Statement by the President Upon Signing the "Fair-Trade Laws" Bill

I HAVE today signed H.R. 5767, "To amend the Federal Trade Commission Act with respect to certain contracts and agreements which establish minimum or stipulated resale prices and which are extended by State law to persons who are not parties to such contracts and agreements, and for certain other purposes."

This act has to do with the so-called fair-trade laws of 45 States. Under these State fair-trade laws, a manufacturer of a trademark or brand name product can, if he wishes, fix the price at which his product may be sold. He does this by making resale price contracts with distributors of his products-and under the State laws, if he makes such a contract with one retailer, it applies to all others in the State whether or not they have agreed to such a contract. This means that every retailer in a given State may be required to sell "fair-traded" products at the same price, and no retailer may attempt to attract customers by reducing his prices on any such product.

Such price-fixing arrangements would, of course, be illegal under the Federal antitrust laws, insofar as they applied to interstate commerce, unless special legislative exemption were given to them. The Miller-Tydings Act of 1937 was passed to grant such exemption, but recent decisions of the Supreme Court have held, among other things, that the Miller-Tydings Act did not sanction the so-called "nonsigner" clauses of the State laws, under which retailers are bound by the resale prices set by manufacturers, even if they have not agreed to be so bound. The purpose of H.R. 5767 is to exempt these "nonsigner" clauses from the Federal antitrust laws, and to extend the exemption for State fair-trade laws in certain other ways.

The central question posed by this act, therefore, is whether the limitations on competition that are established under the State fair-trade laws should be given the sanction of Federal law.

The main reason given for enacting the State fair-trade laws is to prevent some merchants from selling branded items at very low prices (often below cost) in order to drive other merchants out of business, or in order to attract customers who are then sold other items on which high prices are charged. There is no doubt that such practices exist, and that the fair-trade laws prevent them to some extent. This is the reason that the State fair-trade laws, and H.R. 5767, have such strong support among small and independent businessmen--particularly druggists, and hardware and appliance merchants-who fear they cannot survive against such unfair competitive practices.

At the same time, there is no doubt that the fair-trade laws also have the effect of removing some competitive forces which otherwise would operate to help keep prices down. Under the fair-trade laws, retailers cannot compete with each other by reducing the price of branded products, even where such reductions may reflect greater efficiency by one retailer as compared to another. Furthermore, the operation of the fair-trade laws in the past has on occasion been used as a cloak for unlawful conspiracies among retailers, wholesalers, and manufacturers-conspiracies which have gone much further in eliminating competition than the fair-trade laws actually permit. These are the reasons why so many economists, lawyers, and consumer groups oppose fair-trade laws, on the grounds that they eliminate too much of the vigorous, effective competition among sellers which should exist in our free enterprise system.

I believe that the effects of this legislation have been somewhat exaggerated by both sides. I do not believe that the fair-trade laws are as harmful to competition as some have asserted. There are and will be strong competitive forces among manufacturers, wholesalers, and retailers even with the fair-trade laws in effect.

At the same time, it is clear that fair-trade laws are no cure-all for the problems of small retailers. While the fair-trade laws protect him against some types of cutthroat competition, the local independent merchant will continue to have to offer better and more convenient service, and to sell at reasonable prices, if he is to survive against the legitimate and keen competition of such modern advances in the retail field as the supermarket, the mail-order house, and the branch department store.

I have signed this act because it does have value in eliminating certain unfair competitive practices, and thereby will help small businessmen to stay in business--which I believe is a healthy thing for our economy and our society.

At the same time, I believe the fair-trade laws do remove some competitive forces which should be retained in our progressive free enterprise economy.

Accordingly, I believe we have not yet found the best solution for the problem this legislation is intended to solve, and I urge the Congress to make a thorough investigation of this field, including not only the fair-trade laws, but the related problems of price discrimination and antitrust policy. I note that in the course of the debate on H.R. 5767, Senator Humphrey indicated that he would propose an investigation of this field at the next session of Congress. I hope very much that such an investigation will be undertaken, so that we may have a fresh and thorough review of the means for maintaining fair and vigorous competition in our economy.