productive resources and prevents the full utilization of productive capacity. It obstructs adjustment to economic change and contributes to general industrial instability. Concentration blocks the possibility of improving the standard of living by failing fully to develop technological innovations. It attempts to control and limit technical experimentation and to withhold the benefits of increased production from workers and consumers, thus aggravating inequalities in the distribution of income. Finally, concentration of political power, with the result that small groups of powerful interests control the State and National political life. Industrial concentration thus inevitably comes to be paralleled by the concentration of political power in the hands of a small but powerful minority. Symptomatic of these evils of concentration are examples of the inflexibility of prices in concentrated industries, the deliberate deterioration of quality standards, and the withholding of technological advances from public use. In closing, I would like again to commend you for undertaking these hearings and to assure you and the other members of the committee of my continuing interest, not only in the problems which you are studying, but the testimony that you will be receiving in the months ahead and the report that the full House Small Business Committee will act upon later during this Congress. Thank you very much, gentlemen. Mr. DINGELL. Mr. Chairman, the committee is indeed grateful to you for your presence this morning. As you well recall, your son and I had the privilege of growing up together. We used to hunt squirrels together, and I had the privilege of knowing you, both as a boy and man. This is something which I regard as a great and high honor and that I have greatly cherished and enjoyed. I was wondering if you might wish to direct your comments briefly to some problems relating to Robinson-Patman, both from the standpoint of the fact that it is no longer a portion of the antitrust laws for purposes of litigation by the small businessman, and also perhaps dealing with the fact Mr. PATMAN. That is section 3. Mr. PATMAN. Yes, the Borah amendment. Mr. DINGELL (continuing). And also, unfortunately, the fact that the courts have chosen to erode rather substantially the impact of that particular legislation through a series of decisions which have allowed some defenses dealing with good-faith meeting of competition. I was wondering if you would like to make some comments. Mr. PATMAN. I don't want to go into the details because you will have witnesses who are well informed on that, but the object and intention of the law I think everybody agrees are good. Possibly loopholes have developed, I don't know. I know probably some have, but they can be cured. They can be corrected. The idea is not to permit further erosion of the act if it has eroded but to correct those loopholes and those inadequacies where they do occur, and bring it back to the "Magna Carta" of business, the "Golden Rule" of business, to help the little man, and it doesn't hurt the big man. It is just fair competition for all. Mr. DINGELL. The function of it very simply would be really to assure that the little man can compete. Mr. PATMAN. Yes, sir. Mr. DINGELL. In the same way that the big man can when he purchases under the same conditions the same volumes of goods. Mr. PATMAN. Yes, sir. Mr. DINGELL. That he can then achieve the same benefits of the purchases as can the large competitor who has the tremendous economic advantages inherent in his own size. Am I correct, Mr. Chairman? Mr. PATMAN. You put your finger on it. Now, really, a wholesale merchant in my hometown started this idea. He said: If I buy one carload of merchandise from St. Louis, I pay the same cost per car on that one car as I would if I ordered 10 cars or 100 cars. In other words, exactly the same amount if I buy that much in quantity. Therefore, if I get freight rates according to that, why shouldn't I get purchasing power in the same way from industry? If I can't use a carload, of course I have to pay a larger price. But if I can buy a carload, I should have it at the same price as the big man who buys a carload. That was the germ of the idea that started on the road and it finally became the Robinson-Patman Act. At one time in the House, a carload provision was written into the bill. Mr. DINGELL. Thank you very much, Mr. Chairman. Counsel? Mr. WILLIAMS. No questions, thank you. Mr. DINGELL. Mr. Chairman, we are honored and privileged that you came here. You have contributed vitally to the cause of small business, and in the Robinson-Patman Act you have provided perhaps the basis for small business' continued existence in this country. The committee is indeed grateful to you for your presence this morning. Mr. PATMAN. Thank you very much, sir. Mr. DINGELL. The Chair notes that we now have two other witnesses. Mr. Kintner, the Chair is indeed happy to welcome you. I recall with great affection your distinguished service as Chairman of the Federal Trade Commission, and I am pleased to see that you have become counsel to the National Association of Retail Druggists. It is the hope of the Chair that your presence there might moderate some differences that have existed in the past between the present occupant of the chair and that very fine organization. The committee is certainly privileged to welcome you for whatever statement and whatever help you choose to give this committee today. TESTIMONY OF EARL W. KINTNER, WASHINGTON COUNSEL FOR NATIONAL ASSOCIATION OF RETAIL DRUGGISTS; ACCOMPANIED BY JACK L. LAHR AND LAWRENCE F. HENNEBERGER Mr. KINTNER. Thank you, Mr. Chairman. I appear here today in my capacity as Washington counsel to the National Association of Retail Druggists. NARD expresses its appreciation for this opportunity to appear here today. I would like before I present my prepared statement, with the Chair's indulgence, to comment briefly upon some of the philosophy which Mr. Patman expressed here with respect to small business. Mr. DINGELL. That would be most appropriate. Mr. KINTNER. Mr. Chairman, I am accompanied by Mr. Jack L. Lahr, associate in my office, who works with me on drug industry matters, and also in the room is Mr. Lawrence F. Henneberger. Mr. DINGELL. They may join you at the table if you wish. Mr. KINTNER. Mr. Henneberger began studying to become a pharmacist and actually lectured in a pharmacy school while he was going to law school, but became an antitrust lawyer instead, which is very fortunate for our firm. He is from my hometown in Indiana. We are very proud to have him in our firm. I was greatly moved by the statement that Mr. Patman made concerning the absolute necessity of preserving small business in this country. I thoroughly agree with him that the best shield that large- and medium-size business has in this country is small business. I think that if small business disappears, and it is suffering to a great extent today, and disappearing to some extent, that large- and medium-size business will suffer in the future. I think that the surest way to preserve capitalistic free enterprise is to preserve small business, and I am sure that the Robinson-Patman Act is an absolute essential to preserve small business in this country, and that it is to the interest of large- and medium-size business that there be a strong enforcement program with respect to the Robinson-Patman Act. I realize that this act has been much maligned, and I suppose that I am one of the few members of the antitrust bar in private practice who has steadfastly defended the objectives and the purposes of the Robinson-Patman Act. I make no apology, Mr. Chairman, for this defense of the act. During my years as a trial attorney, and then General Counsel and Chairman of the Trade Commission, I became convinced that this was a good law, that it was good for all business, not just small business, that it was right and just and in the public interest that there be a measure of equality in the market place which the Robinson-Patman Act is designed to insure. I believe that there should be always a strong enforcement program at the Federal Trade Commission. I realize that there are difficulties presented by the Robinson-Patman Act. It was not the most elegantly drafted law. Many of these laws are not elegantly drafted because they become in the legislative process creatures of compromise, as you know from experience, Mr. Chairman, but the law basically was right, and its objectives were right. well I am convinced that if we were to repeal the Robinson-Patman Act tomorrow, there would have to be another such act adopted by the Congress and placed in its stead. Mr. DINGELL. Would you yield at that point. Wouldn't it be fair to say that even though it may not perhaps be elegant in its language, it might have some highly technical and linguistic difficulties which could be corrected and that, with good administration, the obstacles to good law enforcement would be very small? Mr. KINTNER. Yes, sir; and some of the case law at the Trade Commission, since I served there, has, I think, gone a long way in developing practical interpretations of the Robinson-Patman law with which businessmen-large, medium size and small-can live. I particularly applaud the Commission for its approach in the Fred Meyer case, a case that is now before the Supreme Court. I think this is a realistic approach. I wish that it could have been adopted when I was at the Trade Commission. I wish that I could have thought of this approach. I think it makes very good sense. I therefore applaud the Trade Commission for its forays into enforcement which lead to practical interpretations of the law. I think this law is susceptible of practical interpretation which will carry out its basic objectives. I counsel businessmen, large and small, and I am convinced, based upon my experience of 13 years at the Trade Commission, and 6 years since in private practice in this field, that it is possible for any businessman who wishes to comply with the Robinson-Patman Act to do so, and still make a good profit, whether he is large or small. I repeat, that I think this law is one of the principal shields that protects capitalistic free enterprise, both with respect to large and small business, and I agree with Mr. Patman that if we ever reach the point where we have a few large businesses in most of our industries, that we are inviting either takeover from the extreme right or takeover from the extreme left, and I don't want that for my country in the future. I apologize for launching out on this, Mr. Chairman, this line of discussion-but it is something that I feel very strongly about. Mr. DINGELL. Quite the contrary, Mr. Kintner, I think that the fundamental philosophy behind Robinson-Patman and its great value to our society and economy is an extremely important part of the proceeding that we are now engaged in. It occurs to me that without this kind of underpinning, it will be very difficult for the committee to make an intelligent appraisal of the administration of Robinson-Patman insofar as the particular kinds of problems that the committee has before it today are concerned. The Chair wishes to note that we have a number of guests in the room from the Tennessee Conference U.N. Washington Seminar of the Methodist Youth Fellowship. I believe these young people are from the district of our distinguished chairman. Would you stand so that we may acknowledge your presence, please. (Discussion off the record.) Mr. DINGELL. You certainly have a distinguished Member of Congress of whom we are very proud indeed. Thank you very much, Mr. Kintner. Mr. KINTNER. Mr. Chairman, if I may now present my formal statement-NARD is a trade association representing some 36,000 independent retail druggists in virtually every trading area of the United States. These association members are at once highly educated and trained professionals and small business owners. NARD members are licensed under State laws to dispense pharmaceutical preparations. They commonly sell a wide variety of proprietary drug products, sundries, health and beauty aids, and other "up-front" convenience products which the neighborhood druggists have traditionally sold in the community. There are clear indications that the independent retail druggists of America have declined in number and relative economic significance during the 1960's. Government statistical sources show that the total sales of the retail drugstore business in the United States amounted to about $8.4 billion in 1962, and sales are estimated to have been around $10 billion in 1966.2 Prescription drugs in 1966 were estimated to amount to 30 percent of total drugstore volume. While Govern 1"Statistics of Income, U.S. Business Tax Returns for 1962," Internal Revenue Service (herein "IRS statistics"). American Druggist, Mar, 13, 1967, p. 17; the total 1965 drugstore sales was estimated to be $9.3 billion. American Druggist, Mar. 14, 1966, p. 13. * Id., Mar. 13, 1967, ed. at p. 12. 78-783-67-vol. I- 2 ment statistics do not separate independent retail druggists from their chainstore competitors, available data shows that in 1962 there were about 41,800 drugstores in the United States operating as sole proprietorships and partnerships. The 1962 sales of this class was about $4.1 billion, slightly less than one-half of the total retail drug industry sales. The number of sole proprietorships and partnerships actually declined from 41,800 in 1962 to 38,400 in 1964, which is a decrease of about 8.2 percent. Total sales of this same class also decreased during this 2-year period by approximately 10 percent, from $4.1 billion in 1962 to $3.6 billion in 1964. While a number of factors probably contribute to this decline, NARD attributes a significant cause of this decline to the small independent retail druggists' adverse competitive position versus their economically more powerful chainstore competitors and suppliers. As the committee is aware, price discrimination practices operate to the competitive disadvantage of this class of American business, and the Robinson-Patman Act of 1936 was designed to mitigate the anticompetitive effects of such price discrimination practices. During the 1960's the Federal Trade Commission has shifted emphasis away from formal litigative processes to enforce the RobinsonPatman Act to programs emphasizing education and voluntary compliance. Indeed, the FTC deserves to be commended for its enlightened industrywide voluntary compliance efforts, its ambitious advisory opinion program, and efforts toward better Federal-State cooperation in many areas of gray-area jurisdiction. However, I am convinced that these splendid programs will be effective only to the extent that they are accompanied by a hard-hitting enforcement program directed at the minority of violators who refuse to comply voluntarily with the antitrust laws. NARD is committed to the principle of strong and vigorous enforcement of our Federal laws prohibiting price discrimination practices. In this connection, I should like to discuss a specific problem area where NARD believes Robinson-Patman abuses are serious, and where more vigorous enforcement by the Federal Trade Commission is in the public interest. Generally, this problem area involves drug suppliers granting discriminatory price concessions to institutional purchasers, when these drugs are then resold in direct competition with the disfavored class of competition, retail druggists, to the latter's competitive injury. As we shall see, the Robinson-Patman Act in no way prohibits the institutional purchaser from reselling prescription drugs in competition with retail druggists, but only operates to insure fairness and equality with respect to the prices paid by the institution for those competing drugs. I. Institutional drug dispensing to outpatients and nonpatients is big business. A 1964 report of the American Society of Hospital Pharmacists, conducted under a grant from the Public Health Service, offers interesting information." During the survey period, about 64 percent of the Nation's hospitals provided prescriptions for nonhospitalized patients. About 50 per Data compiled from IRS statistics, supra note 1. Act of June 19, 1936, c. 592, 49 Stat. 1526, 15 U.S.C. sec. 13. See generally 1965 FTC Annual Report, pp. 22-23; 1966 FTC Annual Report, pp. 22-26. Mirror to Hospital Pharmacy, pp. 117-120 (ASHP, 1964). |