REVISE THE DISTRICT OF COLUMBIA ALCOHOLIC BEVERAGE CONTROL ACT WEDNESDAY, SEPTEMBER 8, 1965 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE No. 4 OF THE Washington, D.O. The Subcommittee met, pursuant to notice, at 10 a.m., in Room 1310, Longworth House Office Building, Honorable John Dowdy (Chairman of the Subcommittee) presiding. Present: Representatives Dowdy (presiding), Grider, Roudebush, and Springer. Also present: James T. Clark, Clerk; Donald Tubridy, Minority Clerk; and Leonard O. Hilder, Investigator. Mr. Dowdy. The hearing will be in order. We have three bills for hearing this morning. The first two will be called together. They are bills by Mr. Sisk, H.R. 3316 and H.R. 3317, to amend the District of Columbia Alcoholic Beverages Control Act. (H.R. 3316, and H.R. 3317, referred to, follow:) [H.R. 3316, 89th Cong., 1st sess.] A BILL To amend the District of Columbia Alcoholic Beverage Control Act Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That (a) the last sentence of paragraph (c) of section 3 of the District of Columbia Alcoholic Beverage Control Act (D.C. Code, sec. 25-103(c)) is amended by striking out “, other than” and inserting in lieu thereof "and". (b) Section 7 of such Act (D.C. Code, sec. 25-107) is amended (1) in the second paragraph, by striking out "forbid the sale on Sundays; but the Commissioners shall not authorize the sale by any licensee, other than the holders of a retailer's license, class E, of any beverages on Sunday other than light wines and beer, and any such sale is hereby prohibited." and inserting in lieu thereof "prohibit the sale of any or all alcoholic beverages on such days as the Commissioners determine necessary in the public interest." ; (2) in the last paragraph, by inserting immediately before the first sentence thereof the following new sentences : “No regulation shall be made, altered, or revoked by the Commissioners without first holding a public hearing thereon. Such public hearing shall be called after at least ten days' notice printed in a daily newspaper of general circulation published in the District." (3) by adding at the end thereof the following new paragraphs: “Notwithstanding any other provision of this Act, no retailer's license, class A, shall be granted for any premises located within five hundred feet of any premises holding such class of license on the same street or avenue. This paragraph shall apply only with respect to retailer's licenses, class A, which are initially issued “The Commissioners are hereby authorized and directed to prescribe such rules and regulations as they deem necessary “(1) to permit the conduct of business in any dining room in any hotel or restaurant, notwithstanding the service of alcoholic beverages in such room (including, but not limited to, the display of merchandise and the holding of exhibits and fashion shows); “(2) requiring information concerning any officer, director, or stockholder of any licensee under this Act in addition to any information otherwise required by this Act." (c) Section 10 of such Act (D.C. Code, sec. 25–110) is amended by adding at the end thereof the following new paragraph: “The Board shall give priority to the application of any person licensed under this Act to relocate his premises if such person is required to vacate his premises as the result of the exercise by the United States or the District of its power of eminent domain, or as the result of any urban renewal, urban redevelopment, highway, transportation, or governmental program.” (d) Subsection (b) of section 12 of such Act (D.C. Code, sec. 25-113(b)) is amended to read as follows: “(b) No licensee holding a retailer's license, class A or class B, and no person including any members of the corporation whether or not owning stock in said corporation owning any interest in such licensee shall own, directly or indirectly, any interest in any other license, other than a retailer's license, class E. No licensee holding a retailer's license, class C or D, and no person owning any interest in such licensee, shall own, directly or indirectly, any interest in any other license other than a retailer's license, class C, D, or E." (e) The last sentence of subsection (b) of section 14 of such Act (D.C. Code, sec. 25–115(b)) is amended by striking out "notice by advertisement in some newspaper of general circulation" and inserting in lieu thereof "posting of notice and newspaper advertisement”. (f) Section 17 of such Act (D.C. Code, sec. 25–118) is amended by adding at the end thereof the following new paragraph : ***"Every licensee or permittee shall furnish to the Commissioners any information it may deem reasonably necessary with respect to all sales and offers to sell alcoholic beverages. The Commissioners shall issue appropriate regulations with reference thereto which shall apply with equal force and effect to all licensees and permittees.” (g) Section 18 of such Act (D.C. Code, sec. 25–119) is amended by striking out “$10" each place it appears and inserting in lieu thereof at each such place “$25". (b) Section 19 of such Act (D.C. Code, sec. 25–120) is amended by striking out "$10” each place that it appears and inserting in lieu thereof at each such place "$25". (1) Such Act is amended by adding at the end thereof the following new section: “Sec. 42. No person licensed under this Act shall offer for sale or sell, directly or indirectly, to any person holding a retailer's license under this Act any alcoholic beverage, except that each alcoholic beverage offered for sale or sold by said person to said retailer shall be sold or offered for sale separately and not in combination with any other alcoholic beverage or any other commodity, directly or indirectly.” . SEC. 2. The amendments made by the first section of this Act shall take effect on the sixtieth day after the date of the enactment of this Act. (H.R. 3317, 89th Cong., 1st sess.] A BILL To amend the District of Columbia Alcoholic Beverage Control Act for the purpose of prohibiting certain sales below cost Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the District of Columbia Alcoholic Beverage Control Act. as amended (D.C. Code, sec. 25–101 et seq.), is hereby amended by adding at the end thereof the following new section: “SEC. 42. (a) The Congress hereby finds that the manufacture, distribution, and consumption of alcoholic beverages affect the public interest, and it is necessary for the full protection of the public health, welfare, and morals that such manufacture, distribution, and consumption be so regulated so that the orderly distribution of alcoholic beverages be achieved for the further purpose of encouraging temperance and moderation and for best serving the public interest, convenience, and advantage. “(b) As used in this section "(1) the term 'cost to the retailer shall mean the invoice price of the alcoholic beverage to the retailer or the replacement cost of the alcoholic beverage to the retailer, whichever is lower, less all trade discounts except any discounts for cash; to which shall be added : “(A) Freight charges not otherwise included in the invoice cost or replacement cost of the alcoholic beverage, as herein set forth; and *(B) The cost of doing business by the respective retailer, which shall include the total outlay or expenditure by the retailer in the acquisition, processing, and distribution of the specific alcoholic beverage involved, excluding invoice price or replacement cost and freight charges as set out above, and including all other elements of cost such as labor, materials, depreciation, taxes (except taxes on net income and such other taxes as are not properly applicable to cost), and all general overhead expenses incurred by the retailer in the acquisition, processing, preparation for marketing, sale, and delivery of the specific alcoholic beverage involved. In the absence of proof of a lesser cost of doing business, such cost shall be 6 percent of the cost to the retailer as herein set forth, after adding thereto freight charges, if any, but before adding thereto the cost of doing business. “(2) the term 'replacement cost shall mean the cost per unit for which the alcoholic beverage sold or offered for sale could have been bought by the seller at any time within thirty days prior to the date of sale or the date upon which it is offered for sale by the seller if bought in the same quantity or quantities as the seller's last purchase of the said alcoholic beverage. "(3) the terms 'sell at retail', 'sales at retail', and 'retail sales', shall mean and include any transfer, for a valuable consideration made in the ordinary course of trade or in the usual prosecution of the seller's business, of title to an alcoholic beverage to the purchaser for consumption or use other than resale. "(4) the term 'retailer shall mean and include every person licensed under this Act who is engaged in the business of making sales of alcoholic beverages at retail within the District. "(c) It is hereby declared that the offer to sell, or sale of any alcoholic beverage, by retailers, at less than cost as defined in this section, with the intent, effect, or result of deceiving any purchaser or prospective purchaser, substantially lessening competition, unreasonably restraining trade, or tending to create a monopoly is an unfair method of competition, contrary to public policy, and in violation of the provisions of this section. "(d) Any retailer who shall iu violation of the provisions of this section, offer to sell or sell at retail any alcoholic beverage at less than cost to the retailer as defined in this section, shall be guilty of a misdemeanor and upon conviction thereof, shall be punished by a fine of not more than $500, and shall also be subject to the penalties provided in section 17 of this Act. Proof of any such offer to sell or sale by any retailer in violation of the provisions of this section shall be prima facie evidence of a violation of this section. "(e) In addition to the penalties provided in this section, the courts of the District are hereby invested with jurisdiction to prevent and restrain violation of this section, and it shall be the duty of the corporation counsel to institute proceedings in equity to prevent and restrain violations. Any person shall be entitled to sue for and have injunctive relief in any court of competent jurisdiction against any threatened loss or injury to such person by reason of a violation of this section, and any person suffering damages by reason of a violation of this section may sue for such damages in any court of competent jurisdiction and shall be entitled to recover the amount of damages sustained. If an injunction be granted or damages awarded, the person bringing such action shall also be entitled to recover the costs of such suit, including a reasonable attorney's fee. "(f) If any alcoholic beverage is offered for sale or sold with one or more rately priced and the sale and the offering for sale of each such alcoholic beverage shall be subject to this section. “(g) The provisions of this section shall not apply to sales at retail (1) where the alcoholic beverage is sold in bona fide clearance sales, if marked and sold as such and the seller, for a period of at least one year thereafter, discontinues any further sale of the brands sold in such bona fide clearance sales; (2) where the alcoholic beverage is imperfect or damaged, and is marked and sold as such ; (3) where the alcoholic beverage is sold upon the final liquidation of any business; (4) where the alcoholic beverage is sold for charitable purposes or to relief agencies; (5) where the price of the alcoholic beverage is made in good faith to meet lawful competition; and (6) where the alcoholic beverage is sold by any officer acting under the order or direction of any court or by any fiduciary, or by any trustee in a deed of trust or deed of assignment for the benefit of creditors." Mr. Dowdy. The first witness we have on this list is Mr. Hilliard Schulberg, Executive Director, D.C. Retail Liquor Dealers Association, Inc. We are glad to have you, and will be pleased to listen to any statement you would like to make relative to these two bills. STATEMENT OF HILLIARD SCHULBERG, EXECUTIVE DIRECTOR, WASHINGTON, D.C., RETAIL LIQUOR DEALERS ASSOCIATION, INC. Mr. SCHULBERG. Mr. Chairman, my name is Hilliard Schulberg. I am the Executive Director of the Washington D.C. Retail Liquor Dealers Association, an organization composed of proprietors of retail stores which sell alcoholic beverages for off-premises consumption. I am appearing here today at the direction of the Association in support of H.R. 3316 and 3317, bills which would revise, amend and modernize the Alcoholic Beverage Controls Laws of the District of Columbia. The Association has membership of over 300 of the 388 package beverage stores licensed by the District of Columbia. While we totally support both H.R. 3316 and H.R. 3317, we do have suggested amendments to H.R. 3317 which we would like to bring to your attention at this time. (1) Page 3 line 19, before the word “consumption” add "offpremises”. (2) Page 3, line 23, strike the period after the word “District” and add "for off-premises consumption.” Mr. Dowdy. Before you go beyond that, let me understand what the effect of those amendments would be. Mr. SCHULBERG. I think the next paragraph would bring that out. Mr. Dowdy. All right. Mr. SCHULBERG. It is our understanding that H.R. 3317 by its terms is intended to be restricted to retailers who sell alcoholic beverages for off-premises consumption. As presently written in H.R. 3317, the term “retailers” would be all encompassing and would include those who also sell alcoholic beverages by the drink for on-premises consumption, such as hotels, restaurants and taverns. It is our understanding that this was not the intent of the subject bill and therefore we believe that these clarifying amendments are necessary. This concludes the suggested changes we have to offer. Now we would like to comment on some of the outstanding provisions of both bills. an for sp of obe destroy bill to the serem, elp be es, busines resultor'belo For the first time, the bills provide for the following: (a) Public hearings, with due notice thereof, before regulations can be made, altered, or revoked. (b) Criteria for location of package stores. (c) Recognition of the distress caused by urban renewal, highway construction, etc., and providing for relocation privileges. (d) Increasing display allowances, which are presently based on a 1934 cost of display materials. (e) In line with Federal controls, prohibits "tie-in” sales. But, in addition to the aforementioned changes, H.R. 3317 contains an additional new feature, upon which we would like to comment. The language of H.R. 3317, with the amendatory language we have offered, is salient, for it will strengthen independent competitive enterprise by providing that sales and advertising below net cost, plus a 6 percent markup which represents a proportionate part of the cost of doing business, are unfair methods of competition. It does not seek to establish fair trade. I want to emphasize this—all this section provides for, in essence, is a prohibition against below-cost, loss-leader sales for the purpose of destroying competition. It guarantees no one a profit. For some time, we have complained of the predatory practices of a group of operators who have been consistently using sales at or below cost to destroy competition. Although the House District Committee reported a bill to end these practices to the House of Representatives at the end of the 86th Congress, no action was taken thereon. So we are still at the mercy of these economic pirates. One might logically ask "Can any help be expected under existing provisions of other laws to help protect small business firms from the ravages and devastation visited upon them as a result of the predatory practices of these large operators in selling at cost or below until all competition is weakened and eventually eliminated ?" At one time there was a hope that Section 5 of the Federal Trade Commission Act could be relied upon for help in that respect. However, largely because of a Federal court decision-Sears, Roebuck and Company vs. Federal Trade Commission, 258 Fed. 307—which held that Section 5 of the Federal Trade Commission Act was not applicable to sales at prices below cost, the Federal Trade Commission since that time has been reluctant to attack the practice unless it was shown to be coupled with an intent to destroy competition. In other words, the Commission now considers that in applying that law to the practice we are complaining of, it requires a standard of proof equivalent to the showing of criminal intent to destroy competition. The Commission and Department of Justice do not consider that under existing law they are authorized and empowered to proceed against the practice of selling at prices below cost simply upon the showing that the effects and results are the substantial lessening of competition and a tendency to create monopoly. Yet at the State level, many of the States have enacted legislation to combat this practice of selling below or at cost. The courts have there was relied upon fourt decision Fed. "307—whis |