In your amendments to S. 852 you do not recommend the deletion of subsection (g) either.

Mr. MULTER. The amendments suggested

Mr. HUDDLESTON. It seems to me that the bar association makes no recommendation with regard to subsection (g). But of course I imagine each member of the committee has his own interpretation of that. Mr. MULTER. Mr. Schwartz, I take it the amendments the bar association are recommending are not to S. 852 but to H.R. 2036? Mr. SCHWARTZ. In my statement?

Mr. MULTER. Yes.

Mr. SCHWARTZ. That is correct.

Mr. MULTER. In other words, S. 852 is not a revision to the act but amendments to it?

Mr. SCHWARTZ. That is correct.

Mr. MULTER. You go along with those amendments.

You also go along with the suggested revision of the act provided it is revised according to the bar association's suggestions in its report. Mr. SCHWARTZ. That is correct.

Mr. HUDDLESTON. I would like to have Mr. Schwartz read his stateents that indicate that. The language he did read indicates they went along with S. 852 and with H.R. 2036 insofar as it was compatible with S. 852 and had the same provisions in it.

Mr. SCHWARTZ. Well, the language is:

Insofar as the Multer bill contains similar provisions as those in the Senate bill heretofore referred to, the committee approves.

Mr. MULTER. Mr. Schwartz, I would be inclined to believe that Mr. Huddleston is correct. If that is the only approval of H.R. 2036, then you have not approved all of H.R. 2036; you have approved S. 852 and you have made certain additional recommendations for amendments of the ABC Act.

Now, if the bar association intended to approve H.R. 2036, with these proposed amendments, then I think it ought to say so.

I am inclined to agree with Mr. Huddleston that it does not say You have said so orally, but you have not said so in this formal statement we have made a part of the record.

so now.

Mr. SCHWENGEL. Mr. Chairman, would not a firm solution be a letter from you to the bar association on the points that we have raised, and ask them specifically; ask the questions that I think are pertinent here?

Mr. MULTER. I do not think we need be that formal about sending them a letter. I think we can ask Mr. Schwartz to find for us what the intent is of the bar association and, if it is as you have expressed it, then please so indicate to us.

On the other hand, if it is not that, indicate that too.

Mr. SCHWARTZ. I shall be happy to do that, sir.

Of course, my mandate, my direction was to confine my testimony only to 2036.

Mr. MULTER. There is some confusion, however, on the record as it stands now.

Mr. Schwartz, one brief point. The District of Columbia Bar Association operates the same as bar associations throughout the country, including State bar associations as well as local ones, and even the National Bar Association, to the extent of considering legislation by

its appropriate committees and making recommendations thereto. The committees make the recommendations to the board or a board of governors or a board of directors, who are authorized to act for the association, with the exception that these matters can always be called up at a general meeting of the association so that, if there is something where there is great difference of opinion within the association, the ultimate decision is by the members of the association? Mr. SCHWARTZ. By the bar association itself?

Mr. MULTER. Yes.

Mr. SCHWARTZ. That is correct.

Mr. MULTER. But unless some member will indicate that there is controversy about a position taken by a committee and the approval by the board, the matter is not submitted to the bar association? Mr. SCHWARTZ. That is correct.

Mr. MULTER. And like all these other bar associations, the District of Columbia Bar Association has working on its committees its members; it is all voluntary service, is it not?

Mr SCHWARTZ. That is correct.

Mr. MULTER. And invariably the members who serve on the different committees are those who specialize in the particular fields of endeavor that the committee is concerned about?

Mr. SCHWARTZ. That is correct, sir.

Mr. SCHWENGEL. Now, Mr. Chairman, I think this section that we are talking about is quite important, and since Chief Murray and people like him, the Commissioners, have some apprehension about it, I think this ought to be noted.

And I would like to have you recheck this with the bar committee and with some competent members of your bar to see if they really endorse this deletion.

Mr. SCHWARTZ. I shall do that, sir.

Mr. MULTER. And in that connection you might call their attention to the testimony heretofore adduced.

I do not see that Chief Murray is listed as a witness. We will be glad to hear him, of course, if he wants to be heard.

If I recall correctly, the testimony before the committee in the last session was that Chief Murray pointed to one instance where the carrying of the licensee's number on the bottle was of some help to him.

If that is all the help he gets out of the license number being affixed to the bottle, I wonder if it is worth all the time, effort, and trouble. That is a matter of enforcement.

We ought to hear from the ABC Board and, of course, get the guidance of the bar association to the extent they can give it to us. Mr. SCHWARTZ. I shall be very happy to get that, sir.

Mr. MULTER. Thank you, Mr. Schwartz.

Mr. Bindeman, you may proceed, sir.

STATEMENT OF J. E. BINDEMAN, ATTORNEY, REPRESENTING MAJOR LIQUOR STORES, A TRADE ASSOCIATION IN THE DISTRICT OF COLUMBIA

Mr. BINDEMAN. Thank you, Mr. Chairman.

If the committee please:

My name is J. E. Bindeman. I am an attorney at law representing Major Liquor Stores, which is a voluntary trade association of approximately 100 retail liquor dealers in the District of Columbia.

Mr. MULTER. May I interrupt you at that point? bership roll of the association?

Mr. BINDEMAN. Yes, sir.

Is that the mem

Mr. MULTER. Or is that the paid-up membership roll?

Mr. BINDEMAN. That is the membership roll. We are presently in the process of conducting a dues campaign, so we will know a little bit later on exactly what the paid-up members are. But those are on the rolls, Mr. Chairman.

Mr. MULTER. As of this moment, how many paid members do you have?

Mr. BINDEMAN. I do not know as of the moment, because the bills went out the 1st of May, and we have not as yet had a complete statement as to exactly who paid dues.

Mr. MULTER. How many paid-up members did you have before you sent out the current bills?

Mr. BINDEMAN. We had about 83.

Mr. MULTER. That is close enough to the hundred mark.

Mr. BINDEMAN. Yes, sir.

Mr. MULTER. Proceed.

Mr. BINDEMAN. Now, Mr. Chairman, and members of the committee, our members own small stores, and we believe that our membership is composed of typical small retail liquor retailers in Washington. Now, at least year's hearings, our association made the committee know of its stand on various aspects of the bill. Some of the points of the bill we approved, and some of the points of the bill we opposed. In view of your admonition, I should like to refer to the previous testimony and limit my statement to two aspects of H.R. 2036. Mr. MULTER. Your full statement, however, will be made part of the record.

Mr. BINDEMAN. Thank you, sir.

Now, the first point, sir, concerns the present solicitor system and the attempt to change that system by section 11, subsection 5, and section 11, subsection 12, of the proposed bill, H.R. 2036. Those sections would change the existing rules with respect to solicitors and allow these solicitors to solicit orders only on behalf of wholesalers licensed under the act.

And the position of my clients is that they strongly oppose any change in the present solicitor system.

The system whereby retail liquor dealers purchase their merchandise is most unusual. Under the present law, a retailer in Washington cannot purchase his liquor or his spirits from the cheapest source available. The law compels a retailer to purchase a brand sold in Washington only through the local wholesaler who handles that brand. We all know that in any other business a retailer has a freedom of choice. He may purchase his merchandise from the cheapest source possible. But the law does not give a retailer a freedom of choice. So that every wholesaler who sells a brand in Washington, D.C., has, in effect, a monopoly on that brand, and every retailer who wants to buy that merchandise can purchase it only from the wholesaler who sells it. Now, this quite obviously could be a monopoly-it is a monopoly which could be abused.

But when the original Alcoholic Beverage Control Act was passed in 1934, Congress built a safeguard into the law. And that safeguard is the existing solicitor system.

The present law permits out-of-town distributors to sell merchandise through their authorized agents, who are the solicitors. These solicitors offer for sale merchandise which is comparable in quality to brands sold in the District but less in price. The merchandise is topgrade whisky, packaged according to the wishes of the retailer and known as private brands. Sometimes it bears the name of the retailer who is selling it. It may be some other name. The name of the label is worked out with the retailer and the solicitor, and it is known as a private brand.

Now, we think that the sale of these private brands is in the public interest. In the first place, the retailer effects a saving in price. And he passes on that saving in price to the consumer, who thereby gets a bargain in good merchandise at a reasonable price.

Secondly, we feel that the solicitor system acts as an effective brake on excessive wholesale prices for merchandise in the District of Columbia because it acts as a deterrent upon the wholesaler abusing his monopoly. The wholesaler knows that he has to meet this competition, and therefore he cannot set unnaturally high prices.

Now, if you please, sirs, it is understandable that local wholesale interests would want to do away with this effective competition, but any change in the present system we believe would encourage monopoly and take money out of the pockets of consumers.

And we believe very strongly that any legislation which tampers with the solicitor system is contrary to the public interest.

Now, section 11, subsection 5 permits a solicitor's supplier to come into the District of Columbia and qualify as a wholesaler. We do not think that this is a justification in support of the proposed change. Because we say that some of the solicitor's suppliers may do so, but others may not do so, because that same section requires these out-oftown suppliers to become subject to the law of the District of Columbia. And to the extent that even one supplier does not choose to come into the District, does not choose to register and become subject to the laws of the District of Columbia, to that extent the solicitor's source of supply is diminished, and again to that extent the public interest is adversely affected.

Moreover, I call to your attention that the proposed bill does not require suppliers of class A wholesalers to come into the District of Columbia and obtain a license.

We feel the present system works very well for retailers and for the consuming public and should not be tampered with. We therefore urge that you eliminate those two sections of the bill which will alter the present solicitor system and reinstate the present section relating to solicitors.

I would say that we are rather surprised that these provisions are even included in this new draft of the change of the ABC law, because at last year's hearing there was a unanimous testimony opposed to any change in the solicitor system. And my recollection is that not one voice was raised publicly in favor of the change.

The wholesalers, who would admittedly benefit from this change, did not appear last year, and Mr. Schwartz has indicated this morning that they will not appear this year.

So I suggest that, in view of the fact that there seems to be no public cry to make this change, that we should not make the change and that the present section which relates to solicitors ought to be reinstated.

Mr. MULTER. Before you go on to the second point, I assume you have finished your statement with reference to that point? Mr. BINDEMAN. Yes, sir.

Mr. MULTER. It is my recollection, however, that the subcommittee did recommend to the full committee that the change be made. Mr. BINDEMAN. That is correct, sir.

Mr. MULTER. And I think the record does show there is not a single other jurisdiction anywhere in the United States that does not have a provision similar to the one in this bill on solicitors.

Mr. BINDEMAN. I have no information on this subject, Mr. Chairman. I do not know if any do or if any do not. But I shall simply make an effort to ascertain that and write a letter on that specifically. Mr. MULTER. Mr. Bindeman, you have been representing this organization for a long time, have you not?

Mr. BINDEMAN. I have.

Mr. MULTER. You are familiar with the compilations that have been made by the industry of the laws in the United States in various jurisdictions, are you not, sir?

Mr. BINDEMAN. If I were, sir, I would answer your question affirmatively. I do not have that information.

sir.

Mr. MULTER. All right, you may proceed with your second point,

Mr. BINDEMAN. Now, with respect to section 38, which prohibits sales at less than cost, we are in favor of the principle behind that section. We favor that principle because it would eliminate cutrate loss leaders and bring some order out of what we feel is an extreme situation.

My clients are astonished by the fact that various stores sell merchandise below what is my clients' invoice costs. And this, it seems to us, can only lead to bankruptcy. We would, therefore, strongly urge the subcommittee to adopt a section which would prohibit sales at less than cost.

But section 38 (b) (1), which has to do with a definition of cost, defines "cost" as the invoice costs, plus freight, plus, in the language of the bill, "a markup to cover the cost of doing business."

Now, we feel that that language puts our small member stores at a serious disadvantage. Because the unit cost of doing business of large stores with a large operation has got to be much less than the unit cost of the small stores with a small operation.

So that section, put into practical effect, would permit the larger store to sell at a lesser price than the small store, because the larger store's markup would be less.

Now, while the bill permits us to meet that price, by the same token that would be at an economic loss to the small stores, and we feel that what that would do is simply repeat the present situation.

Now, we feel the language in last year's bill is preferable. In last year's bill, as I am sure the committee recalls, what you did is you defined the term "cost of doing business" at 6 percent of the total cost.

21-065-63- -5