simplify and expedite your duties. Otherwise it is going to greatly multiply your duties. Is that right or wrong? Mr. DIXON. I think your first premise is correct. It will not be easy, certainly to enter this broad field and perform these requirements, but somewhere, sometime, they will be performed if the law is passed. Once that time is reached, Senator, the job will be much simpler than it is now. It will be much easier to understand and basically much fairer, in my opinion. I know and have a great deal of sympathy for the fears that I believe that some of the businessmen that will appear here will express. They will say this just simply falls in the area of foolishness and in a sense that the consumer is a lot smarter than you characterize them and you ought to let them alone, that this is competition, this is what competition is about, and you ought to not go too far because you will kill the goose that lays the golden eggs. But I decipher this need predicated upon hearings that I have read that were held here in this Congress, and I think there is justification for the bill. I think if it is properly administered it will bring a great deal of order out of chaos, and I think that basically when it is all over industry will find it is not near as bad for them as they thought it was. Senator COTTON. I have just one more question, Mr. Chairman, and I thank you for your patience with me and for the very fair and full answers you have given me. I have some other responsibilities besides membership on this committee. I happen to be a member of the Appropriations Committee and a member of the subcommittee of the Appropriations Committee that deals with the appropriations for your Commission. Now, I have studied this bill. You have considered and studied it and testified regarding its administration if it becomes law. You have said that it would require some additional staff. From your studies of the bill and from your experience and your knowledge, will you give me a general estimate of how many more people you are going to need and how much more money you are going to have to have if we pass this bill, if this bill is passed into law? Mr. DIXON. May I supply this in the record at this point, sir? Senator COTTON. Certainly. Mr. DIXON. I would be willing to, but I would rather listen to some of these staff people before I do it. Senator COTTON. Thank you very much. That is all, Madam Chairman. Senator NEUBERGER. Thank you. (Mr. Dixon subsequently furnished requested information.) FEDERAL TRADE COMMISSION, Hon. WARREN G. MAGNUSON, U.S. Senate, Washington, D.C. DEAR MR. CHAIRMAN: At the hearing on April 29, regarding the so-called fair packaging and labeling bill, S. 985, Senator Cotton asked that the Commission furnish an estimate of the cost of administering the bill should it be enacted into law. Assuming that the various affected industries afford maximum cooperation in developing regulations and educating their members in their responsibilities thereunder, it is estimated that additional funds in the amount of $1 million per year would be required to administer the provisions of the bill, if the Commission were the sole administering agency; $250,000 if it were not responsible for the packaging and labeling of food, drugs, devices, and cosmetics. These estimates are based upon a need for 100 or 25 additional personnel, respectively. With best wishes, I am, Sincerely, PAUL RAND DIXON, Chairman. Our next witness will be Mr. Max Banzhaf, who will speak for the Chamber of Commerce of the United States. Mr. Banzhaf, do you wish to introduce your associates? STATEMENT OF MAX BANZHAF, VICE PRESIDENT, ARMSTRONG CORK CO., ON BEHALF OF CHAMBER OF COMMERCE OF THE UNITED STATES; ACCOMPANIED BY FRED BYSET, ATTORNEY, U.S. CHAMBER OF COMMERCE; AND WILLIAM F. NOBLE, ATTORNEY, ARMSTRONG CORK CO. Mr. BANZHAF. My name is Max Banzhaf. I am staff vice president of the Armstrong Cork Co. We manufacture resilient flooring and other building materials and industrial products and packaging materials. My company is a long-time member of the Chamber of Commerce of the United States, which is the Nation's largest business federation with more than 3,700 organizations members and more than 30,000 business members. A very large share of the latter are medium- and small-size businesses. Along with other Armstrong officials, I have been active in various chamber functions over the years. I am here today to present the national chamber's views on S. 985, the packaging and labeling controls bill. The formal brief has been submitted in advance and states in detail our views on the proposed legislation. To conserve your time, I intend now to present only a brief summary of it and comment on a few of the major points. Let me state at the outset that manufacturers of packagers' and consumer goods believe in serving the consumer. We wholeheartedly support the principle that the merchant should truthfully represent his wares, since this is morally and ethically sound and also good business. At the same time, we recognize that an orderly society in a complex world requires reasonable regulation and sanction against misleading, unfair, or deceptive business practices, where there are always a few who do not recognize the importance of ethical conduct, so that the question before you in considering S. 985 is whether present regulatory powers under the FTC Act and the Food, Drug, and Cosmetics Act are adequate to curb unfair or deceptive practices in today's marketplace. Our position is that the present regulatory powers of the FTC Act and FDC Act are adequate to the job and no new legislation is needed. We therefore oppose S. 985 for this reason, and also because its side. effects would increase production costs, raise consumer prices, retarding packaging improvements, and restrict the variety of choice in the marketplace. All these things would harm rather than help the consumer. Permit me to document briefly these points. The formal brief cites rulings and decisions that show clearly the FTC and FDA at present have power to cope with the type of consumer complaints that have been mentioned frequently by proponents of S. 985 as evidence of need for new law. A good deal of regulation on packaging and labeling already exists. FDA regulations, for example, set forth in detail the standard packaging of tuna fish. The regulation, in fact, occupies several pages. Title 21 of the Code of Federal Regulations covers not only labeling but also seasoning, forms of pack, packing media, color designations, and many other factors for this important food product. I have here a few of the definitions of standards concerning quality and fill of container which have been promulgated under the FDC Act and are now in existence. These cover such things as chocolate, cocoa products, cereal flours, macaroni and noodles, bakery products, milk, cheese, frozen desserts, shellfish, tuna, canned vegetables, and many others. Here is a phamplet entitled "Facts for Consumers-Food Standards," published by the Food and Drug Administration. This booklet was distributed with other literature to those who attended last year's four regional consumer conferences. It tells about the standards I have already mentioned, and on page 2 it says, and I quote This law applies to drugs and cosmetics as well as to foods. It is a complex law, but its fundamentals are simple. One way it operates is through the medium of a truthful label. The food label must tell what is in the package. It must not be false or misleading in any particular. Important court decisions have done much to explain this point. Labels which are literally true have been held to be misleading because of what they failed to tell the buyer, or because the product was not what the consumer expected when she selected it by its common or usual name. Products with false or misleading labeling are misbranded. Federal law prohibits the shipment of misbranded products across State lines. Commissioner Larrick of the FDA has testified with respect to a predecessor of S. 985 that his agency could deal adequately with packaging abuses provided the FDA had more funds. If we concede that there is considerable abuse, which we doubt, the need can be met by additional funds for more FDA policing of packaging and labeling rather than additional legislation. The FDA budget has been increased from $20 million in 1962 to $39 million in 1965 for salaries and expenses. Fifty million dollars for FDA salaries and expenses have been requested for fiscal 1966. The chamber is currently supporting increased funds for the FDA. Now let us turn to the equally important aspect of S. 985-how its side effects will harm consumers. First, consumers would lose the benefits of cents-off promotion, which would be prohibited by this bill. Surveys have repeatedly shown that legitimate promotions of this type are highly popular with consumers because they result in genuine savings. The unfair use of cents-off provisions, of course, should and could be prohibited by present law. To a smaller business firm, prohibition of all centsoff promotion would take away one of its most useful competitive devices. Quite often the small or marginal firm can afford this means of promoting its product, but it cannot afford the national advertising campaigns used by the larger companies. The cents-off promotion, in short, gives the smaller or new competitor a chance against large, well-established rivals. The second adverse side effect of the bill is that it would result in higher production costs and increase prices to the consumer, because many products have different densities. When packaged in a single size container, the weights are not uniform. Of course, packing in a single size container is done for reasons of economy. Let me cite an illustration. We produce glass jars for baby food in two basic sizes, one known as the strained size for small infants, the other the junior size for older children. Because of the varying densities for the foods packed in these jars, the net weights vary from food to food and are frequently in ounces and fractions. For instance, in the smaller size the jar of strained sweet potatoes contains 434 ounces and strained green beans 42 ounces. In the larger size, a jar of junior plums with tapioca is 8 ounces and vanilla custard pudding is 712 ounces. To require these foods to be packed in sizes of multiples of even ounces and/or in jars of equal product weight would necessitate many different sizes of containers, which would make them less convenient to handle and stack both in the supermarket and the home. In addition, the proliferation of many sizes of containers would increase costs to the consumer because of required production-line changes on the part of both container producer and the food packers. Consider the added cost through production loss during setup time in changing from one size of jar to another in order to have uniform weights for different density foods. In some instances new production machinery may be needed and additional factory space built to house it, which is most expensive. Third, the bill would curtail product variety in the marketplace. If the right to be different is taken away, if creativity in packaging innovation is outlawed through standardization and regulation, products that serve the public in new and better ways may well be kept off the market. Products offering new convenience, new enjoyment, new standards of service will appear less frequently. It must be remembered that many businesses start small, with a new innovator product. One of the chief means they have to become established against large firms is some dramatic packaging innovations. If the right to be different in the packaging is denied them, they may never get started and the product may never reach the consumer. So a key issue in this proposed legislation is whether or not its attempt to protect the consuming public is really in the public interest. No one, of course, could be opposed to insuring each consumer's opportunity for making rational comparisons, provided of course we know for certain what is a rational comparison for everyone. The danger comes in administering laws that attempt to accomplish this by requiring a centralized authority instead of free market to decide what is a rational comparison. For every one of the millions of consumers that make up our economy, what makes great sense to some people makes no sense to others. Furthermore, like an overly protective parent, a government inclined to insure the opportunity for rational choice will inevitably become unduly suspicious of every attempt to court its consuming public. The result would be to deny consumers the products or packaging they prefer, for we are inclined to forget that restrictions imposed on the action of the seller restrict the actions of the buyer equally and to the same extent. Since we now have laws which provide all the authority needed to protect the consuming public and honest businessmen from any form of deception, the only purpose S. 985 would serve would be to advise the regulatory agencies to become overly suspicious, overly zealous, and overly protective. The net effect of the bill then would be to deny segments of the consuming public the opportunity to buy what it wants in the form it wants it, and by a series of regulations the opportunity of manufacturers to serve the public with new and imaginative ways of packaging, and their incentive for doing so would be seriously reduced. The public and the economy would be the chief losers. To summarize, these undesirable side effects are real, not imaginary. Provisions of the bill would deny consumers the savings of cents-off promotions, take away a competitive tool of the small businessman, reduce product variety, cause increased production costs, and raise consumer prices. These effects would in our view seriously harm the consumer rather than protect or help him. This I am sure no one wants to do. Senator NEUBERGER. What are the benefits in these cents-off promotions that we have? Mr. BANZHAF. Lower prices. Senator NEUBERGER. This does not tell me what the lower price is, what it was before there was 5 cents off. How long does it have a cents-off label before that becomes the regular price? Mr. BANZHAF. Well, you are assuming, of course, I believe, that a cents-off label is a constant state of a particular commodity. I do not think that necessarily applies. I am well aware of many centsoff promotions that exist for a time to encourage people to try a new product. Then it is removed later on. Senator NEUBERGER. We are always hearing about the cost of revising machinery. This is printed on here. It is not just stuck on here. Obviously millions of these labels are printed. How long do we have to have this on here before it is amortized? When is the price going back up 5 cents is what the consumer wants to know. Long studies and watching of specific products find this becomes the permanent price, and the consumer is getting educated to understand that she does not benefit from a cents-off promotion. Mr. BANZHAF. Then is she harmed? Senator NEUBERGER. I think she is, yes; because she is led to believe that she is saving money when she is not. She paid the same price whether it says on it "cents off" or whether it does not. I think that it is very deceptive. I mean I think it would be quite a question about what benefit there is in a cents-off device. Your first statement on page 12 is that consumers would lose the benefit of price reductions under cents-off promotions. Mrs. Consumer does not agree with you. Mr. BANZHAF. Senator, I believe that there are many studies that show-good validated studies. that show the consumers do think they are getting a bargain from a cents-off promotion, and it is very popular. I think that the previous testimony given on the predecessor bill has been quite well demonstrated, if you examine the testimony. |