs. Sarah Newman, of the National Consumers League, has succinctly observed that these private brand products

are hardly made with inferior labor and materials because they are made in the same factories under the same conditions as the fair-traded items.

Our own particular interest in this bill is not, of course, specifically from the standpoint of small business or from that of manufacturers, but from the standpoint of the consuming public of which wage-earner families form so large a part.

All impartial evidence on this issue has indicated that prices of consumer retail products would rise substantially if Federal resale price maintenance were to become law. Estimates range from a minimum of $1.5 to $14 billion a year added cost to the consumer, based on limited experience under State laws. With a possibly much larger volume of products placed under "stabilization" provisions if a univer

sally available Federal law were enacted, the potential cost to the consumer might vastly exceed these estimates.

The right of the consumer to shop for the lowest price on a distinctly identifiable product would disappear. The field would be increasingly dominated by brand competition-lower priced house brands and higher priced name brands. Costly, competitive brand advertising and, in some instances, competitive efforts by manufacturers to woo their resellers through offering higher resale margins, would increase prices generally, quite apart from the specific price setting to be encouraged for trademarked products.

We are especially disturbed by the fact that the bill does not offer adequate assurance that the public will be protected from retail price fixing by manufacturers of products which are not competitive as to price at the manufacturers' level. The language of the bill which is supposed to insure that price-fixed items at retail are competitive at the producer level is the requirement that goods "usable for the same general purpose" must be available to the public from sources other than the owner of the brand name and they must be in "free and open competition therewith."

The language has been moderately strengthened over the wording of last year's bill by the addition of the phrase "in free and open competition therewith." But no guidance is given as to just how much competition would in fact be required. Last year some of the leading proponents of this bill testified that if there were only one other manufacturer of a particular product, that would be considered "competition."

We believe, in fact, that the bill in itself lends encouragement to the elimination of competition, especially through the system of "price leadership" under which prices move upward in mysterious concert after a price increase has been put into effect by one of the producers. In industries where price competition has been successfully eliminated for all practical purposes and at the same time has resisted definite proof of collusion under the antitrust laws, the consumers' remaining protection-namely, competition among resellerswill have been sealed off by this bill.

At last year's hearings, the Justice Department produced an impressive list of 126 retail products for which the 4 largest manufacturing companies accounted for at least 50 percent of the value of shipments. In all except 16 of these lines, the 20 largest companies accounted for 90 percent or more of output. We consider it a most serious matter to make resale price maintenance generally available to manufacturers in which so few producers account for so large a share of the market. The one specific exception that has been made. by this bill is the very special case of prescription drugs in which the availability of alternative products may be precluded by a doctor's order.

If resale price protection were to be written into law, then at the very least strong safeguards to the public should be included. One might think of such devices, for example, as requiring a certification from the Department of Justice that free and open competition actually exist on any product for which price maintenance is proposed. Another alternative might be to require public review and approval