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ties, in which there are NEA members, have no department store, and food advertising in some weeklies is the No. 1 source of revenue. Thus, the very livelihood of many papers is endangered by the FTC ruling. Chairman Evins, in your announcement of this hearing, expressed the hope that hearings would establish "whether there is an adequate and safe course of action to permit cooperative advertising within existing law; or whether this form of promotional activity can be authorized by law without sacrificing essential safeguards against conspiracies and restraints of trade."
NEA has no quarrel with those objectives, and will cooperate, fully with this committee to achieve those goals. If any additional information will prove useful, we stand ready to assist in any way.
Thank you for the opportunity to present these views on behalf of the National Editorial Association.
(The tabulation referred to follows:)
(Representative samples of the advertisements referred to in tabulation above appear on pp. 149-153 of the appendix.)
The CHAIRMAN. Thank you, Mr. Serrill, for a very helpful statement. It is your view, I judge, that this advisory opinion is not only damaging to the small businessman but to the small press, which is another very important segment of the small business of our country.
Mr. SERRILL. The news was not very long in print, particularly through Advertising Age and some other very widely circulated trade publications, before I started getting inquiries from my office as to the damaging effect that this may have. Yes, sir.
The CHAIRMAN. This might, if followed to its ultimate conclusion, result in many small newspapers not being able to continue in business, and the concentration of the press into the larger dailies and into the larger advertising mediums of the country.
Mr. SERRILL. This could happen in several instances, sir.
The CHAIRMAN. Would you think that this advisory opinion might change the longstanding advertising policy that is carried on in the country today?
Mr. SERRILL. In this particular area, it would, sir. I hesitate to think what these gentlemen that operate the Independent Better Retail Stores in Bedford County, Pa., think, or over in Clinton, Tenn., where I think two merchants are cooperating through a program sponsored by one of the independent grocer organizations.
The CHAIRMAN. In other words, if this advisory opinion is followed and enforced and carried into effect, we might find a closing of small newspapers throughout the country, because they were not able to be supported. The advertising under the present cooperative plan is a principal source of their advertising support.
Mr. SERRILL. In at least two of these newspapers, the grocery store advertisement which I clipped is the largest single advertisement in that newspaper, and this may be as much as 20 percent of the total volume in that issue. So it would have a very serious effect on some of these newspapers.
The CHAIRMAN. And of course you pointed out that it is most unrealistic and unwise. You indicated also-having been in the newspaper and advertising business for more than 30 years-this is common knowledge, common practice. It has been pursued for many years. Mr. SERRILL. I have firsthand knowledge of it having been in practice for the committees for about 30 years, sir. Beyond that, I do not
And it is information that this type of advertising appears not only in the less populated areas, but it is common practice for metropolitan areas to also have groups of independent merchants place their advertising cooperatively in groups.
Mr. McCULLOCH. Yes, we have been learning, in the Judiciary Committee, that competition, even in some of the metropolitan areas of the country, so far as newspapers are concerned, is becoming more and more deadly. We are concerned that there be only one newspaper in some such areas, and that there be only one voice about public issues of the day.
My questions are all friendly I assure you, but I cannot lay too heavy a hand on the fact that the problem is a difficult one, and there are many factors involved in the problem before us.
I noted your repetitious statements, and I am glad they were repetitious, that you use as your example the food advertisements. That lends further tentative belief on my part that there may be a difference in advertising food for sale than advertising gasoline or the things that may be advertised in many other retail stores, all of which is a part of our problem.
Mr. SERRILL. I might point out, sir, that this tearpage here is from Skokie, Chicago, Evanston, a group of independent merchants in the north area of Chicago who have joined together for tabloid page advertisements in this area.
Mr. McCULLOCH. Thank you.
The CHAIRMAN. I want to preserve our free and small and independent press, not only to serve small business so that they may survive and prosper, but certainly the free, independent press should also be promoted.
Mr. SERRILL. Thank you, sir.
The CHAIRMAN. I would hate to see the time come when all the advertising was concentrated in a few national magazines or a few large metropolitan dailies. We don't want this to happen in America.
Mr. McCULLOCH. Mr. Chairman, one further comment, and I certainly agree with just what the chairman has said.
I cannot refrain again from quoting from the statement by my friend, Commissioner MacIntyre, on page 6 of his statement, which is one of the reasons why we are so much concerned with the problem that is before us. The quote is from the Department of Justice, and I begin the quote now:
Pursuant to my letter to you dated October 25, 1962, we have reviewed your attached proposed memorandnum to the Commission concerning the legality of a proposed cooperative advertising program in retail drugs.
On the basis of the information submitted to the Department of Justice and to the Commission we agreed that the granting of clearance in this matter would be inconsistent with the antitrust laws.
How we can make it consistent with the antitrust laws is one of the prime reasons if not the prime reason that we are here. I am sorry to belabor it, but lest my position not be fully understood, I think it deserves that repetition.
The CHAIRMAN. The committee will ask you and the National Editorial Association to give us the benefit of your good judgments, and your collective judgments on what should be done and what can be done within the scope of the antitrust laws, and what amendments to the laws are necessary-if necessary.
Mr. SERRILL. Thank you.
The CHAIRMAN. We will look forward to your recommendations in this matter. Mr. Avery, do you have any questions?
Mr. AVERY. No questions.
The CHAIRMAN. Mr. Kluczynski.
Mr. KLUCZYNSKI. No questions, but I want to compliment the gentleman. I am sorry I came in late. But I agree with you there is nothing better than a community newspaper. It is the life of every community.
I know in my own district, and I am very happy that you showed the newspaper from Skokie, I knew it was for my benefit, being close to Chicago, but I watch the people in front of their homes waiting for the community newspaper. If they are going to lose all this advertising, it looks like you folks will be in for a little subsidy from the Federal Government.
Mr. SERRILL. Well, we don't want subsidy, sir. We haven't proposed that.
Mr. KLUCZYNSKI. I am glad to hear that. It is nice to see you are doing a good job. The people in my community, like in all other communities, read that newspaper over the weekend. They don't throw that in a wastepaper basket. The kids go over it. They want to see what is going on in the neighborhood such as births, marriages, deaths, and so on and so forth.
You are doing a marvelous job, and if we can be of any assistance, I am sure we will.
Mr. SERRILL. Thank you. I will wish to quote you some time on that.
The CHAIRMAN. Mr. Robison.
Mr. ROBISON. No questions.
The CHAIRMAN. Thank you, Mr. Serrill, for a very helpful state
We will call Judge Loevinger, who I believe has just come into the room. He has timed his entrance. Judge Loevinger, the committee will be pleased to hear your testimony. We appreciate your coming before the committee.
TESTIMONY OF HON. LEE LOEVINGER, ASSISTANT ATTORNEY GENERAL, ANTITRUST DIVISION, DEPARTMENT OF JUSTICE
Mr. LOEVINGER. Thank you, Mr. Chairman.
The CHAIRMAN. You may be seated and give the committee the benefit of your knowledge, judgment, and experience.
We are confronted here with the matter of trying to preserve the small businessman-even the small, the free and independent pressin the face of a decision that has been rendered on which there has been considerable confusion and concern. I wish you would give us your statement.
Mr. LOEVINGER. I have no statement, Mr. Chairman. I understood that the committee was inquiring into the matter of cooperative advertising, and the position of the Department of Justice was formulated in response to an inquiry from my good friend, Senator Humphrey.
There is an exchange of correspondence between myself and Senator Humphrey on this subject. Senator Humphrey I suppose wrote to me partly because we have been good friends for many years, and partly because he is chairman of a subcommittee of the Senate Small Business Committee, that is concerned with small retail business, and I was therefore concerned about this ruling, and he sought my views on it.
On April 18, 1963, Senator Humphrey wrote to me:
DEAR LEE: I have recently learned of an advisory opinion issued by the Federal Trade Commission March 29, 1963, in which the Commission states that cooperative advertising by small retailers in which prices are mentioned would constitute a price-fixing agreement and therefore would be a violation of the antitrust laws. Newspaper stories have stated that the Department of Justice concurred in this ruling.
It appears to me that this ruling will operate to handicap small business in competing with chainstores and other large business enterprises. I have offered a bill (S. 1320) to provide that a group composed exclusively of small business concerns engaged in retail trade may enter and carry into effect a cooperative program of advertising which may include prices without violating the antitrust laws.
It seems to me that this FTC ruling is contrary to the spirit and the purpose of the antitrust laws and would tend to inhibit rather than promote competition. I am also concerned because the significant part of this ruling seems to be based upon the Sherman Act and upon the possibility of criminal prosecution under the Sherman Act, whereas I had assumed that the Department of Justice had exclusive responsibility for enforcement of the Sherman Act and that the Federal Trade Commission had no authority to institute any criminal prosecutions. This makes it particularly important to ascertain whether or not the Department of Justice has, in fact, concurred in the ruling of the Federal Trade Commission.
I will appreciate it very much if you will advise me on the position of the Antitrust Division on this matter and make any comments that you think might help to clarify this situation.
HUBERT H. HUMPHREY.
The following day I responded to Senator Humphrey as follows: DEAR SENATOR HUMPHREY: This is in response to your inquiry as to whether the Department of Justice concurred in the Federal Trade Commission advisory
opinion of March 29, 1963, stating in effect, that cooperative advertising containing prices is contrary to the antitrust laws.
The Federal Trade Commission does not normally submit advisory opinions to the Department of Justice in advance and did not do so in this instance. It is our opinion that the action of a group of small retail business concerns in publishing cooperative advertising containing selling prices does not in and of itself constitute a violation of the Sherman Act.
Prior to the issuance of the FTC opinion the staff of the Commission submitted a memorandum to the Antitrust Division which described a particular proposal for a joint advertising program. This proposal did not involve cooperative action by independent business concerns in a legal sense, but did involve explicit delegation of pricing authority and agreement to observe common prices by separate business concerns. On January 15, 1963, the Antitrust Division staff advised the FTC staff that on the basis of the information submitted concerning this specific proposal a grant of clearance for this specific program would be inconsistent with the antitrust laws. The Antitrust Division staff acted with my approval.
The advisory opinion of the Commission issued March 29, 1963, and the accompanying statements of the Commissioners, do not set forth the facts of the specific case which the Antitrust Division staff considered, but state general principles which go far beyond the facts of the case submitted.
There is no question that price fixing by agreement among competitors is per se unreasonable and a violation of the Sherman Act. However, the issue in each case is whether or not there is in fact an agreement upon prices. Such agreement cannot be assumed although it may be inferred from circumstances. Whether or not cooperative advertising referring to prices is, therefore, legally permissible depends upon the facts and circumstances of each case. In some circumstances such activity may constitute a means of price fixing and a violation of law. If large chain stores, with no apparent economic incentive to do so, engage in joint advertising, this would be a circumstance tending to raise an inference of price fixing. On the other hand, where small retail business concerns engage in cooperative advertising in order better to compete with larger competitors, a similar inference cannot be drawn from the fact of cooperative advertising alone.
It is significant that there are some fields in which small business concerns have been engaged in cooperative advertising containing prices for many years without any challenge to this practice by the Department of Justice. I see no reason at this time to change our past practice, or employ different criteria than we have heretofore applied to such activities.
We share your concern for the problems of small business and the promotion of competition. We believe that the antitrust laws should be enforced and applied in harmony with their purpose and spirit. Among the ends sought to be secured are the economic opportunities of small business and the maintenance of competition in a free enterprise system.
The Department of Justice has exclusively statutory responsibility for enforcement of the Sherman Act. It is our opinion that the application of the principles of this act is best made on a case-by-case basis, and the authoritative interpretation of the act can be made only by the courts.
I hope that this may help to clarify the subject of your inquiry.
Assistant Attorney General, Antitrust Division.
I would like to add, Mr. Chairman, only that I regret that the examination of this question has arisen in a context which may seem to imply controversy or disagreement among Federal agencies. I think that the disagreement is more apparent than real.
I think that the FTC has chosen to emphasize the negative aspects of the matter. The majority at least have chosen to emphasize the things that small business cannot do.
I have thought it appropriate in responding to Senator Humphrey to emphasize the positive aspects of the matter, the things that small business may at least potentially do, and I think that this puts a slighly better cast upon the problem. Basically I don't believe that we are in disagreement.