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Mr. KINTNER. Well, in this instance if you
Mr. DINGELL. You are not advocating, for example, that the agency simply shut its eyes and permit a long continuing series of violations of the antitrust laws?
Mr. KINTER. Oh, no.
Mr. DINGELL. Even of the so-called technical nature, to continue unabated, are you?
Mr. KINTER. No, I am not.
Mr. DINGELL. As a matter of fact, that kind of technical evasion of the law would require corrective action, would it not, even if it were of a technical nature, if it were long continued?
Mr. KINTNER. It depends on the public interest.
The CHAIRMAN. I think the gentleman is speaking, as he said, as to what is best in the public interest, and as to small business, the importance of it is a declared policy of Congress, and he thinks that that should also be taken into consideration as a factor and judgment on
Mr. DINGELL. I am willing to look for legitimate means, but I do not want anyone to come before the committee and advocate a long continuing, determined, and willful series of technical violations of the antitrust laws. I hope I am not inferring that this is what you are recommending.
Mr. KINTNER. Mr. Dingell, you are shifting your grounds so often that I have some difficulty in answering your question.
Mr. DINGELL. I am not shifting my grounds at all. I am staying very, very solidly on the same point, and I am trying to get you to
Mr. KINTNER. I am not advocating a long continuing willful violation of the antitrust laws to go unchallenged by the antitrust agencies. I simply indicate that there may be situations that involve technical violations of the antitrust laws which the agency, for reasons of public interest, might not choose in its enforcement policy to challenge; simply that, nothing more.
Mr. DINGELL. I think that would be malfeasance in office, don't you; misfeasance, non feasance, you choose the term.
Mr. KINTNER. No, I don't.
Mr. DINGELL. I do. What I am trying to find out, Mr. Kintner, is, do you need legislative relief? You are aware of the fact that these men on the Federal Trade Commission, the Assistant Attorney General in charge of antitrust matters, take an oath to defend and uphold the laws and Constitution of the United States.
Mr. KINTNER. That is correct.
Mr. DINGELL. And they do not take an oath to ignore long continuing violations of the antitrust laws, even if they be of a technical
Mr. KINTNER. Well, it depends on how you define the word "technical," Mr. Dingell.
Mr. DINGELL. You are the one who used the term first. I am trying to determine here very sincerely whether there is need for relief. I am also very interested to determine whether or not you are advocating that these agencies ought to close their eyes to a violation of law.
Mr. KINTNER. Oh, no, but I think that in determining which cases should be challenged, that the antitrust enforcement agencies ought
to consider the public interest and the public policy of protecting small, independent business.
Mr. DINGELL. I think this is a very important and very worthwhile purpose.
Mr. KINTNER. Then we are agreed.
Mr. DINGELL. Adherence to and upholding of the laws of the United States is also important, and perhaps in a nation of laws it may be still more important, and that is one of the reasons we have the Čongress, to change these laws if they are unwise or bad, or if they are hurtful to the economy of this country.
The CHAIRMAN. Any further questions, Mr. Dingell?
Mr. DINGELL. No, thank you.
The CHAIRMAN. Mr. Robison?
Mr. ROBISON. Mr. Chairman, I wonder if I can't summarize a little bit with Mr. Kintner, our situation.
The FTC advisory opinion here evidently left the impression that all cooperative advertisement, which included any reference to dollar prices, might per se be illegal as an attempt to fix prices.
I am not sure in my own mind, although I think these hearings have been extremely useful, that we have clarified here today that opinion in the way in which you think it needs to be clarified.
Now, Judge Loevinger made some specific references to some part of the factual background with respect to the Iowa druggists' proposal which he said made it a bad one. I don't remember that Commissioner Dixon did this, although undoubtedly somewhere back in the staff operation prior to the rendering of the advisory opinion somebody did.
You, yourself, have indicated that you felt that there were some specific things about the Iowa plan that were not good, that might produce an adverse opinion. I wonder, Mr. Chairman-and I leave it up to you-is there some fashion in which we can get more of that into this record without prolonging this hearing this afternoon? Could we invite, for instance, Judge Loevinger to be more specific in advising us what was wrong?
The CHAIRMAN. We have asked each of the witnesses to come forward with a letter or memorandum giving us, the committee, further suggestions as to how we may constructively advise small business that they may proceed with cooperative advertising, and also legislative recommendations. We are going to take a consensus of all this testimony, and come up with an answer, we hope.
Mr. ROBISON. Do you see my point?
The CHAIRMAN. Yes.
Mr. ROBISON. There is a sort of a blind spot left here today as to what was wrong with this particular plan on which this narrowly based advisory opinion was rendered.
Mr. KINTNER. The plan is in the record, Mr. Congressman. It was placed in the record by Mr. Dixon this morning, I believe, and I would agree with the points that Judge Loevinger made with respect to that plan, and his conclusions with respect to that plan.
I think that was the conclusion of the staff of the Trade Commission, and probably would be the conclusion of the five Commissioners, if they answered the precise facts.
The CHAIRMAN. While there has been confusion, we certainly hope that these hearings have been somewhat clarifying and constructive
and helpful, and that some worthwhile recommendations and conclusions will result from these hearings. We thank you, Mr. Kintner. Mr. KINTNER. Thank you.
The CHAIRMAN. Thank you very kindly for your fine statement.
We have one further witness. Mr. Gale, if you will come forward now we will be pleased to hear you. Mr. Gale, do you wish to submit your statement for the record?
TESTIMONY OF GEORGE GALE, PRESIDENT, MARKETING PROGRAMS, INC., AND PHARMACEUTICAL ASSOCIATIONS' MARKETING COUNCIL, INC.
Mr. GALE. There has been a printed statement which you have. The CHAIRMAN. Mr. Gale, please be seated and give your full name and whom you represent and your statement may be included in the record, and you may summarize your statement or make such comments as you may wish.
(The statement referred to follows:)
STATEMENT OF George GalE, PRESIDENT OF MARKETING PROGRAMS, INC., AND ITS AFFILIATE, PHARMACEUTICAL ASSOCIATIONS' MARKETING COUNCIL, INC.
My name is George Gale. I am president of Marketing Programs, Inc., and its affiliate Pharmaceutical Associations' Marketing Council, Inc.
My firm has been appointed agent for 9 pharmaceutical associations composed of approximately 3,000 independent druggists. Under conditions as they are today, suppliers of toiletries, cosmetics, and proprietary medicines make available to their customers funds to be used for promotional purposes. The amount of the allowance to each of the customers is usually dependent upon the numbers of articles sold. In the case of giant drug, supermarket and discount chains these allowances represent great sums of money. Furthermore, because the volume sold in these chains is so huge, they are able to accept and use these allowances.
In the case of the small independent, however, the situation is entirely different. The volume of sales in the average small drugstore provides promotional allowances of only a few dollars a week. Thus, not only is it unusable but it is not even worth the bookkeeping costs to collect it.
Under our plan, the associations we represent can pool their promotional allowances and advertise cooperatively. This would put them in a position to compete, at least to some extent, with the chains. In our proposed program, these independent druggists wanted to advertise their retail prices and let the public know they are competitive with the giants.
Last September we advised the Justice Department of our proposed plan in behalf of the druggists and requested its approval. In January we further advised the Federal Trade Commission of the plan and requested their opinion. As you know, on March 29 the Federal Trade Commission issued its advisory approving the basic principles of cooperative advertising for independents but not allowing the advertising of common prices.
We were shocked that the majority of the Commission interpreted our antitrust laws in a manner that essentially gives a very important advantage to the giant chains and penalizes the small independent businessman by preventing him from advertising a common price.
Nevertheless, we advised the FTC that we would continue with our plan on behalf of the independent druggist but would stick strictly to its interpretation of the law and not advertise common prices.
In other words, we were compelled to advise our associations of independent druggists that they would be unable to advertise common prices while the chain uses these funds to advertise its price.
Since the FTC's advisory opinion was issued, much has been said in the public press which has not clarified any of the issues involved-rather these statements have served to confuse.
Actually, in several instances we have a very strange picture of small businessmen being advised to go ahead with running advertisements which show
common prices. They are advised that the Federal Trade Commission might or would look the other way and not prosecute offenders.
In addition, we learned that the Antitrust Division said that it did not concur with the FTC advisory opinion while the Commission had previously said that the Antitrust Division concurred in the opinion.
Because of the mass of confusion, on April 19 we asked the Federal Trade Commission to declare a moratorium on disciplinary action on pooled, priced, cooperative advertising pending action on remedial legislation by the Congress. Ten days later, because of additional confusing statements on the issue, we asked the Federal Trade Commission to declare its position publicly in regard to the moratorium we requested.
If the FTC is going to accept the idea of a moratorium we believe the Commission should say so. On the other hand, if they do not accept the moratorium and intend to prosecute anyone who violates this concept then we think they should state this publicly also.
While I am sure this committee will give this problem serious consideration I would like to point out that the present regulations put the independent businessman at a disadvantage in competing with giant chains. Competition is stifled rather than increased because the independent druggists do not compete with one another; rather they compete with the chains. Collectively, they can enter into fair competition with the giants.
I believe it would be very much in the public interest if this committee would direct the Federal Trade Commission to take administrative action that would allow cooperative, priced advertising. This should be done in the interest of time since independents are finding it more difficult each day to compete with the giants. It would provide temporary relief, at least.
Secondly, it would be very much appreciated if the committee would call upon the Congress to pass the necessary remedial legislation which would clear up this question once and for all.
Mr. GALE. Thank you, Mr. Chairman.
My name George Gale. I am president of Marketing Programs, Inc., also president of Pharmaceutical Associations' Marketing Council.
I have listened to the testimony today from various witnesses, and I will say this. I am more confused now than when I came in here. No. 1, I have heard the Iowa plan referred to repeatedly as a price fixing device, and if you will look in this format here, the Iowa plan did not have any price at any time. The place for the products was blank. There was not price at any time in the Iowa plan.
Now the format that I have here which you saw this morning, I believe Mr. Dixon submitted this, this format is an established format that has been used for the past 30 years by retail outlets. It is exactly the same format. Now who sets the prices here for these products?
The CHAIRMAN. I should think, Mr. Gale, your having sat here today through all these hearings and heard the Chief of the Antitrust Division and the Chairman of the Trade Commission and the former Chairman and expert counsel, that you would have received some free legal opinions and some free advice.
Mr. GALE. I did. Now, No. 1, the plan that was submitted to the Department of Justice was the Lowell plan and not the Iowa plan. The Iowa plan was never submitted to the Department of Justice, to the best of my knowledge, at least not with my authority, because I created that plan.
No. 2, the Lowell plan which you see here, which is the format listing prices was submitted to the Department of Justice by our firm of attorneys here, Brookhart, Becker & Dorsey. At that time there was quite a bit of controversy in the drug field about criminal liability.
The Iowa Association asked me if I would clear up, before they put any prices or talked prices, if I could clear up any criminal responcibility. I believe the firm of Brookhart, Becker & Dorsey wrote to Mr. Robert Gibbs, the executive secretary, telling him that they had submitted the Lowell plan, and what was determined by the Department of Justice on that Lowell plan they would then forward that information to Iowa.
The response that we got, that our office got, was that our firm of attorneys could see no criminal liability on the part of the association that did this. We did not submit it then to the Federal Trade Commission.
It was submitted originally to the Department of Justice, and they in turn, after having studied this, suggested that our attorneys take it to the Federal Trade Commission. We did not take it without the suggestion of the Department of Justice.
The CHAIRMAN. You were properly advised to secure counsel and opinion, Mr. Gale.
Mr. GALE. That is right.
The CHAIRMAN. And this committee is on your side.
Mr. GALE. That is right.
The CHAIRMAN. We are trying to help cooperative advertising. Mr. GALE. We just got that opinion, I think it was, the latter part of March, the one that I have heard about today.
This was submitted originally to the Department of Justice in August of last year, 1962, that is the Lowell plan. We do not set the prices.
We ask the associations, however, they want to put the prices in here, to then tell our attorneys, which they did. In Lowell they said that they would have an executive committee, their advertising committee, that would set these prices. The only way it possibly could be done is the same way that every other firm for the past 30 years have set these prices in retail advertising.
Now No. 2, we create programs for newspapers, advertising programs. We are affiliated with a great number of newspapers throughout the United States.
I was very interested in Mr. Serrill's comments this morning. In this business today, as Mr. Serrill I believe testified, there was great competition for the advertising dollar, competition between TV, radio, newspapers, and publications of all sorts. The newspapers have asked us to create advertising programs for them which we have done.
We do this in the food field and the Lowell people asked us if we could create some kind of a program that could help the independent druggist with his problems. I have been writing advertising in the drug and food field for the past 30 years. I think I know quite a bit about it.
What I have heard today would make things impractical. For example, in Lowell there are 63 druggists that are members of the association. I heard the testimony say that there was 1 big drug chain included in this and 19 that were left out. This was brand new to me. I had never heard of that before. There are 65 stores in Lowell, and 63 of them are members of this, and not a drug chain.
Now in order to do this, the independent druggist, if he will stop and analyze his problem for one moment, the advertising allowances