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Mr. AVERY. And then the fact that specific prices were stated in the ad, you don't consider that to have been significant in this conclusion you reached?
Mr. LOEVINGER. In my opinion this was not the controlling fact, that is right. It was the fact that the prices were determined and that they were agreed upon, not the fact that they appeared in the advertisement.
Mr. AVERY. I thank the chairman and I thank the witness. I think we have brought this into pretty clear perspective.
Mr. McCULLOCH. One further question. The mere fact though that there was an agreement with the figures then appearing in the ad of course is evidence of one of the things which is objectionable, isn't it?
The mere fact that the figure, the agreed selling price which bound all the people who appeared in the ad, was some of the evidence of the illegal act or one of the illegal acts.
Mr. LOEVINGER. Well, of course there wasn't any real question of evidence in this situation, Mr. McCulloch, because all of the facts were laid before us. So you didn't need this kind of evidence.
Mr. McCULLOCH. Let me ask this then. If the evidence laid before you was that there was to be an advertisement price which was the selling price which was binding on all the parties to the agreement, that was one of the important factors in your decision, wasn't it?
Mr. LOEVINGER. The fact that there was an executive committee established to determine a binding selling price is one of the important facts.
Mr. MCCULLOCH. This was just the evidence of what the selling price was to be, I take it, wasn't it?
Mr. LOEVINGER. Well, the advertisement becomes really irrelevant. in this circumstance, you see.
The CHAIRMAN. Judge Loevinger, suppose that independent retail grocer A gets on the telephone in the morning and calls his competitor B and competitor C and says, "Bill, what are you selling lettuce for today?" and he says, "15 cents." He calls the other man and he says, "I am selling it for 15 cents." He says, "That is what I am going to sell mine for, and we will run an ad in the paper."
You would not say that is price fixing under those circumstances of cooperative advertising?
Mr. LOEVINGER. This is a tough case, Mr. Chairman, and to be perfectly candid with you, I am going to give a lawyer's answer. I would not say this was not price fixing, but I would say this is one of the cases that we wouldn't prosecute.
The CHAIRMAN. Well now, suppose we go one step further and the editor of a small rural newspaper either called or had an ad solicitor who went around and asked all the retail grocerymen what they were selling lettuce for, and they told him the price, and they all agreed to say, "We will pay one-quarter of the ad this week. You send me a bill for one-quarter of it, and you send Bill a bill for the other quarter."
If this ad seller for the small retail store went around, would this in your opinion constitute a violation of the Sherman antitrust law? Mr. LOEVINGER. I don't think the facts are sufficiently complete there, Mr. Chairman.
If an advertising solicitor went to all the retail outlets in a particular community so that by the time he got agreement on price he had
eliminated price competition in that community, you might have a different case than the one with which we started our discussion, in which small retailers found it necessary to combine, in order to compete with larger stores.
The CHAIRMAN. Judge Loevinger, have you given an advisory opinion or written a report to our distinguished colleague, Senator Humphrey, regarding S. 1320?
Mr. LOEVINGER. No, sir.
The CHAIRMAN. The Department will in due course give him an opinion on his proposed bill?
Mr. LOEVINGER. I suppose the normal process is that when a committee decides to consider one of these bills, a committee of either House, that the chairman writes to the Department and asks for a formal opinion. Ordinarily we don't volunteer opinions unless we are asked for them.
The CHAIRMAN. We want to continue to solicit your good counsel and good advice and good judgment, and hope that you will give us a memorandum or report where this committee can be helpful in this field.
You have been most kind to endeavor to clarify it, but sometimes we lawyers get the water a little more muddy and confused. Mr. LOEVINGER. Yes, sir.
The CHAIRMAN. Mr. Robison.
Mr. ROBISON. Judge Loevinger, I frankly don't see why it is any worse, if that is the right way to put it, for a committee of cooperaing merchants to agree upon the prices than it is for each individual member. I know that is only one part of the objections you found, but why is it worse for a committee?
Mr. LOEVINGER. I did not say it was worse for a committee. In the factual context in which this situation arose, the existence and operation of a committee made the agreement clear.
If a group of retailers got together, in order to make it very clear and very hypothetical, they said, "We will all vote on how much the price should be on all of our commodities, here is a list of our commodities and we all agree in advance that whatever the vote is, none of us will deviate from the established price," this would be illegal.
On the other hand, this isn't the way the situation normally comes up. If you get a group of people getting together merely exchanging information, this is not in and of itself illegal.
Frequently when you get particular businessmen together, there will be a certain amount of talk about prices, and we get a factual question as to whether or not there has been an agreement or what has been done.
However, when a large group of businessmen set a committee apart and say, "This committee will decide prices, and we will agree to abide by whatever it decides," the fact of delegation simply reinforces the fact of agreement, so that it becomes perfectly clear that you have a kind of situation that the antitrust laws were designed to prevent.
Mr. ROBISON. Does it make any difference that the items listed in these ads may be 40 or 60, or something like that in total, whereas the inventory of items in the store, in the normal drugstore, might run to 1,500, 2,000 or better? Is that one of the facts to consider?
Mr. LOEVINGER. So far as the law with respect to fixing prices is concerned, it doesn't make any difference. It is as illegal to fix the price of 1 out of 10,000 items as it is to fix 9,000 out of 10,000.
However, again it is very difficult to be categorical in these situations. You do have inferences to draw when you are proceeding on circumstantial evidence, and if you have stores with 10,000 items that are advertising 20 for a particular weekend, and you have competition between these stores and other stores, the ads and the prices are transitory and change from week to week, it seems to me that all of these facts combine to tend to negative an inference of price fixing.
Mr. ROBISON. Apparently these people in this plan sought to get around the suspicion, somehow, that they were fixing prices by saying something like this:
Prices shown on this page are only manufacturers' suggested selling prices. In each store listed in the column to the left, your pharmacist sets his own prices—usually lower, never higher.
Mr. LOEVINGER. If this were the price plan to which the comments were directed, I think that would make a substantial difference. That is not the plan to which we directed our comments.
Part of the difficulty is that apparently, at least it is my impression from looking at the documents submitted this morning by the FTC, there were several different plans that were under discussion and under contemplation at one time.
Mr. ROBISON. But some such language as that in the ad might help?
Mr. LOEVINGER. Of course, it is. As a matter of record, the Department of Justice has entered on at least one occasion a consent judgment in which there was a specific exception to an otherwise broad prohibition.
This exception provided in substance that a number of small independent business enterprises, which manufactured the identical product, could engage in cooperative national advertising, stating suggested retail prices.
Mr. ROBISON. Carrying out that sort of a phraseology in the ad, then if I have read my file correctly, the FTC also said it thought that this sort of thing might run into the prohibition against deceptive advertising, so there we go again.
Mr. LOEVINGER. I don't think that deserves comment.
Mr. ROBISON. Well, the file shows that. That is all, Mr. Chairman. The CHAIRMAN. Judge Loevinger, you have been most helpful. One further question.
Chairman Dixon of the FTC testified this morning that he did not think this was a very difficult matter to be resolved. He thought it could be simply resolved by an amendment providing an escape in certain instances to the antitrust laws.
Do you concur and agree with Chairman Dixon in this respect? Mr. LOEVINGER. I think there might be more difficulties than Mr. Dixon envisions, sir. I don't know really what he has in mind, so I can't fairly comment on it.
The CHAIRMAN. We were speaking at the time with respect to recommendations for amendment to either the Federal Trade Commission
Act or the Sherman Antitrust Act, so that this longstanding practice could be continued without confusion.
Mr. LOEVINGER. I hesitate to volunteer an opinion, sir, or a statement, but I must say if I may be so presumptuous to take the liberty, that I find it a little anomalous that it should be thought necessary to amend the Sherman Act on the basis of letters written by the Federal Trade Commission to various people who have in effect made an inquiry of the FTC, when the FTC has no statutory authority to interpret nor to enforce the Sherman Act.
It is the exclusive responsibility of the Department of Justice to enforce the Sherman Act.
Now violation of the Sherman Act may constitute violation of section 5 of the Federal Trade Commission Act. Violation of many other statutes may also constitute violation of section 5 of the Federal Trade Commission Act. I don't understand that the FTC is thereby
The CHAIRMAN. This situation has arisen. It has developed. It has occurred and we are looking for a proper solution, a proper way out. Any further questions?
Mr. MITCHELL. For the purpose of the record, I believe it should identify the act you are speaking of, the Sherman Antitrust Act. It is section 1 of that act, is it not?
Mr. LOEVINGER. Yes, sir.
Mr. MITCHELL. I will read that into the record at this point:
Every contract, combination, in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the States or with foreign nations is hereby declared to be illegal.
Under that act, Mr. Loevinger, any cooperative advertising would have to be in restraint of trade before it would be in violation of the Sherman Act, would it not?
Mr. LOEVINGER. Yes, sir. Furthermore, of course, the Sherman Act no longer stands in the pristine simplicity of its enactment. It has been interpreted over many years by the U.S. Supreme Court, and it comes to us with a very elaborate gloss added by the Supreme Court decisions. I think that these must be considered in connection with it.
Mr. MITCHELL. You have mentioned, I believe that there have been no prosecutions or no small businessmen sent to prison on this business of cooperative advertising.
I believe that in 1958 there were three small businessmen sentenced to prison for price fixing under the Sherman Act, were there not? Mr. LOEVINGER. Oh yes, businessmen have been sent to prison for price fixing under the Sherman Act; yes, sir.
Mr. MITCHELL. But it did not involve cooperative advertising, did it?
Mr. LOEVINGER. No, sir; it must assuredly did not.
The CHAIRMAN. Thank you, Judge Loevinger. Thank you very kindly.
Mr. LOEVINGER. Thank you, sir.
TESTIMONY OF EARL W. KINTNER, SPECIAL ANTITRUST COUNSEL, NATIONAL ASSOCIATION OF RETAIL DRUGGISTS
The CHAIRMAN. We will call Mr. Earl Kintner. We will hear next Mr. Earl Kintner. Mr. Kintner, do you have a prepared statement? Mr. KINTNER. Yes, sir, I have. I have delivered copies of my statement to the committee clerk this morning.
The CHAIRMAN. Mr. Kintner, we will be delighted to hear you. I see you have an extensive statement. Do you wish to read it all? Mr. KINTNER. No, sir. I will not read the attachments to that statement. It will therefore be relatively short.
My name, for the record, is Earl W. Kintner. I am a practicing attorney in Washington. I am here at the request of the committee, and in my capacity as special antitrust counsel of the National Association of Retail Druggists, a post which I have held almost since leaving the Federal Trade Commission as its Chairman. I appear here, as I have stated, at the request of the committee.
I have been asked to provide the background of the request by the Iowa Retail Pharmaceutical Association and the National Association of Retail Druggists to the Federal Trade Commission for an advisory opinion concerning certain plans for cooperative advertising by independent druggists, and to comment upon the problem.
Independent retail pharmacists have felt increasing business pressures created by the pricing activities of large, high volume chain drugstores and large discount houses in recent years. They have also been subject to economic pressures by other large diversified stores which have taken on lines of merchandise which were traditionally sold only through drugstores. These large retail chains have the economic power to engage in extensive advertising and they use advertising, primarily price advertising, as an effective competitive tool. For this reason, advertising was seen as an important way for the small drugstores to attempt to attract some of their former customers back to their stores. Advertising, as you know, is expensive, and it was recognized that the small retail drugstore could only advertise if groups of them pooled resources, received aid for this purpose from suppliers and advertised jointly.
During 1962 the Iowa Retail Pharmaceutical Association had been negotiating with Marketing Programs, Inc. of New York to develop a joint or cooperative advertising plan for the Iowa association. Other local pharmaceutical associations throughout the Nation were similarly negotiating with Marketing Programs, Inc. and other consultants. Many other pharmaceutical associations were developing such advertising plans either independently or in conjunction with wholesalers.
The plan developed by Marketing Programs, Inc., and other joint advertising plans concurrently in use by groups of independent retailers provided for price advertising. In view of the recent Department of Justice suits charging pharmaceutical asociations with price fixing, many independent druggists were reluctant to engage in price advertising without clearance.
I should like to state at that point, Mr. Chairman, that at the time I was engaged as antitrust counsel to the NARD, there were pending several Department of Justice suits charging State pharmaceutical associations with engaging in price fixing. The NARD advised, after