us about price discrimination. He told us about unfair competition. He told us about defaming competitors, selling below costs, and I think that everyone in this room knows that in those few sentences there was the root of the trouble that our industry contends with and has contended with over a period of years. Of course, there is one thing that Mr. Snow didn't know. He doesn't know the leather finders. They didn't have to wait until business got back to normal to cut prices. It is part of the habits that the finders have gotten into over a period of years. So, you see, to us this proposition is a rather simple promise. Supposing that as a result of the trade-practice conference we stop a lot of the evils that exist in the industry. Let's say as a result of that, it costs the consumer a couple of cents more for a shoe-repair job. So what? Is there anything wrong about that? Do we have to live on vicious practices in order to keep our prices down?

If we write our rules and those rules bring us more profit, that is all we are interested in. If the price happens to go up, it goes up. If it happens to go down, it goes down. You see, there are other things that are involved in this also.

That is the point I took exception to. We have shoe manufacturers who, the minute shoe repairing gets too high, up went the price, and when the shoe repairers got their prices so high, that is when the chains got in and started their business. Mr. Kotin criticizes me. I want you to hear why I opposed-and this is written here as a matter of record.

You have just heard from two good salesmen who sell law. I would like to have you listen to my views now as just a mediocre fellow who sells leather and shoe findings. I am not going to expound the advisability of this meeting. I am not going to try to sell the Federal Trade Commission. I am not going to try and sell against it.

"We are arguing for something here for which there is no out. I would rather be in a position if we are to have a code of ethics, a Federal Trade Commission code of ethics or any other code of ethics-I would rather face this thing in a year or 2 or 5 or 10 years from now. I would rather do that than "Here, you asked for it, now you have to live with it."

I don't think our national association has any right to say to the Federal Trade Commission on behalf of the findings industry, "We want a code of ethics." We have no right to do that. We are only part of the industry. What right have we to commit an entire industry to something of which we are a small segment?

There are more finders who are not members of the national association than who are members of the national.

I say, if the Federal Trade Commission wants thiş meeting, we should accept it, we should be represented. We should try to put our views in that code of ethics if we are going to have it. That is going to serve the industry best, not the national, but the industry best. But I don't think we should stick our necks in the noose and say pull. Therefore, I do not think we should vote on that motion today without giving the industry a chance to pass on it.

Then I went on further to say, why not send a questionnaire to the industry and let them decide. If more than 50 percent say that they want a code of ethics, I am for it.

To prove to you my views on that and to substantiate my views, the question was called for, the question put, and the president stated that the vote was 25 for the motion and 35 against the motion. That means there were 60 voting members present. I do not think 60 voting members out of 800 to a thousand members have the moral right to take any action which was to give us a code. That is why I opposed it. Mr. BALLINGER. Was the motion voted down?

Mr. LEVEY. Yes, certainly, and I am thankful it was. But that is not based on the Robinson-Patman Act. It has a bearing only on the code of ethics for the industry.

Mr. BALLINGER. You do not think 60 members ought to have the power to commit your industry?

Mr. LEVEY. I do not. I do not think it is the democratic way. Mr. BALLINGER. Why not send out a questionnaire and ask the absent members what they thought about it?

Mr. LEVEY. Because the association only has 300 members out of a thousand.

Mr. BALLINGER. You say that is a proper subject for the association, yet you voted down the motion. Why didn't you consult the other 348 members as to whether they wanted a Federal trade conference or not?

Mr. LEVEY. I say that the association also has not the right to ask for a controlling law or a code of ethics for the industry when there are some finders in the United States who are not members of the association, as a matter of fact, more out than there are in the association; therefore, I said if somebody will take it upon himself to send out a questionnaire to the entire industry at large, association members and nonassociation members, if more than 50 percent of them say, "Yes, we want a code of ethics," I would join with them in endorsing it and do everything in my power to live up to it.

Mr. BALLINGER. There is no other national association of leather finders except this one?

Mr. LEVEY. No.

Mr. BALLINGER. This is the only trade association in the field?

Mr. LEVEY. No; there are several.

Mr. BALLINGER. They are local ones?
Mr. LEVEY. There is a regional group.

Mr. BALLINGER. Not national.

Mr. LEVEY. One in New York, covering the New England cities. There is the Wisconsin group, and others. You see, there is another angle to this that I want no part of and that is, knowing this findings industry, and knowing what happened under ÓPA, and in talking to other finders in Chicago, they are not anxious for a code of ethics because they think it is going to improve the industry, they are anxious for a code of ethics because they think it will insure them getting a minimum margin of profit and that minimum margin of profit will be helpful. I do not think the laws of the United States want to back that up.

Mr. BALLINGER. Any trade-practice program would have the power to impose a minimum.

Mr. LEVEY. I think before the industry at large considers this matter of a code of ethics, it should be presented clearly and truly showing what it can do and what it cannot do. It was clearly said no code of ethics can put a floor on profits percentagewise. I dare say that the Chicago group would want a code of ethics

Mr. BALLINGER. Would or would not?

Mr. LEVEY. I would gamble on that. If you gentlemen went to Chicago and conducted a similar meeting that you are conducting here, if you gentlemen wanted to go to Chicago and call the finders one by one, like you are doing here, and let them tell you how they happened to be in this picture, going back to NRA days and building up the whole story and see why they are for this program, I think it would be a very enlightening situation that would take care of some laws other than the Robinson-Patman Act.

Mr. BALLINGER. If you think they have the impression, that is, these finders, that a trade conference would impose a minimum mark

up, and you find that is not the case, why did you not inform your association of that fact?

Mr. LEVEY. Frankly, I have been the Good Samaritan of the association, I have been put on the pan today probably because I was courageous enough to speak my mind when others were not. Crudely speaking, is there any reason why I should stick my neck out all the time?

Chairman PLOESER. Of course not. That is entirely your privilege. Mr. LEVEY. Anything else I can tell you?

Chairman PLOESER. May I say to both of you gentlemen, if you care to you may prepare further statements for the record. There seems to be quite a difference of opinion between the two of you. If you want to extend your statements, you have the privilege of doing so. I would like to have you do that within the next 10 days if you care to.

Mr. LEVEY. I might. I think I have told you everything I know. Mr. BALLINGER. Would you care to supplement your statement, Mr. Kotin?

Mr. KOTIN. I may. I will discuss it further.

Chairman PLOESER. It will be the privilege of both of you.

Is that the proceedings of the convention?

Mr. LEVEY. Yes, sir.

Chairman PLOESER. Why can't you give it to us?

Mr. KOTIN. May I say that is not the full discussion that took place. Those are excerpts of the discussion, so do not think you are getting everything.

Chairman PLOESER. Mr. Levey did not say that.

Mr. LEVEY. I happen to say it is. There was a stenographer taking every word that was said there. There was not a thing deleted. Mr. KOTIN. Three-quarters of my talk was out.

Mr. LEVEY. I did not read your whole talk.

Mr. KOTIN. That is what I said.

Mr. LEVEY. But it is in there.

Mr. KOTIN. I merely said that it was not all in there. That is all I stated.

Mr. LEVEY. I say it is all in there but I did not read it all. I do not care to take the time of the committee to do that.

(Witness excused.)

Chairman PLOESER. Before we take up another witness I want to introduce the Honorable Karl Stefan, who is one of our most distinguished Members of Congress. He represents an adjoining district here in the State of Nebraska.

A little earlier we had the Honorable Howard Buffett, who represents this district and some adjoining territory, I believe, to the south. In all of our problems which relate to small business I want to say to both of these gentlemen that we have very strong help from them in particular. They have demonstrated time after time their interest. in small business and whenever it is necessary for our committee to go to Mr. Stefan's Committee on Appropriations and ask for help, we get it. The same is true of the Banking and Currency Committee of Mr. Buffett. This is all very important, because we are not a legislative committee; we are merely a study committee; so we have to go begging after we make up our minds to get somebody else to do it. It is very important therefore that we have friends in the Congress.

Your chairman is going to be compelled to take a plane about the middle of the afternoon, and when the afternoon sessions opens up at 1:30 Mr. Buffett will be back and as a courtesy to the committee and out of respect for his representation from this district, we have asked Mr. Buffett to preside for the afternoon. He has agreed to do so. I think you will find a much better presiding officer after 2:30.

In the meantime I would like Mr. Ballinger to tell us how many witnesses he expects to get in by 12 o'clock.

Mr. BALLINGER. I have the assistant attorney general of the State and three more witnesses.

TESTIMONY OF BERT L. OVERCASH, ASSISTANT ATTORNEY GENERAL OF THE STATE OF NEBRASKA

(The witness was duly sworn and testified as follows:)

Mr. BALLINGER. State your name.

Mr. OVERCASH. Bert L. Overcash.

Mr. BALLINGER. What is your position?

Mr. OVERCASH. Assistant attorney general of the State of Nebraska; Lincoln, Nebr.

Mr. BALLINGER. Do you have in this State what is commonly called an Unfair Trade Practices Act?

Mr. OVERCASH. We have a law called an Unfair Sales Act.

Mr. BALLINGER. The purpose of which is to prevent selling below cost?

Mr. OVERCASH. That is right.

Mr. BALLINGER. When was this law enacted?

Mr. OVERCASH. Well, the present law was enacted in 1943.

Mr. BALLINGER. You say the present law. Was there a predecessor law?

Mr. OVERCASH. Yes, sir. In 1937 we had a similar law, but it was held unconstitutional by our supreme court.

Mr. BALLINGER. How long did it last-from 1937 until when?
Mr. OVERCASH. About a year, I would say.

Mr. BALLINGER. When this existing law was passed, could you tell the committee what group sponsored it in the State?

Mr. OVERCASH. I am not sure that I know, but I believe it was largely the retailers' organization.

Mr. BALLINGER. The retail grocers' organization?

Mr. OVERCASH. I would not say whether it was the grocers or not. Mr. BALLINGER. The retail organizations in general?

Mr. OVERCASH. Yes, sir.

Mr. BALLINGER. Would you briefly describe this act?

Mr. OVERCASH. The present act is a very short law. It prohibits sales below cost and cost is either actual cost or replacement.

Mr. BALLINGER. Whichever is what?

Mr. OVERCASH. Whichever is lower. It has a provision that in the absence of other proof, 6 percent is deemed to be the cost of doing business.

Mr. BALLINGER. At the retail or wholesale level?

Mr. OVERCASH. Both. No; the wholesale is different. Six at retail. Wholesale, I believe, is 2 percent.

Mr.BALLINGER. It is 2 percent mark-up at the wholesale level and 6 percent mark-up at the retail level?

Mr. OVERCASH. That is right. The act prohibits selling below cost with the intent of or effect of inducing the purchase of other merchandise, or of unfairly diverting trade of a competitor or otherwise injuring a competitor, impair and prevent fair competition, where the result is to deceive a purchaser or to substantially lessen competition. Mr. BALLINGER. Is that aimed at these so-called loss leaders?

Mr. OVERCASH. I think it is, but not so much as the earlier act which was thrown out by the court.

Mr. BALLINGER. Why was the earlier law declared unconstitutional? Mr. OVERCASH. The earlier act was a stricter act. It had criminal provisions and penalties in it. It prohibited the sales below cost without regard to the proof of definite intention and the act was also indefinite in that you did not have to establish a lessening of competition, but if it may have that effect, why, the act applied. The court held that violated the bill of rights of our State constitution.

Mr. BALLINGER. In what respect?

Mr. OVERCASH. Freedom of contract.

Mr. BALLINGER. So this new law is a weaker law?

Mr. OVERCASH. It is definitely a weaker law.

Mr. BALLINGER. What penalties does the existing law provide for infractions?

Mr. OVERCASH. There are no penalties whatever in the new law and the State has no responsibility to enforce it. All that the new law does is to give the person damaged a right of action in court.

Mr. BALLINGER. The right to sue for civil damages?

Mr. OVERCASH. They are entitled to sue in any court of competent jurisdiction against any damage or threatened loss or injury by reason of a violation, presumably by injunction, although the courts have not determined yet what it does mean.

I may say that under the new law there has been one action as a test of the constitutionality of the new law. The district court has upheld the act and that is pending in the Supreme Court. Under our law, whenever an act is challenged, the attorney general has to appear.

Mr. BALLINGER. Under this law here a grocer can come in and ask for an injunction against a competitor?

Mr. OVERCASH. Yes; provided the provisions of the act are satisfied. In the particular case that was brought, it involved the wholesale tobacco industry. The plaintiff alleged that the defendant was selling tobacco at $1.62 a carton that cost him $1.65 with the intention of destroying competition.

Mr. BALLINGER. Under this act, Mr. Overcash, if a chain store operating in this State also owns manufacturing plants, and if it ships goods into this State to those stores here at cost, there is no provision in this act requiring them to make any mark-up on that?

Mr. OVERCASH. There is no particular provision in this act dealing with that situation. That would be a matter of construction under the general language and I would not want to say.

Mr. BALLINGER. In other words, the manufacturer who supposedly might sell below cost to the distributing store could add a 6 percent mark-up as required by law, but it would still be below cost?

Mr. ÖVERCASH. I think that might happen.

Mr. BALLINGER. It does not close that loophole. That loophole appears in all these unfair sales acts.