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sales prices are undercut by someone
else, he often gives vent to expressions
of moral indignations and mutterings
about unfair trade practices.
An instance which is relatively recent
is a price reduction which was made by
a manufacturer in the carpet industry.
This reduction was precipitated by re-
duced sales, but immediately drew the
fire of other carpet manufacturers who
branded the action as "cheap, mislead-
ing, price cutting" and charged that
competition threatened the trade with
""chaos."
Fair Trade Pricing
Free enterprise is championed by
everyone until a toe gets tramped on, at
which time its owner yells blody murder
and wants somebody to protect him. A
form of this protection is what is known
as "fair trade pricing." Fair trade pric-
ing is legalized price fixing under fed-
eral law and in 44 of the 48 states. Like
everything, fair trading has its price
too. The price of fair trading is the fix-
ing of your retail margin. You gel
your price for getting the manufactur-
ers' price and there is no flexibility to
it. I hold no brief for or against fair
trade pricing and NAMM has never tak-
en any position on the subject for it is a
manufacturers' problem, and whether
retailers like it or don't like it, is of
very little consequence. In my opinion
fair trading's greatest weakness is the
inability or disinterest of many manu-
facturers to police their fair trade agree-
ments once they have been made. Un-
questionably fair traded items have a
snob appeal, but beyond that I can de-
tect very little value. Certainly, fair
traded merchandise has never carried
the assurance that you can stay in busi-
ness more profitably by maintaining a
store of fair traded products. What you
should be able to logically expect from
such an enterprise would be reasonable
protection which some merchants etern-
ally seek. In practice, however, you are
subject to more restriction than protec-
tion. So much for fair trade pricing.
Its merits and demerits can be argued
ad infi 11 iturn, in both theory and prac-
tice.
In February of 1944, the NAMM in
concert with other industry associations
subscribed to and joined in the promul-
gation of the Trade Practice Rules for
the Musical Instrument and Accessories
Industry, issued by the Federal Trade
Commission. This industry Trade Prac-
tice Committee has its headquarters in
Cleveland, Ohio; and is supported by
voluntary contributions from through-
out our industry. Individual retailers
contribute money to its support as does
the NAMM and other associations. The
chairman of NAMM's Trade Practice
Committee represents your association
as a member of the industry committee.
I believe that these two facts: first
NAMM's contribution to the industry
committee, and second, the integration
of the NAMM committee with the in-
dustry group, is irrefutable evidence
that NAMM is interested in trade prac-
tices, and does contribute wore than lip
service, contrary to the erroneous opin-
ion of some who cherish misbelief nwre
than understanding.
Trade Practice Rules
The trade practice rules established
for the industry by the Federal Trade
Commission are published in a booklet,
a copy of which is available to any
member upon request. Here is what
this booklet says about the Rules and
which should be well remembered by
everyone:
"These rules promulgated by tin-
Commission are designed to foster
and promote the maintenance of
fair competitive practices in har-
mony with law and the public in-
terest. They are not to be used,
directly or indirectly, as a part of.
or in conjunction with, any unlaw-
ful combination or agreement to fix
prices, or to suppress competition,
or otherwise to restrain trade."
This preamble to the 17 trade prac-
tice rules recognizes that even this in-
strument, designed to "foster and pro-
mote . . . fair competitive practices."
has within it the seeds of abuse against
which it warns in the second paragraph,
by the phrase, "they (the rules) are not
to be used . . . to suppress competition,
or otherwise to restrain trade."
These rules recognize the basic weak-
ness in man and seek to set up stand-
ards of lawful business behavior. Were
it not for the basic weaknesses in man
these rules would not be necessary.
Even with them we must recognize that
they are not a "cure-all." They will not
of themselves cure unfair trade practices
—but if used properly the rules will
curb malpractices, and act to discourage
improper behavior. You cannot legis-
late goodness—laws are for guidance,
but so long as there are people, the
human element must be recognized,
standards erected and violators pun-
ished.
Unfair Competition a Problem
Unfair competition is a
problem.
That is the only all inclusive term that
to me, defines unfair competition—"«
problem." There are many forms in
which this problem appears. Not all
forms of unfair competition are illegal,
and in fact some forms of unfair com-
petition can be perfectly legal in one
state and illegal in another. Other
forms of unfair trade practices may be
legal in inlrastate commerce, but will
run afoul of federal laws under inter-
state commerce. As an example: a Phil-
adelphia retailer sued a manufacturer in
the same city for $50.000 damages and
an injunction under the Hobinson-Pat-
nam Act charging the defendant com-
pany was committing unfair competi-
tion in efforts to drive him out of busi-
ness. The Federal Court held it is not
a violation of the Hobinson-Patnam Act
for a manufacturer in interstate com-
merce' to oiler his goods to retailers at
prices lower than he charges his whole-
salers to drive a competitor out of busi-
ness, if the transactions are wholly with-
in a state. Had the retailer been en-
gaged in interstate commerce, the ver-
dict would have been a different one.
Under the existing laws governing
fair trade practices, there are courses
of action and activities that can be en-
gaged in by local, or state groups and
organizations, but in which a national
group such as NAMM may not partici-
pate. There are other activities which
cannot be undertaken by two or more
persons or organized groups. Any ac-
tion contemplated or taken by one or
more persons should be cleared by
competent legal talent and supervised
by legal authority from beginning to
end, otherwise you can precipitate far
more difficulty for yourself, than the
original ill which you sought to over-
come.
Competition is legally unfair when-
ever it violates one of the 17 rules in
Croup I of the Trade Practice Rules. I
shall not enumerate these rules at this
time for we are not concerned al the
moment with specifics. They are listed
in the rules book.
What Unfair Competition
Constitutes
Let us bear in mind that the term
"Unfair Competition," has a legal def-
inition. That definition is determined
by law. You may regard a certain act
as unfair competition, but that does not
make it so. What may be regarded as
unfair by one person's standards may
be perfectly fair by another's. Therefore
the same laws that protect your com-
petitor from loose charges also protects
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THE MUSIC TRADE REVIEW, FEBRUARY, 1954