(10) A reseller who sells under the brand name after revocation commits an act of unfair competition and is liable in a civil action for damages and injunctive relief by the brand owner, in any U.S. district court in which the defendant resides or is found or has an agent, without respect to the amount in controversy; the owner may recover the cost of suit including reasonable attorneys' fees. (11) Lack of due diligence in revoking as to competing resellers who are violating (8) is specifically set forth as a defense.

The other paragraphs are saving and definitional provisions, and include antitrust exemption language and a statement that the Miller-Tydings and McGuire Acts, inter alia, are not modified or repealed.

3. Objectives of Senate Joint Resolution 159

Senator Humphrey's statement introducing the quality stabilization resolution emphasized the following reasons in support of the legislation:

(1) The resolution is merely an extension of the trademark laws enabling a brand owner to protect his property rights through channels of distribution. (2) The resolution would permit a reseller to remove the brand from the product "thus separating the physical property, which he owns, from the goodwill, which is another's property"-and then sell at any price.

(3) The legislation would be permissive and would leave decision as to enforcement in the hands of the brand owner.

(4) The proposal would permit the continuance of independent retailing and provide assurance to consumers that quality-tested and reliable products will continue to be available.

(5) In the light of increasing numbers of bankruptcies of small business concerns, the proposed legislation is essential to competitive survival of hundreds of thousands of independent businessmen.

Several of these reasons have been equally appropriate in past consideration of fair trade legislation and have been reviewed in detail by many commentators in the past. The most compelling reason now offered in support of the quality stabilization proposal would seem to be the reference to the current plight of independent retailers, particularly in the light of the present phenomenon of widespread "discount selling." The inroads of discount operations on sales of traditional retail stores have no doubt been substantial-"Last year, according to trade sources, discounters grossed more than $4 billion in sales."

The extent to which there has been a substantial causal relationship between retailing of branded goods at prices below those established or suggested by manufacturers and small business failures is of course a difficult factual issue involving many and complex considerations. Wholly apart from the question whether the proposal is the appropriate solution, reliable probative evidence of such a relationship would undoubtedly be significant in any differentiation of the present setting from that confronting Congress during its consideration of proposed Federal fair trade legislation in recent years.

4. Relationship to other legislation

The three practices condemned in paragraph (8) as proposed by the joint resolution deserve separate comment.5

(a) Bait merchandising.-The scope of this term, not defined in the resolution, is somewhat vague and uncertain. Ordinarily the concept "bait merchandising" would be thought to embrace only the use of loss leader selling by which certain branded goods are offered for sale at less than "cost" in order to "bait" customers into a store in the mistaken belief that all goods in the store are being sold at comparably low prices. This practice may already be subject to various State unfair practices statutes, sales below cost statutes, or fair trade statutes, or to condemnation under section 5 of the Federal Trade Commission Act or common law principles as a species of false advertising or unfair competition. As so limited, prohibition of the practice would seem to be consistent with traditional antitrust or trade regulation principles.

(b) Resale price maintenance.-While the Miller-Tydings Act of 1937 and McGuire Act of 1952 created a condition permitting State fair trade laws to be effective by providing exemption from Federal antitrust legislation, fair trade

3 Congressional Record, pp. 2479-2482 (Feb. 21, 1962). A list of over 50 national trade associations supporting the measure was appended to Senator Humphrey's remarks. 4 New York Times, Jan. 30, 1962, p. 32.

The legislation would apply "to all acts and transactions in or affecting commerce which Congress may lawfully regulate," in territories and in the District of Columbia.

is not available in a number of States where no fair trade legislation has been enacted or where fair trade legislation has been rendered ineffective by adverse holdings on constitutional issues. An apparent objective of the proposed legislation would be to supplement the remaining State laws by creating a Federal right of brand owners to effect resale price maintenance on certain goods. While the proposed legislation provides that "No exercise of any rights or remedy provided [herein] shall be construed to be a violation of any of the antitrust acts," it is not clear whether this language is intended to immunize arrangements between manufacturers and retailers as to prices or enforcement of rights or remedies of the brand owner. A significant aspect of this problem is that while a principal reason advanced in support of the joint resolution is the plight of small independent resellers, the rights and remedies are given only to brand owners, who will presumably be urged by resellers to enforce the statutory rights and remedies.

(c) Misrepresentation.-The proposed legislation would create a limited private cause of action providing for relief against commission of acts of misrepresentation which would probably be considered to fall within the scope of section 5 of the Federal Trade Commission Act, which prohibits unfair methods of competition and unfair or deceptive acts or practices in commerce. In consideration of the effects of the proposed law, the elastic scope of section 5 as it would bear on the content of the private right to proceed against "misrepresentation concerning such goods" and the problems attendant to possible overlapping of or conflict between privately obtained injunctions and the cease and desist order authority of the Federal Trade Commission, would be significant. 5. Observations and conclusion

The basic principle of the quality stabilization resolution appears to be that certain desirable national objectives will be maintained by providing specific private rights against three types of activities asserted to be detrimental to maintenance of a valuable property right in a brand name.

With respect to the protection against "bait merchandising practices," a prime difficulty is the lack of precision of the term. If flagrant loss-leader selling is all that is encompassed by the term, the natural question would be whether the practice is sufficiently prevalent and serious to warrant Federal legislation, and whether the legislation would be effective in its apparent objective to protect small retailers against the competition of discount or other operations which may sell all items at a low markup over cost. Substantively there is probably general agreement among most antitrust students that the flagrant type of lossleader selling should be actionable. But it is unclear whether the scope is to be interpreted as so limited.

With respect to misrepresentation, again a fundamental problem is that the scope of the prohibition should be sufficiently defined. Private enforcement to supplement Federal Trade Commission authority against flagrant types of misrepresentation directly injuring a producer or brand owner, such as undisclosed substitution of goods, might well be useful. But without precise delineation of the scope of the term, problems of vagueness and provocation of trivial litigation' similar to those presented by section 5 of the Federal Trade Commission Act could be expected.

With respect to resale price maintenance, the proposed legislation differs in language considerably from existing Federal and State fair trade statutes; however, the fundamental approach seems to be the same-to permit a brand owner to control prices at which resellers may sell branded goods. Since at least 1912 the subject of resale price maintenance legislation has been highly controversial; during this 50-year period retailing and distribution have adapted to a series of drastic innovations. While the fundamental question of the desirability of such legislation may be an economic issue, any such legislation

Alaska, Missouri, Nebraska, Texas, Vermont, and the District of Columbia do not have fair trade laws. Puerto Rico's fair trade law was repealed in 1959. The laws of at least 19 States have been held in part or generally unconstitutional at some time. See chart 2, Tr. Reg. Rep., par. 6041.

7 See dissenting opinions of Commissioner Elman in matter of Gimbel Bros., 3 CCH Tr. Reg. Rep., par. 15,748 (1962); and Judge Friendly in Exposition Press, Inc. v. F.T.C., 295 F. 2d 869 (2d Cir. 1961).

8 "Whether a producer of goods should be permitted to fix by contract, express or implied, the price at which the purchaser may resell them, and if so, under what conditions, is an economic question. To decide it wisely it is necessary to consider the relevant facts, industrial and commercial, rather than established legal principles." Brandeis, J., concurring in Boston Store of Chicago v. American Graphophone Co., 246 U.S. 8 (1918).

would have important legal ramifications as well. The belief that a general resale price maintenance system goes beyond the requirements for protection against practices such as loss-leader selling and the basic antitrust reliance upon price and other competition, with exemptions enacted only in compelling circumstances, have been strong factors in the opposition to extension of Federal resale price maintenance legislation beyond the enabling principle of the Miller-Tydings and McGuire Acts. In fact, a majority of the Attorney General's National Committee To Study the Antitrust Laws in 1955 recommended congressional repeal of the Miller-Tydings and McGuire Acts. The Department of Justice and Federal Trade Commission have consistently opposed fair trade legislation, and recently specifically opposed the quality stabilization proposals. Apart from the problems of the judicial administration which may be posed by transferring to the Federal courts the burden of policing resale price maintenance through litigation brought without regard to the amount in controversy, the creation of a Federal cause of action for the enforcement of resale price maintenance would appear to represent one more step in the intrusion of Federal legislative power into the area of control of the public policy of the several States. As noted above, in 24 States as well as the District of Columbia and Puerto Rico, resale price maintenance is incompatible with the State's legislative or judicially construed constitutional policy. Under the provisions of Senate Joint Resolution 159, the right to legislate under the McGuire Act with respect to this significant area of economic policy in the interest of its own citizens is denied the several States by the assertion of a paramount Federal policy in the exercise of the constitutional power over interstate commerce. There can be no doubt that many small independent businesses are faced with effective price cutting competition by discount houses and others which may cause them significant loss of trade. Assuming that maintenance of the traditional independent business part of the retailing and distribution structure is an important national objective, alternative methods of alleviating the situation should be considered. Examples would include Federal legislation designed to prohibit retail selling, of at least specified categories of goods, at prices below defined "cost", or additional financial assistance by the Government to small business; such measures might suffice to alleviate the situation depicted. But it would seem that to date the strong factual justification required to overcome traditional reluctance of Congress and the enforcement agencies to endorse Federal resale price maintenance legislation has not been shown. A copy of Senate Joint Resolution 159 is attached as an appendix. Respectfully submitted.

S. CHESTERFIELD OPPENHEIM, Chairman.

NOTE.-Paul Rand Dixon and Lee Loevinger did not participate in the consideration or voting on this matter.

APPENDIX

[S.J. Res. 159, 87th Cong., 2d sess.]

JOINT RESOLUTION To amend the Federal Trade Commission Act, to promote quality and price stabilization, to define and restrain certain unfair methods of distribution and to confirm, define, and equalize the rights of producers and resellers in the distribution of goods identified by distinguishing brands, names, or trademarks, and for other purposes

Whereas it is recognized that, in the chain of distribution of products so identified, there may be encountered resellers having predatory interests and committing, in the resale of such products, unfair or deceptive acts or practices (such as, but not limited to, store-traffic baiting, and misrepresentation as to the size, capacity, quality, condition, model, or age of the goods), all tending to destroy unfairly the value to its owner, to smaller resellers, and to the public, of the brand, name, or trademark, and tending to disable and destroy competition, thus to create monopoly of retail distribution, contrary to public interest; and

Whereas the above-recited deceptive acts and practices and unfair methods of competition tend to diminish the volume of such identified products moving in commerce by adversely affecting the demand for such goods, thereby impairing the producer's ability, and reducing his incentive to maintain and increase, with relation to price, the value of such goods to the public, or to maintain and increase opportunities for employment, or pay rates for labor, in his factory; and

Whereas substitutions of inferior labor and materials forced by the downward spiral of unrestrained predatory pricing on popular identified products, in the fields of foods, drugs, and beverages, endanger public health, and in other fields, endanger public safety; and

Whereas it is recognized that unless fair competitive practices can be maintained in all appropriate stages in the distribution of such identified products, the marketing of such identified products is depressed and the quality thereof tends to deteriorate; and

Whereas the distinguishing brand, name, or trademark of a product, and trade and public goodwill associated therewith, constitute property, the rights to which are entitled to protection by the owner thereof despite transfer of the product itself; and

Whereas, in order to remove the above-recited obstructions to commerce, and to remove the quality-deteriorating and value-diluting pressures resulting therefrom, in the manufacture and resale of products bearing distinguishing brands, names, or trademarks, it is found and declared that it is in the public interest to define, confirm, and implement said property rights: Therefore be it

Resolved by the Senate and House of Representatives of the United States of America in Congress assembled, That (a) this Act may be cited as the "Quality Stabilization Act."

(b) Section 5(a) of the Federal Trade Commission Act, as amended, as hereby amended by adding, at the end thereof, paragraphs (7) to (14), inclusive, as follows:

"(7) The owner of a brand, name, or trademark shall be deemed to retain his property rights therein, and in the trade and public goodwill symbolized thereby, regardless of any sale or transfer of the goods to which such brand, name, or trademark relates, and no such sale or transfer shall be deemed to diminish or extinguish any such rights. Any person who resells in commerce goods identified by a distinguishing brand, name, or trademark, either on the label, container, dispenser thereof, or otherwise, may rightfully employ such brand, name, or trademark, but only in effecting the resale of such goods, and subject to the provisions of paragraph (8) hereof.

"(8) When goods usable for the same general purpose are available to the public from sources other than the owner of such brand, name, or trademark, the right of any person to employ such brand, name, or trademark in effecting resale