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WE reprint elsewhere in this issue the text of the Stevens bill to legalize fixed prices which was introduced into the House last month. Although it is considered unlikely by those best informed that this particular bill will make much legislative progress, net price legislation in some form is being so earnestly urged and widely discussed that some such relief is not improbable. Despite the interest which publishers and booksellers naturally take in this pending legislation, representatives of neither have so far taken any part in either the shaping of the bills in question or in the presentation before the committees of arguments in their support.
SUBSEQUENTLY to the Stevens bill a second net price measure, the Metz bill, was in troduced into the House. The full text of the latter bill has not come to the notice of the PUBLISHERS' WEEKLY but its purport is to extend the law of unfair competition one step, to prevent the impairment of trade-mark rights by cutting prices on trade-marked articles. The distinction between it and the Stevens bill is that the latter attempts to legalize a system of contracts by which net prices on trade-marked articles could be maintained; whereas the Metz bill, instead of being a contract bill, is what may be described as a "notice" bill-that is to say, it aims to give force and effect to a price notice, which may be attached to the article itself or served on the trade through the usual trade channels.
THERE is one man in the publishing trade whom all who know the history of the trade especially delight to honor and that is George Haven Putnam, who completed his seventieth year on Friday of this week. The story of his life is one of extraordinary and varied interests and his fulfilling of three score years and ten is marked by the publication of the first chapter of these memoirs, of which it has required a full volume to tell the story of his boyhood interests in literary and publishing affairs through association with his father, George Palmer Putnam, of honored memory, his university life in Germany and his experiences and stirring adventures in the Civil War. It is to be hoped that he may be spared for many years of work ahead, so that he may complete the memoirs and record with his own pen his later experiences as a publisher and his wide relations with authors and scholars in England as well as America. His middle and later years during which he has
devoted himself to building up into large success the house which his father founded, have been full of public spirit without the trade, in all good causes, as well as within it; and within it he has been foremost in international copyright and in the protection of the trade from attacks from various quarters, the Treasury Department in particular. In 1891, at the conclusion of his labors on behalf of international copyright, a few of his fellow publishers representing the houses of historic name, gave him a loving cup inscribed on its five sides "With the Love of Harper; With the Love of Appleton; With the Love of Scribner; With the Love of Holt; For the Love of Putnam", and on Friday his seventieth birthday was fittingly celebrated with a dinner at the Century Club in which a larger circle of publishing and other friends joined to do him honor. And here's to his eightieth birthday! -and ten years of good work between.
THE STEVENS BILL TO LEGALIZE NET PRICES.
ON Feb. 12th, Representative Stevens, of New Hampshire, introduced in the lower house of Congress a measure authorizing the standardization of prices the consumer pays to the dealer, and making legal, under certain conditions imposed by the measure, agreements between manufacturers and dealers as to what these prices shall be. The bill represents the views of the Fair Trade League. The following is its text in full:
To prevent discrimination in prices and to provide for publicity of prices to dealers and to the public.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That in any contract for the sale of articles of commerce to any dealer, wholesale or retail, by any producer, grower, manufacturer, or Owner thereof, under trade-mark or special brand, hereinafter referred to as the "vendor," it shall be lawful for such vendor, whenever the contract constitutes a transaction of commerce among the several states, or with foreign nations, or in any territory of the United States, or in the District of Columbia, or between any such territory and another, or between any such territory or territories and any states or the District of Columbia, or with a foreign nation or nations, or between the District of Columbia and any state or states or a foreign nation or nations, to prescribe the sole uniform price at which each article covered by such contract may be resold: Provided, That the following conditions are complied with:
(A) Such vendor shall not have any monopoly or control of the market for articles belonging to the same general class of merchandise as such article or articles of commerce as shall be covered by such contract of
sale; nor shall such vendor be a party to any agreement, combination, or understanding with any competitor in the production, manufacture, or sale of any merchandise in the same general class in regard to the price at which the same shall be sold either to dealers at wholesale or retail or to the public.
(B) Such vendor shall affix à notice to each article of commerce or to each carton, package, or other receptacle inclosing an article of commerce covered by such contract of sale stating the price prescribed by the vendor at the time of the delivery of said article as the uniform price of sale of such article to the public, and the name and address of such vendor, and bearing the said trade-mark or special brand of such vendor. Such article
or articles of commerce covered thereby shall not be resold except with such notice affixed thereto or to the cartons, packages, or other receptacles inclosing the same.
(C) Such vendor shall file in the Bureau of Corporations a statement setting forth the trade-mark or special brand owned or claimed by such vendor in respect of such article or articles of commerce to be covered by such contract of sale, and also, from time to time, as the same may be adopted or modified, a schedule setting forth the uniform price of sale thereof to dealers at wholesale, and the uniform price of sale thereof at retail to dealers from whatever source acquired and the uniform price of sale thereof to the public and upon filing such statement such vendor shall pay to the Commissioner of Corporations a registration fee of $10. The price to the vendee under any such contract shall be one of such uniform prices to wholesale and to retail dealers according as such vendee shall be a dealer at wholesale or a dealer at retail, and there shall be no discrimination in favor of any vendee by the allowance of a discount for any cause, by the grant of any special concession or allowance, or by the payment of any rebate or commission, or by any other device what
(D) Any article of commerce or any carton, package, or other receptacle inclosing an article or articles of commerce covered by such contract and in possession of a dealer may be sold for a price other than the uniform price for re-sale by such dealer as set forth in the schedule provided in the next preceding paragraph (C): First, if such dealer shall cease to do business and the sale is made in the course of winding up the business of such dealer, or if such dealer shall have become bankrupt, or a receiver of the business of such dealer shall have been appointed, provided that such article or articles of commerce shall have first been offered to the vendor thereof by such dealer or the legal representative of such dealer by written offer at the price paid for the same by such dealer, and that such vendor, after reasonable opportunity to inspect such article or articles, shall have refused or neglected to accept such offer, or, second, if such article of commerce or contents of such carton, package, or other receptacle shall have become damaged, deteriorated, or soiled: Provided, That such damaged, deteriorated, or soiled article shall have first
been offered to the vendor by such dealer by written offer, at the price paid for the same by such dealer, and that such vendor, after reasonable opportunity to inspect such article or articles, shall have refused or neglected to accept such offer, and that such damaged, deteriorated, or soiled article shall thereafter only be offered for sale by such dealer with prominent notice to the purchaser that such article is damaged, deteriorated, or soiled, and that the price thereof is reduced because of such damage.
COMMITTEE HEARINGS ON NET PRICE MAINTENANCE.
THE House Judiciary Committee for several weeks, in the course of its hearings on the various proposed anti-trust bills, took up from time to time the question of net price maintenance, upon which two of the pending Committee bills have something more or less indirectly to say.
Among the many important and carefully reasoned presentations of the subject made to the Committee none was more clearly phrased than that of Mr. W. H. C. Clarke, of the law firm of Moore & Clarke of Washington, D. C., who incorporated in his remarks an interesting letter from Mr. Clarke to Mortimer Byers, the secretary of the National Association of Stationers and an article on Predatory price cutting as unfair trade,' by Edward Rogers of Chicago, which was reprinted from the Harvard Law Review. The following digest summarizes some of the more important points made in each of these three articles.
Mr. Clarke said:
BRANDED VS. UNBRANDED COMMODITIES.
Commodities entering into interstate commerce fall roughly into two classes, which I shall describe as branded commodities and unbranded commodities.
By unbranded commodities I mean commodities which enter into commerce without any designation of their origin. They might be likened to mavericks, in that they contain no brand or indication of their proprietors or original producers. The other class of commodities are the branded commodities, by which I mean trade-marked commodities, which carry on them or in connection with them some brand or indication of their origin.
The principal characteristics of branded or trade-marked commodities are that they are uniform in character and that they carry with them the good-will or reputation of the originating proprietor, who assumes the responsibility for the commodity and is willing to take any blame for any defect which may develop in it.
The first section of the Clayton bill interferes to a marked degree with the marketing of the unbranded class of commodities. The second section of the Clayton bill interferes in a similar degree with the marketing of branded commodities.
The first section of the Clayton bill provides in substance that the same commodity shall be sold by the dealer to all consumers at the same price, after making an allowance
unimpaired, and his bills are promptly paid and where he probably buys closer, studying the prices of similar commodities in all nearby stores, he gets better prices than the customer who is slow pay and who is unreliable, and until some means can be found to equalize these inequalities in customers or consumers it is impossible as a matter of practical business for the dealer to sell the same commodity at the same price to all his customers.
These two classes of commodities, branded and unbranded, have produced two rather distinct systems of salesmanship for marketing
ADVERTISING THE COMMODITY VS. ADVERTISING THE SELLER.
For instance, in marketing a trade-marked article, the aim of the proprietor is to advertise the commodity itself, as distinguished from advertising himself. His aim is, so to speak, to magnetize that particular commodity or to instill into it the advertising value he can produce.
marked article also fixes the even price at which the article is to be sold everywhere at retail by all dealers.
What I conceive to be the disadvantages of the uneven price system are, first, that uneven prices prevent a class of competition which might be described as "show-case" or "stock" competition.
When these trade-marked articles go into commerce the aim of the proprietor is to have every retailer carry his particular article in the show-case or on the stock shelves, and the aim of every other proprietor is to do the same, so that under a perfect system of distribution every retail store would have a complete stock of all the trade-marked articles in its line.
The result would be, for instance, that you could go into a hardware store and ask for a razor, and under perfect conditions of trade, the hardware dealer would have in stock a complete line of razors. He would take you to his razor show-case and you would have an opportunity to examine a razor out of every factory in the world. You would be able to examine razors ranging in price all the way from 25 cents to $7.50, to $10, or $15. This examination of a complete line of goods produces what I term "show-case competition." You examine that entire line of razors, and the even or uniform price of each is marked on it. If you pick out one make of razor, you are fostering competition to the extent that you are patronizing that one factory. If you pick out another razor you are fostering competition by patronizing another factory.
CUT PRICES REALLY IMPAIR COMPETITION. The first disadvantage of the system of uneven prices is that it prevents or impairs this show-case or stock competition. Uneven prices cut into the stock of some of the dealers, and makes the stock incomplete, so that when you go into a store to select a razor, there would be certain razors that probably had been driven out of the stock by reason of the fact that some department store or some cutrate dealer has used that particular razor as a leader by probably cutting the price below the trade cost and selling it thus at a loss, and if this practice has been followed persistently enough, other dealers are forced to level down their prices below cost, and clear out their stock of those particular razors, and to that extent the stock of your dealer is incomplete. Uneven prices thus prevent or impair this effective form of show-case or stock competition.
THE BIG DEALER GIVEN THE ADVANTAGE.
The second disadvantage of this uneven price system is that it gives the big dealers an advantage over the little dealers. tends to monopolize the sale of trade-marked articles in the hands of the dealers who are using those articles as leaders. The large dealers have the advantage of the quantity price; that is, they are able to buy articles in large quantities and at lower prices, and the advantage of the quantity price, added to the advantage of selling trade-marked articles at uneven prices as an advertising leader and thus driving these articles out of the show
cases of their smaller competitors, gives the large dealers a very great advantage.
Right on that point I wish to call your attention to the fact that there is a similarity in principle between this practice of department stores in using certain trade-marked lines as leaders, on the one hand, with the practice of a large oil company, which at one time was engaged, as is charged, in the practice of underselling the market in competing territory, and overcharging the market in non-competing territory. On the one hand we have the example of this oil company with a map of the United States spread out before it, divided up into states like a checker board, and playing the game of unfair competition. In one square it would lower the prices until competitors were put out of business, and in another square where it had no competitors it would charge enough to make up its losses in the competitive squares. In principle there is a very great similarity between that practice of the oil company and the practice of some department stores. In the case of the department store these various blocks of the checker board have been brought together and piled up into one great store which affords same chances of manipulation similar in principle to those of the oil company.
At one time the proprietor of the department store can conduct a campaign to injure his competitors in a particular line. For instance, he drops the prices in his china department; at the same time, in the other departments maintaining his prices sufficiently to make up the losses in his china department. This campaign could be kept up until he has injured his competitors in the china line. He will make the losses in one line always balance against the higher prices he will charge in another department. Now, that is one of the practices which is fostered by uneven prices in these trade-marked, and even in untrade-marked, commodities.
PROPERTY RIGHTS IMPAIRED OR CONFISCATED.
Another disadvantage of the system of uneven prices in trade-marked goods is that in effect it denies the right of ownership in that great class of trade-mark property which is created as the result of advertising and the carrying on of business with high standards.
The reason why the right of ownership in trade-mark property or good will is lost or impaired under the operation of the uneven price system is this: A man can not be said to own any property unless he has the right to prevent others from wantonly destroying it. In the case of my house, I would not consider that I had a very strong right or title of ownership unless I could prevent some other man from throwing a brick through my window or wantonly burning my house. Under this system of uneven prices for trademark goods we have almost a parallel case to that. A man spends his life developing a certain trade-mark article of which he is proud and into which he has put his best work and behind which he places his reputation and about which he spends money and time for advertising. As soon as that article is so magnetized with advertising value that
it practically acts as its own salesman, one of the retailers engaged in the other system of private salesmanship gets the idea that he would like to draw some of that advertising Ivalue out of that article and unto himself. So he cuts the price on that article, perhaps, below the cost. He thus secures a great deal of advertising for himself. He advertises, for instance, that here is the Ingersoll watch which everybody knows is worth clearly $1, and I am selling it for 50 cents. He advertises himself by demagnetizing the Ingersoll watch of the advertising value which has been instilled into it by years of effort and expenditure.
NET PRICES NOT RESTRAINT OF TRADE.
In his letter to Mr. Byers Mr. Clark said: It appears to me that the supporters of this reform have permitted themselves to be maneuvered into a wrong position. They have been put in a class with monopolists and restrainers of trade. This has been due somewhat to the fact that they have accepted the premises of those who oppose the principle of price maintenance. For instance, Mr. Patterson in his address says, "Unless I am entirely mistaken such a restraint upon trade as is involved in a price-maintenance agreement between a manufacturer and his customer may be well accepted, because it carries its own safeguard."
That is true; but why admit that price maintenance is a "restraint upon trade"? As a matter of fact, I believe the reverse is true. I believe it is more of a restraint on trade to prevent price maintenance than it is to permit price maintenance, because when price maintenance is prevented the ultimate market of the manufacturers is destroyed and their industries, as I show later, are demoralized, with the result that a restraint of trade which amounts, in effect, to a destruction of trade or confiscation of property is the result.
The supporters of price maintenance instead of permitting themselves to be classed with monopolists and restrainers of trade should insist that they are working for a reform which will strike from trade shackles which are now restraining it. ERRONEOUS DEFINITIONS OF COMPETITION." The attitude of the courts and Congress is that competition between different retailers is what modern conditions. demand. That is not the case. Retailers dealing in the same products from the same factories can not be expected to compete with each other without demoralizing trade any more than the different agents of a manufacturing concern located in different parts of the country could be expected to compete with each other in selling their own product. As a matter of fact, different retailers handling the same product from the same factory are in fact the agents of that factory, and should not be expected to compete in that article. A type of competition which is wanted is competition between manufactured articles made in different factories competing with each other on the ground of price or quality or characteristics or designs of the different articles.
Unless this principle is established, namely,
that retailers handling the same article from the same factory are not competitors, but are agents of a common principal, the product of a factory can not be successfully marketed, and if it can not be successfully marketed it can not be successfully made If an article from one factory is offered at too high a pri e, the very retailers who handle it will have in stock an article for the same purpose from another factory which they will offer at a competing price.
NET PRICES SHOULD BE LEGALLY OBLIGATORY.
The courts and Congress have gotten strangely topsy-turvy on this question of price maintenance. As a matter of fact, instead of so making and interpreting the laws as in fact to compel different retailers dealing in the same article from the same factory to sell that article at different prices, so as to compete with each other, it would be more logical to pass a law making it unlawful to sell the same products from the same factory at different prices in different stores. We all remember the time when one of the worst industrial crimes charged against a certain large oil company was that it sold its product at different prices in different parts of the country; that at competing points it sold its oil by such low prices as to put its competitors out of business; and that, at the same time, at non-competing points it had sufficiently high prices to make up for the losses which it was sustaining in competition territory. This very industrial crime, which was charged so strenuously against this oil company some twenty years ago, contained the very condition which, in fact, the courts and the Congress are now trying to bring about. They are trying to force a condition where the same product made by the same machines in the same factory is to be sold at different prices in different retail establish
POINTS TO BE ESTABLISHed.
I am convinced that if this question is properly presented it can be established(1) That price maintenance instead of being a restraint of trade is a release of trade.
(2) That competition should be between the products of different factories, and not between retailers handling the same product from the same factory.
(3) That it would be more conservative and proper for Congress to pass a law making it unlawful to sell the output of a certain factory for different prices in different parts of the country than it is to bring about a condition wherein retailers are practically forced to sell the product of one and the same factory at different prices in different places, or even in the same place, thus legalizing the very device which has been used so frequently by large corporations in underselling their competitors at competing points and making up for their losses by raising the prices in non-competing territory.
(4) Retailers handling the same article from the same factory are not proper competitors, but are all agents of a principal and should not be even permitted, much less required, to compete with each