I have stated that unless something is done soon it will be but a matter of a few years until all retail merchandising will be in the hands of a few giants. Testifying in the final days of House hearings on the quality stabilization bill was the National Association of Mass Merchandisers. It is members of the mass merchandisers who have often been quoted as bragging that it is only a matter of years until they control better than 80 percent of America's retail trade. I can, Mr. Chairman, better understand their interests in wanting to kill this bill-can understand it as I deplore it. I do not want to put them out of business. I do want to create ground rules whereby they have to compete fairly.

It is also deploring to me that the National Farmers Union as well as the American Farm Bureau Federation testified in the House hearings against the livelihood of the American retailer-against the crossroads grocer, hardware dealer, druggist, bicycle dealer, gas station operator-the people who meet with him at the town hall, the people whose kids go to school with his kids, the people who join in the parties at his home.

Both of us know, Mr. Chairman, that the Government-ourselves-have fixed the farmer's prices. We've gone further. We've established laws whereby he is paid for not producing-in order to save our way of life. When the Government actually-not semantically-fixes prices, it is always in "the best interests of the consumer, country, and economy."

Isn't it incongruous that the farmer who gets "fixed" rates for not producing will tell you that the brand name manufacturer, distributor, and retailer who serves the farmer as a neighborhood or area consumer has no rights to any protection?

To quote the very able Raymond S. Reed from his column for Home Furnishings Daily on May 10-"One Government bureau calumniates, persecutes, and prosecutes the manufacturer who merely stops selling a retailer who wrecks his brand name and price structure in the marketplace while another bureau threatens to put any farmer, who cuts it fixed prices, out of business."

Last year, and again this year, a Washington, D.C., newspaper struck out in its editorial columns against the quality stabilization bill as fair trade "price fixing" under a new cloak. Now, any newspaper has the right to give its opinion and I shall never criticize it for such. But I would rather hope of a newspaper that it would research its material-and do a little reflection as to its own policies before falling to prejudice or pressured bias. And most interesting was that this editorial was what we used to call "pot boiler"-meaning prepared in some other place and used as filler by newspapers-thereby saving them the expense of mind and money in creating their own stories. This "pot boiler" editorial attacking the quality stablilization bill was used throughout the country. But of most interest and significance to me was that these editorials inevitably appear right alongside or below the very definitely fixed price of the newspaper to the consumer and its fixed advertising rates. The senior citizen who for some reason-such as a requiem mass notice ad for a departed relativewould find no "bargain” at the newspaper-no sympathy at all for his advanced years or lesser income-he would pay the fixed price or get no notice. Where, oh where, is the Golden Rule of "Do unto others as you would have them do unto you?" I cannot help but be interested in learning of a newspaper's low percentage of advertising income from national brand name advertisers as compared with its income from ads by local discount houses and loss-leader operators. And I wonder again about sincerity and commonsense. And that is why I have taken this valuable committee's time.

It is even more deploring to me that certain members of the AFL-CIO are arguing against passage of this single-purpose lifesaving measure. Here again is a "traditional stand" preventing an objective study as to merits. There certainly are no Members of Congress more dedicated to the salutary principles of the labor movement than Ray Madden, Chet Holified, Hubert Humphrey, or myself. We have joined in introducing, and in fighting tooth and nail for immediate enactment of the quality stabilization bill. We have done so to promote the survival interest of the union movement. We look upon the quality stabilization bill as a means of increasing employment when such is of ultraimportance to our national welfare and as a means of implementing the often-stated code of AFL-CIO President George Meany, to continue the quality of product, to ever upgrade it, and to create the incentives for new goods as the only way to insure and improve the lot of labor.

My esteemed colleague, Congressman Chet Holifield, of California, has most eloquently and positively outlined many, many reasons why labor should be far out in the lead in support of quality stabilization. His testimony before the House Commerce Committee is a must study for every Congressman and certainly for the officers and members of the great AFL-CIO. I am not surprised that the directors of the Oklahoma AFL-CIO organization unanimously voiced their full support of this bill's passage into law. I am surprised that the national organization of the AFL-CIO has not been in the forefront of support for this bill.

I repeat now, Where would labor be today if it had not adapted itself to modern needs by forcing experimentation of betterment for the good of the American worker? Where will labor be tomorrow if it continues to abet a cannibalistic marketplace which worsens day by day-not only to put the store owner out of business but to force the manufacturer of brand name products to move to foreign countries, there to make cheaper products to send back in competition with his own American factory? Where is labor's future in supporting a distributive system that depends on automation, on profit from foreign nonunion products and on duping the laborer himself, the greatest consumer in number, into buying goods not produced by him or in his interests? What kind of tradition calls for suicide?

Let me quote from Business Week of February 3, 1962: "Food industry labor groups have sounded the alarm over the discounting invasion. At least two unions, the 350,000-member Amalgamated Meat Cutters and Retail Food Store Employees and the Retail Clerks International Association, are launching drives to organize discount stores affiliated with food outlets.

"President Toby Coletti of Meat Cutters Local 342 says the discounters pose two main problems for labor:

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"They've introduced a number of practices long since eliminated by unions in the food industry—including extended hours, split shifts, 80 percent to 90 percent part-time workers and Sunday openings; and

""They threaten to turn food retailing into a profitless or nearly profitless industry in which further improvements in wages and benefits would become economically infeasible.'

"Besides stepping up its organizing activities, Coletti says, local 342 will refuse to permit its skilled journeymen to work in the discount centers and food markets which do not adhere to traditional work practices."

Americans don't want a cheaper product, Mr. Chairman. They, every one of them, want the finest product invention, industry, and genius can produce they want the brand name superior at the cheapest price possible. And if there be a consistent tradition, it is the economic proof that competition, healthy, not "scab" competition, will give them just that. I ask the AFL-CIO leaders-remembering my own career is representative of labor-to simply but very carefully and honestly consider the jungle warfare on the merchandising streets of America that depresses markets and depresses quality of product in the drive for lower and lower prices; to consider the harmful effects of this upon our productive economy; to consider the link between these conditions, the job shortage in this country, and the ever-increasing employment of foreign labor in Americanowned plants in foreign lands making products to compete with the Americanmade product not only in this country but also in those foreign lands. When traditional stand is equated with 61⁄2 million people out of work shouldn't labor itself be using commonsense to find a solution?

To everyone against trying this "prove itself" emergency measure as a stopgap to industrial and distributive death, are you in reality of the belief that the independent businessman is America's "price-fixing" bandit? How about the "price fixing" of the farmer, the union worker, the utilities, the communications and transportation systems, insurance, rent, the freight lines, the newspaperyes, even salaries including that of the Congressman?

I would think that everyone would know the term "price fixing" is a term applied to the collusion of all manufacturers or all resellers of a like product and that the Quality Stabilization Act cannot be used unless there are substitute products in free and open competition available to the consumer.

But, if you insist on applying "price fixing" to quality stabilization, then be fair enough to apply it every other place as indicated above, and realize very well that this economic life of ours today, and which some are demanding be not now changed, is like protecting by very stringent rules the first three quarters of the football game but to leave the final quarter without any rules at all.

Today, we hear much of the common market. Commonsense will tell every one of us in America that we cannot exist without expecting tough competition in such a world market. Does commonsense tell us today that we cannot possibly compete unless we make a continually better brand-name product so much better that the foreign buyer, whatever his own earning status, will covet above all else for the better bargain of lasting quality?

We live our daily lives placing things and people in the right or left wings. America does, and I hope it always will, have a strong conservative and liberal, a right and left wing. But it also has a middle-and that middle must be solid. It is very soft today.

Some people use language to express thought. Some use it to conceal thought. And some use it instead of thought. I am herein, and from my deepest sincerity, endeavoring to make commonsense transcend language.

I'm moved to suggest that those who oppose this quality stabilization bill have given us hours and hours of what for the most part are conjectures concerning the damage that they assert might be done by the enactment of this bill, accompanied by statements that these conjectures and assertions are indeed facts.

My prime purpose in coming over this morning is to plead with you to be reminded in your deliberations that emerging above all drum pounding are certain key facts.

That the entrepreneur, or independent businessman, is the backbone of America, is the strength on which America was built, is the strength on which its future as a country depends. There is today a cancer, a stinking evil cancer, rotting and ruining the spinal cord, and which, if unchecked, will so weaken this Nation that it no longer can stand.

That, as far as our Government is concerned, the responsibility for moving to cure the malady resides with this Congress.

That the bill before you reflects countless hours of deliberation by you and your committee, by professional staff, and by committees of prior Congresses. That before you is the only remedy with any chance for success-a remedy wherein Congress establishes economic policy under which our free competitive enterprise system in a limited area is to operate but Government keeps itself out of the picture.

That while this committee deliberates in these hearings, some businesses hover on the brink of failure and others give their final gasp.

I once heard it said that over every mountain there is a path, but ofttimes that path cannot be seen from the valley. We have a mountain to cross. By staying in the valley and denying the possibility of a path, we cannot progress.

I do not ask you to believe in the quality stabilization bill; I do beseech and implore that all of Congress and even the enemies of the bill, give it a good faith trial to serve a purpose for the good of our country.

I repeat-Why do you fight that which can save?
Thank you.

STATEMENT OF JOHN W. ANDERSON, PRESIDENT, THE ANDERSON CO., AND QUALITY BRANDS ASSOCIATES OF AMERICA, INC., TO THE SENATE COMMERCE COMMITTEE IN SUPPORT OF THE QUALITY STABILIZATION BILL, S. 774, JUNE 1963

Mr. Chairman, this opportunity to submit for the consideration of your committee, in support of the quality stabilization bill, a statement based upon more than 50 years of manufacturing and merchandising experience and observation, is appreciated.

My name is John W. Anderson. I am president of the Anderson Co., operating factories in Gary and Valparaiso, Ind. We manufacture a diversity of products marketed through ethical independent resellers-primarily automotive products for original equipment and replacement purposes.

In previous congressional hearings my testimony has included extended information as to my experience in matters relating to price stabilization and in operations involving the traditional American system of production and distribution of trademarked products. So I shall not likewise burden this record.

I am president of Quality Brands Associates of America, Inc. (QBA), and am active in all of its areas of interest-including the area of legislation exemplified in the pending bill here under consideration.

THE QUALITY STABILIZATION BILL DOES NOT MODIFY ANY STATE CONSTITUTION OR STATE LAW, FORBIDDING PRICE FIXING

Under the supremacy clause of the U.S. Constitution, every congressional act may effect a modification of State constitutional and statutory law—unless in the Federal act the contrary is provided. This is axiomatic under our FederalState system.

Since the quality stabilization bill does not authorize the exercise of any rights and remedies that would permit horizontal price-fixing agreements, there, of course, is no conflict between the quality stabilization bill and any State constitution or State law forbidding horizonal price fixing.

Of equal importance is the fact that the quality stabilization bill does not modify, overrule, or conflict with any State law-for the reason that State law does not deal with the subject matter of direct brand-name control, as does the quality stabilization bill. The differences between the quality stabilization approach and fair trade emphasize the lack of conflict between State law and the quality stabilization bill.

The quality stabilization bill permits the establishing of a protective resale price by private action—but only as a condition of the use of the brand. The right of a discounter to cut the price is carefully preserved—his right to continue to misuse the brand (the property of the manufacturer) over the protest of the manufacturer is all that is affected. This poses no problem whatsoever of conflict with State law.

In 1919 the Supreme Court held in the Colgate case that a seller, acting alone, could announce the prices at which he desires a buyer to resell his branded products, and, acting alone, refuse to sell again to any buyer who did not observe his established resale prices.

Under Colgate, the trademark owner (the manufacturer) may neither exact nor accept from any reseller, as a condition of any sale to a reseller, any promise or agreement that the goods will be resold at the manufacturer's preferred prices. But the manufacturer can refuse to sell again-"for any reason or for no reason at all."

HERE'S WHY QUALITY STABILIZATION IS A “MUST”

Many manufacturers make their trademarked products available to retailers only through wholesalers. Wholesalers often supply-to each of many retailers many products. So wholesalers-understandably-cannot undertake to discard a retailer-customer because that retailer may have failed to conform to a single manufacturer's ethical standards.

That's why—to protect the good reputation of his quality product, and to protect all ethical resellers and the public-the quality manufacturer needs the quality stabilization bill to enable him to reach past his wholesalers and terminate all use of his trademark by a subordinate reseller who abuses it.

Thus the quality stabilization bill merely gives effect to a logical extension of the principles of the Colgate decision-to retailers who, as a matter of convenience to them, are made subordinate to a manufacturer's direct wholesale customers.

An important thing to note is that operation under the Colgate doctrine has never been considered "price fixing" in any antitrust sense. Legally speaking. price fixing, of whatever category, has always been limited to arrangements based on agreement either expressed or implied.

Under Colgate, a seller (manufacturer) can suggest a resale price, saying to the buyer, "If you don't maintain the resale price, you will lose the privilege of buying or selling my products." Similarly, under the quality stabilization bill, the seller (manufacturer) says, to all who resell his products, "If you don't protect my good name by maintaining my price, you will lose the privilege of making any further use of my trademark."

The effect of the quality stabilization bill, as to stabilization of prices, is, and clearly should be, no more undesirable than a manufacturer's refusal to deal, under the Colgate doctrine, with a primary reseller. Fair trade rests upon a contractual system of price maintenance. The Colgate doctrine, as honored in the quality stabilization bill, rests solely upon the independent action of the trademark owner. That means no contract, no agreement, as to prices.

Therefore, since Colgate is not "price fixing," neither is quality stabilization price fixing. And since quality stabilization neither condones nor requires any agreement, written or oral, between a manufacturer and any reseller, relating

in any way to prices, quality stabilization cannot in good conscience be called "fair trade."

Quality stabilization is, instead, a clean and lawful defense for the quality manufacturer who is unwilling to have his trademark-his good name-used as store-traffic bait-and who is unwilling to break faith with his resellers-and with the public by squeezing quality and value out of his product to meet the demands of cannibalistic retail monopolists for lower and lower prices with which to destroy the traditional American system of distribution through ethical resellers.

The quality stabilization bill is, in effect, an effort by Congress to assert its primary jurisdiction in respect to purely economic issues, thus affording the necessary guidance to the executive and judicial arms of our Government.

It is therefore our conclusion that the quality stabilization bill creates no conflict with State law, but rather redefines the role of, and sets economic policy for, the executive and judicial branches of our Federal Government.

THE QUALITY STABILIZATION BILL DOES NOT CONFLICT WITH STATES RIGHTS To allege that the quality stabilization bill is an invasion of States rights is superficial and misleading for the reason that the intrastate application of the Sherman Act and other antitrust statutes over the last half century have created the compelling need for this legislation at the Federal level.

Since the 1911 decision by the U.S. Supreme Court in the Dr. Miles case (200 U.S. 373), the Sherman Act has been held to ban resale-price-maintenance contracts.

Thus State policy as to this subject matter has been subordinate to Federal policy for at least half a century.

Among those making this illogical argument that the quality stabilization bill is an invasion of States rights is the Department of Justice.

If the Department of Justice followed through on its line of thinking, it would call also for the repeal of the Sherman Act as it affects retail transactions, and by the repeal of the Sherman Act thus restore the entire area to State control.

The weight of the common law until the Dr. Miles decision was that resaleprice maintenance in the distribution of trademarked products was valid. In 1900, 10 years after the Sherman Act was passed, Mr. Justice Holmes, then the chief justice of the Supreme Court of Massachusetts, recognized the common law doctrine that resale-price agreements were not a restraint of trade. He called this the "inherited doctrine."

The common law background of the validity of resale-price maintenance led Mr. Justice Holmes in his dissenting opinion in the Dr. Miles case to point out that "there is no body of precedent that by any logic requires the conclusion to which the court has come (that resale-price-maintenance contracts violate the Sherman Act). The conclusion is reached by extending a certain conception of public policy to a new sphere * * *. I cannot believe that in the long run the public will profit by this court permitting knaves to cut reasonable prices for some ulterior motive or purpose of their own and thus to impair, if not to destroy, the production and sale of articles which it is assumed to be desirable that the public should be able to get.

Viewed in the proper light, the quality stabilization bill represents an attempt to restore in a limited area the status of the common law before the Sherman Act preempted the field.

Such restoration can only be done by an act of Congress.

The central concept of the quality stabilization bill is that the trademark used to identify goods constitutes a separate property interest severable from the goods themselves and, like other property interests, entitled to be protected by law.

The U.S. Supreme Court in Old Dearborn in 1936 (299 U.S. 183) explicitly recognized this concept, saying:

"We are here dealing not with a commodity alone, but with a commodity plus the brand or trademark which it bears as evidence of its origin and of the quality of the commodity for which the brand or trademark stands. Appellants own the commodity, they do not own the mark or the goodwill that the mark symbolizes. And goodwill is property in a very real sense, injury to which, like injury to any other species of property, is a proper subject for legislation."