mean to imply that it had happened only for 8 months, sir. I am

sorry.

The CHAIRMAN. We thank you, Mr. Eckerd.

Senator Williams, your Senator, could not be here today because he had to be in the Finance Committee where an important matter was up and I am sure he would want me to tell you that he was sorry he could not be present.

Mr. ECKERT. I thank you, sir.

FURTHER STATEMENT OF MAURICE MERMEY, DIRECTOR, BUREAU OF EDUCATION ON FAIR TRADE, NEW YORK, N. Y.

The CHAIRMAN. Now, Mr. Mermey, you want 2 minutes. If you do not want more than that, we can hear

you.

Mr. MERMEY. The National Association of Chain Drug Stores does support fair trade.

The CHAIRMAN. Will you give us a list for the record of the chainstore druggists who belong to your association?

Mr. MERMEY. Well, I do not represent the National Association of Chain Drug Stores. I represent the Bureau of Education on Fair Trade. The National Association of Chain Drug Stores is represented as an association on the steering committee of the bureau. I shall be happy to furnish you a list of the members of the National Association of Chain Drug Stores if that is available to me. It does represent virtually all the chain drug stores in the country.

I will also tell you that the National Association of Chain Drug Stores contributed to the bureau to the extent of 8 percent of the bureau's budget. Now you

The CHAIRMAN. We are glad to have that information. may proceed.

Mr. MERMEY. In my testimony on Monday I omitted a few things in order to keep within the half hour. The first was that price wars were still continuing in a very large way.

I have here for you, sir, photographs taken of a situation in Akron, Ohio, in April of this year.

You will notice that the prices on this ad-this is a Walgreen window-Walgreen had to cut prices to meet prices of the fellow who could sell these items for just a little bit less than the fair-trade price and they eventually got into a war.

The prices advertised here are lower than I think it would cost to steal the merchandise.

I should go on from there, if I may, and refer just a little bit more to the Nielsen price study about which I told you on Monday.

I did not include the specific names of the products that were included in that study. I include them by numbers only. That information was confidential as between Nielsen and its clients. I should be happy to furnish a list of names of those products to the committee for its study, if the committee so wishes. I should not wish to put it in the record but it would be up to the committee. We would be very happy to do it and I know that you would find that every one of the products listed on there are products that you are already fully familiar with.

As to the question of clubbing manufacturers to go on fair trade.

Phillips. The chairman of the board of Sterling Drug, Inc., at the time the Phillips Milk of Magnesia went on fair trade, was Mr. Edward S. Rogers, one of the leading trade-mark and fair-trade lawyers in the country.

It was Mr. Rogers who happened to be the author of the famous nonsigner clause that went into the California act in 1933 and who defended the constitutionality of fair trade before the Supreme Court in 1936. It would hardly seem to me to be necessary to force Mr. Rogers to put his own products on fair trade.

With regard to grocery items, coffee, and so on, I would like to say it is impossible to put articles on fair trade even though they be trademarked when the prices of those articles vary from day to day because the commodity meets the price through a United States or an international market. Coffee is one of those products.

Now something has to be said, and I had forgotten to mention, about economies. I know a lot of economists theoretically find themselves in opposition to fair trade but Phillip Courtney, who is a professional economist of high standing, told me 6 months ago, he said, "You know Mr. Mermey, as an economist I used to be against fair trade. I thought economically and theoretically I was wrong. But I became the president of Coty's and since than I have come to recognize that the realities of the market place do not quite coincide with the theories of the classroom, and I am now for fair trade 100 percent."

I omitted any reference to the validity of the trade-mark-the property value of the trade-mark. Bayer Aspirin is a case in point. A price war in New York. Five-cent Bayer Aspirin was sold for 3.5 cents. Did it hurt the product? I will tell you it did. The very day Bayer Aspirin was sold for 3.5 cents two of the chains prepared a memorandum to go to all supervisors around the country of those two chains telling them to put Bayer Aspirin under the counter. They could not sell it at that price. If the Federal Trade Commission would only put into the record its own reports of 1929 to 1932 to the effect that chains have discontinued carrying national brand merchandise which has been price-cut, because they could not afford to carry them, you would see the damage that price cutting can do.

But as to the value of that Bayer Aspirin, as the Supreme Court noted in 1936 in a transaction between manufacturer and retailer, two things are involved: One is the commodity which the retailer buys and for which he can show a bill. Another is the trade-mark which the retailer never buys and the manufacturer continues to own that trade-mark and the good will it symbolizes.

In the case of Bayer, if they sold the trade-mark for $50 million, I am quite sure the chairman and the president would be fired the next day.

I will answer any questions you have.

The CHAIRMAN. Are there any questions?

Senator BREWSTER. I have no questions.

The CHAIRMAN. Without objection, a statement presented to the committee by Herman Luckoff will appear at this point. (The statement referred to follows:)

TESTIMONY GIVEN BY HERMAN LUCKOFF PERTAINING TO THE SO-CALLED FAIRTRADE MCGUIRE RESALE (Price-Fixing) BILL (H. R. 5767)

I started in business for myself in 1914 in Nelsonville, Ohio, with a capital of $500. I was my own janitor, salesman, and merchandise man. With the aid of my wife and relatives, I slowly branched out and today we operate six department stores, a small chain of shoe stores and a furniture store, with an approximate volume of 31⁄2 million dollars.

We are not engaged in price-cutting. We sell goods at a legitimate profit and a moderate relative price with our competition. We sell few fair-traded items and we maintain prices all along the line.

I am still operating a neighborhood store in Columbus, Ohio, and in small towns in Ohio and Indiana. Small-town stores do not apply all the modern "city-slick" ideas.

I know the feeling of our customers who purchase the popular-priced merchandise, people who are not interested in too much service. They are the middle class, white-collar people, workers and farmers who want values comparable with the prices they receive for their labor and commodities.

Among our competition we compete primarily with J. C. Penney Co. and Montgomery Ward, because there are very few independent merchants left in small towns. I believe that in 5 years of normal business in this country, 70 percent of all independent merchants will disappear.

It is only the unsettled national and international conditions prevailing these past years that has prolonged the independent merchant's existence until today. Fair trade is one more spike in his coffin.

A national fair-trade law is not needed because the Miller-Tydings Resale Act takes its place.

The Miller-Tydings Resale Act nullifies the Sherman antitrust law and the big user compels the manufacturer to enforce a fair price. The Miller-Tydings Resale Act, through the manufacturer's agent, tells the retailer when, how, and at what price to sell his goods.

It is common practice in the industry for the big users to have an agreement with the manufacturer as to the price maintenance he will enforce, the time of sale and how many outlets he can sell. Isn't this enough to see that the retail business is well taken care of?

The fair-trade law will add to the poor man's burden, protecting the large interest by insuring the cost of advertising schemes, not the intrinsic value of the product.

To see and understand the retail combine of this country, all one need do is to investigate the interlocking directors of big business and banking houses to see that all "Main Street" competition is settled around a New York desk, and they are well able to and do erase any unethical business competition at will.

If you must pass a fair-trade law, be sure to limit the profit, and take into consideration advertising allowances, demonstration, help, tie-ins, window and interstore display allowances, etc. You will discover many articles carry a 200 percent mark-up above cost.

Who is paying the bill? The worker and the farmer are the victims.

In my opinion, if a fair-trade bill must pass to guarantee the merchant and manufacturer a profit, we must admit that our help, too, is fully justified in asking us to guarantee full annual employment at a fair standard of living. It will not be fair to underwrite the merchant and manufacturer's profit without underwriting the worker's living.

Let's talk facts. An Arrow Gabarnaro shirt fair-traded at $6.50 was bought by us at $34.50 per dozen. Is it fair to the American public to pay $6.50 for a shirt when he can buy it abroad in our American possessions for $5?

A few years back I saw executives from our largest rug manufacturing concern investigate Montgomery Ward, located next to us, and corrected carpeting prices which had been sold for $1 less than the suggested retail price.

I saw a large cloak manufacturer in our town correcting a nationally advertised garment which had sold for $10 less than the city's largest department store ordered it to be sold for.

I also have seen furniture taken from a retail furniture store, after the manufacturer had paid the retail price, in order to protect the larger user. Isn't this sufficient when it all could be accomplished under the Miller-Tydings Resale Act? I can name many things that by the time you were through would make you wonder what the commodity cost, and it is fair-traded at a ridicuously high price. Bear in mind, a fair-trade law eliminates free competition and legally prevents

be willing and able to operate his establishment profitably on a smaller mark-up. It takes away the advantages and opportunities of our children to ever start in business for themselves.

A fair-trade law assures the department store and chain stores prosperity. It is wrong to think it helps the independent merchant in any way.

The independent merchant does not receive the advantages the chain or department stores do and by the time the fair-trade item reaches the independent merchant through the distributor, it has lost most of its initial advertising appeal. The independent merchant is disillusioned, thinking he can help his business and charge more because of fair-trade pricing. He loses sight of the fact that he is being fattened for the slaughter and the fair trade is high-jacking the public and he benefits very little.

Unless you can put teeth into the fair-trade bill so that it will limit the manufacturers' and retailers' profit within reason, it will be useless.

In conclusion I would like to say the retailer, big and small, is complaining about Government intervention in business, yet he runs to the Government for a license to hold up the public and perpetuate all his schemes.

Think what the future holds for our country. What opportunities will small business have when they endeavor to compete with Wall Street controlled chains and department stores with their billions and influence on our economic life. If they continue to sway legislation their way, there will be no independent retailers in this country.

The CHAIRMAN. We will recess, then, until 2 o'clock. Thank you very much.

(Whereupon at 12:25 p. m.,

2 p. m. the same day.)

the committee recessed to reconvene at

AFTERNOON SESSION

The CHAIRMAN. The committee will be in order.

Mr. Don Smiley, you may proceed.

STATEMENT OF DON SMILEY, ECONOMIST, R. H. MACY & CO., NEW YORK, N. Y.

Mr. SMILEY. Dr. Q. Forrest Walker, our economist who has been appearing down here since the twenties in opposition to price-fixing bills, was supposed to come today. He is ill and I am a substitute. I feel as strongly but I have not been at it as long.

I would like to have leave, if I may, to file the statement of Dr. Walker, with the exhibits, so that we can have that in the record.

We appear here today to voice our nationally known opposition to price fixing and to be sure that we are counted on the side as we have been for 94 years in support of the consumer's right to buy what he wants to buy, and at free, competitive prices.

Let me summarize, if I may, our position.

First, private price fixing invariably and inevitably works against consumers. We believe that public policy requires the protection of millions of consumers, not the self-interest of a handful of manufacturers and retailers.

Second, Congress should not apply to activities affecting interstate commerce the systems of private price fixing now permitted under the falsely labeled fair-trade laws of 45 States.

Third, under the protection of these laws before the Schwegmann case, more and more manufacturers were climbing aboard the pricefixing band wagon. The effect of this trend was to hog-tie competition at the retail level. Public policy demands an end to this unhealthy

trend and a return to the healthy principles of a competition that sets prices according to consumer demand.

Fourth, no matter how it may be camouflaged, private price fixing never benefits consumers by lower prices. On the contrary, price fixing always results in price raising and let me say if a bill such as the one that is before the Senate should become law it is unescapable that prices on thousands of commodities would go up. That is a fact which cannot be denied.

Fifth, Congress has wisely recognized the need for competition among producers. Congress should similarly recognize the need for competition in distribution.

Sixth, arguments that price fixing is necessary to protect smallbusiness men are not substantiated by the facts.

Seventh, experience demonstrates conclusively that fair-trade laws are not fair. They do not work in the manner claimed any more than prohibition did. They are unenforceable because of the consumer's continued insistence on the right to buy at the lowest price he can find. Eighth, fair-trade laws seriously inhibit all retailers and distributors who, like Macy's, make it a cardinal point of business policy to endeavor to offer more and better goods at lower prices to more people all the time.

Ninth, Congress should not surrender, even if it can, its constitutional power to regulate commerce among the States by delegating that power to the legislatures of the several States.

While there is talk that the present bill merely turns over to the States something for them to handle, the really basic decision is one for Congress to determine, what kind of a system it wants to have with respect to retail price fixing.

Since I am filing the complete statement documented on the economic aspects of this thing by Dr. Walker, I think it would better serve the interests of the committee if I were to cut short many of those remarks but I would like to talk, if I may, about one aspect of this problem which I do not believe has been dealt with in any considerable length before the committee. This is a matter which I think argues strongly for disapproval of this kind of legislation.

That point is that price-fixing laws are unworkable. They just are not enforceable. There is no practical means to compel their enforcement and none are feasible. Just as prohibition did, they breed evasion, hypocrisy, fraud, and discrimination. Many retailers who want these bills passed expect that manufacturers will continue to countenance price cutting on their part but fail to take action against other retailers who may advertise the prices at which they are selling their merchandise.

This is not mere speculation. It is backed by the facts and figures of Macy's experience under price fixing prior to the Schwegmann case. What happened in the electrical-appliance trade will serve as an example. When supply caught up with demand at the end of World War II, there were a large number of retailers known in the trade in New York and other metropolitan centers as "discount houses" who sold below fair-trade prices and their business flourished. This was not unknown in the retail trade or to manufacturers.

In December 1948, Retailing Daily, which is a leading trade