Mr. MERRITT. Yes, sir. Mr. MICHENER. Macy could then sell to Montgomery Ward, and if Montgomery Ward and Macy entered into such a contract, that contract would be binding. Mr. MERRITT. Yes. Mr. MICHENER. Then, if Montgomery Ward sells to Jones & Smith, and they enter into a similar contract, that contract would be binding. Mr. MERRITT. I think that is true. Mr. MICHENER. So that, as a matter of practical operation, the provisions of this bill, if it goes into effect, can be followed down through to the retailer. The CHAIRMAN. I do not so understand it. Mr. MERRITT. It could be done, but the manufacturer could not be assured of its being done. Mr. MICHENER. He could not be insured as to its being done. Mr. MICHENER. The manufacturer could not tell whether that was being done unless there was a tacit understanding that it would be carried out. Mr. MERRITT. What you are talking about can, to a certain extent, be done now, I think, under the ruling of the Surpeme Court. Mr. Kelly is more familiar with that law than I am, but I think that in the absence of any general agreement, which would amount to a conspiracy, a man can sell to another man and say, "If you do not sell at this price I will not sell to you again." That is the existing law. Mr. PURNELL. For the information of the committee, or, at least, for myself, I would like to have you state briefly who it is you are seeking to protect, and, in connection with that, give an example of some particular abuse, or an example of some particular abuse that you are trying to reach. Mr. MERRITT. There is one case that I have always remembered, that came out in the testimony before the committee. That was the case where Ingersoll dollar watches were being sold at retail under an agreement that they could not be sold for less than $1. This particular retailer wanted some concession on the part of the watch company, and Ingersoll would not give it to him, so he just put a notice on the window, "Ingersoll $1 watches for 68 cents," or something like that. Now, of course, he could not afford to sell them at that price, because it was less than the watches cost him. He was simply trying to force Ingersoll into doing what he did not want to do. The result of that advertisement was that everybody else who went around in other stores thought when they were paying $1 for an Ingersoll watch that they were paying too much. That practice resulted in the utter demoralization of the whole business of the Ingersoll Watch Co. in the city of Philadelphia. I think that same thing has occurred in many other cases, where they use trade-marked articles as leaders, selling them sometimes at less than cost and making it up on the sale of other things where the customer can not tell what the true price should be. It has been shown by the testimony, I think, that some department stores have cut the prices on those trade-marked articles using them as leaders. People, because they can get for 92 cents what is being sold elsewhere for a dollar, go there, and if it is a store that deals in sugar, flour, or anything else of that kind, they raise the price on those commodities a cent or two per pound, but, of course, the customer does not know that. Mr. PURNELL. Did the testimony before the committee show that this had a tendency to result in ultimate damage to the producer or to the manufacturer? Mr. MERRITT. Yes; because, you see, if one man, at a central store, cuts the price on some leading advertised article, and that price can not be met by the small dealer, of course the small dealer can not afford to carry that article in stock at all. Mr. SPROUL. How does it hurt the manufacturer? He gets his price in any event. Mr. MERRITT. It does hurt him, because it cuts into the market, and the aggregate sales are less. The sales of the central man are not increased correspondingly, and it does interfere with the manufacturer's general control over his own price. The thing that first attracted my attention to this whole business was some litigation that occurred between somebody and the Macy Co., in New York, which company always made a great leading advertisement that they were selling books at less than the advertised price. It always seemed to me that if anything is peculiarly the product of a man's brain and his personal property it is a book. If he wanted that book to sell for $1.75 Macy would advertise that it could be sold for 99 cents. If Macy sold the book for 99 cents, other dealers would have to sell it for that also and they could not afford to handle the book. Under the copyright law the author only has exclusive property in that book for a limited number of years, and such practices tend to take away his right in his own property. Mr. O'CONNOR. The trouble with that is that the man with the brains, who produced the book, is not selling the book. He is getting 10 cents for it, probably. It is the Houghton-Mifflin Co., and the other publishers who are selling the book for $1.75, and they are handling it commercially. There is no great intelligence among them. Mr. MERRITT. I agree with that, but I think, also, that the royalty which the author would get would be dependent largely upon the price of the book being maintained. Mr. MICHENER. Leaving out Mr. O'Connor's suggestion, and taking your original statement that the man who wrote the book should have a right to $1.75 for it, if he wants it: Of course, he wants the $1.75 because it benefits him. He is the original seller, and he controls the price of the book, which is copyrighted. Do you think that he should have the power to have the book sold at whatever price he sees fit, after Macy buys the book. Mr. MERRITT. Yes. Mr. MICHENER. The man who wrote the book is the author, and he sells the book for whatever he can get for it. He says, "Here is a book that should be sold for $1.75," but Macy & Co., in order to increase the sale of the book, sells it for $1.49. Mr. MERRITT. It has been the same way with many other articles. A friend of mine was saying the other day that he tried to buy a book at a big well-known bookstore, but could not get it. They said that it was sold at such a low price by Macy that they would not carry it in stock. You can see what would be the ultimate effect of that sort of thing. It seems to me that it is an unfair trade practice. Mr. THURSTON. There is one thing that concerns me in this bill, and I wonder if your committee discussed it: That is the question of whether this is placing any barriers against the free transportation of property between the States. In other words, has Congress the right to enact legislation that would tend to create a title of this kind running with the title to personal property? Has that matter been discussed? Mr. MERRITT. I do not think it has been in that form. It has never occurred to me that that was an element in the question. Mr. THURSTON. Or would it not be placing an impediment or barrier against the free movement of commerce? Mr. MERRITT. I do not think it is an impediment. Mr. THURSTON. There is one other question: I notice at the bottom of page 3 of your report you say— It must always be kept in view that this bill does not refer to necessities of life, so that it in no way affects the necessary cost of living. Then, in the bill, on page 5, you have some definition. In line 13, page 5, the bill states The term "producer" means grower, packer, maker, manufacturer, or publisher. Would that mean that a meat packer or any of the big packing concerns in the United States would have the right to fix the resale price on their commodities? Mr. MERRITT. Only so far as they might sell under a trade name. Mr. O'CONNOR. There is no cereal made now without some brand or label on it. Mr. THURSTON. You say that this does not affect the necessities. of life, and yet packers are included in this definition. Of course, packers do not produce anything but necessities of life. What is your construction of the language in the report, with reference to this word "packer"? Mr. MERRITT. That, of course, only refers to things that they sell under a trade name. Mr. THURSTON. There is scarcely any meat shop or packing house that does not use a trade name. Mr. MERRITT. That may be true of canned products. Mr. O'CONNOR. It is true of hams. Mr. THURSTON. Yes; the brands are stamped on the hams. Mr. SPROUL. And on bacon, also. Mr. MICHENER. That applies, also, to oranges and grapefruits. Every manufacturer of breakfast food has his standard. There are standard brands of breakfast foods, such as Grape Nuts. Those brands are copyrighted trade names. Mr. MERRITT. Of course, all of those articles are included in the bill, but they must be in fair and open competition. That will take care of the prices, so far as that is concerned. Mr. THURSTON. What do you mean by saying they would be "in fair competition"? Mr. MERRITT. That would mean that if there were only one man producing a particular article, there would not be any competition. Mr. THURSTON. With reference to the definition in line 5 of the bill, where you refer to a trade name, of course that does not mean a registered trade name. Can you think of any article of commerce that does not have a trade name? It seems to me that this language is very inclusive. It provides "that no contract relating to the sale of a commodity which bears (or the label or container of which bears) the trade-mark, brand, or trade name of the producer," and so forth. Would not that term "trade name" be a blanket term, covering everything? Mr. MERRITT. I think if you should go into a dry-goods store or grocery store you would find a great many articles that are not sold under trade names. Mr. O'CONNOR. For instance, you could not buy loose oatmeal in a chain store to-day. Mr. MERRITT. You can buy so many pounds of oatmeal. Mr. O'CONNOR. Of course, under this bill they could fix the price of Quaker Oats. Mr. MERRITT. Yes. Mr. MICHENER. And if you will take oranges, they are sold, for instance, under the brand of "Sunkist" oranges. That brand is stamped on every orange. Now, suppose I go down to a fruit stand on Pennsylvania Avenue and pay so much for a dozen of Sunkist oranges: Then I go to the market, where the expense is not so great, and I carry my purchases home in my basket. There I buy Sunkist oranges for a little less. Now, if this bill should become effective, would it be possible or proper for the market man to say to me when I go down there to get oranges, "I am a seller, and I would like to sell these oranges at a less price, but Congress by its vote said that I could not, and so I must charge you more"? Mr. MERRITT. I would say in that case, "Yes; Congress did that in the interest of justice.' Mr. THURSTON. Did the packers appear in behalf of this bill? Mr. BANKHEAD. May I ask this question: Paragraph (a) of section 2 of the bill reads as follows: That during the life of such agreement all purchasers from the vendor for resale at retail in the same city or town where the vendee is to resell the commodity shall be granted equal terms as to purchase and resale prices. For instance, I would like to have you explain what that means. under this agreement a man running a store in Washington would have to sell that commodity in Washington at a certain price, but there seems to be the inference that a merchant in Alexandria, Va., would have the privilege of selling it at a higher price. That is true, is it not, as to the same commodity? Is not that a fair construction of the language of this bill? Mr. MERRITT. What that is intended to do, of course, is to have one price in any particular community. It might be true that there would be a difference in price as between Washington and Alexandria. Mr. BANKHEAD. Is not that true? It is not a question of "might be" but is not that the purpose of putting that language in the bill? Is it not the purpose to give them the privilege of doing that? Mr. MERRITT. No; it is for the purpose of establishing the market. There will be one New York market, covering a radius all the way around New York, and a Washington market, with a radius all around Washington. It would be legal, I think, to have varying prices as to Alexandria and Washington; but in Washington, where they are competing, the theory is to put the small dealer on a par with the chain stores, so that if a chain store which is started in Washington is selling goods at a certain price, then the vendor must sell to the small dealer at that same price. Mr. THURSTON. But the bill does not say that. For instance, under the terms of this bill you might sell one man a thousand gross of bars of soap, and the dealer who was taking that quantity would be taking it on the same terms as one who bought less. There is nothing in here about the quantity. Then, of course, there is the question of distance and the cost of transportation. The price must take into consideration the cost of transportation. Mr. MICHENER. Referring to the matter called to your attention by Mr. Thurston, where you state in your report that "it must always be kept in view that this bill does not refer to necessities of life, so that it in no way affects the necessary cost of living," after all the questions which have been asked you, as the author of this report, you still insist that this bill, if enacted into law, could not affect the necessities of life. Mr. MERRITT. I do not think it would. Mr. MICHENER. Do you mean to say that it would not affect oranges, grapefruit, and things that packers produce? Mr. MERRITT. I do not think so. Of course, if there were a combination between them, it might affect it. Mr. MICHENER. We will take breakfast foods, for instance: We will take Grape Nuts, which are sold at a standard price of so much, but which the Sanitary Grocery Stores, A. & P. stores, and other chain stores sell for 2 or 3 cents per package less. There is no question that they do that. It is put up in standard packages, and the man who bought that, under the provisions of this bill, would have to pay more for it. Mr. MERRITT. He does not have to buy it. Mr. MICHENER. No; you could go hungry or change your diet. Mr. MERRITT. There are 49 other different kinds of breakfast foods. The manufacturers must keep the price down where the people will buy the product. If they do not, they will buy something else. Mr. MICHENER. That does not answer the question. You say that this will not affect the cost of living, but our families live largely on Grape Nuts, grapefruit, oranges, standard brands of ham, bacon, etc. Those are the things that the people consume in their homes, and if this is enacted into law you will raise the price of those articles, and, therefore, will you not affect the cost of living? Mr. MERRITT. If a man lives on Grape Nuts, it might affect the cost of that particular living, or if he lives on Sunkist oranges, it might affect the cost of his living. You must bear in mind, however, that this does not affect anything unless it is in fair and open competition. Mr. O'CONNOR. That is just the fault with it. It makes it all inclusive. If you will take cereals, for instance, you will see that every cereal is a branded article now. Of course, they are in competition, and because they are in competition you permit this price fixing. If they were not in competition, it would not be permitted. By saying that the price can be fixed where they are in competition, you make it all inclusive. |