people become adherents of Lucky Strike, they would then move Lucky Strike up, advance it 3 cents a package, or 5 cents a package, and then put on the market a new cigarette under some new name that actually was exactly like Lucky Strike. They had worked down to the finest percentage that a percentage of those who had been smoking Lucky Strike had become so fond of the name Lucky Strike that they would move up and pay the extra 5 cents, that Y percentage would buy the new cigarette and save the 3 cents or the 5 cents. Therefore they would make the additional difference from the suckers, we will say, if you will pardon the term, who were enamored of the name Lucky Strike and moved up and continued to buy it.

That is the purpose of this question. I am not so concerned with the point brought out by the chairman as I am this. Do you have any practice of getting the housewives all excited about Cheer and then advancing the price of Cheer and putting out Oxydol or something else at the reasonable price of Cheer and getting the difference? Mr. HALVERSTADT. No, sir, we have never done that, to my knowledge. I think the competitive situation would prevent that. To begin with, we don't wish to do it. But I think the competitive situation would prevent that.

The competition within our own company, among our own brands, would militate against that. And finally, we know that we would be taking a frightful risk on the brand corresponding to your Lucky Strike illustration if we were to, without reason, raise the price and make it much more expensive than other good products in its class. Senator COTTON. You mean your competitors would move in on you?

Mr. HALVERSTADT. I mean this, that if we did this with product A, and there were four other products of ours remaining at the original price level, and our competitors were selling at essentially the same price range, it would be more or less suicidal, I think.

Senator COTTON. I am not doubting your assurance. Please don't misunderstand me. But you didn't start all these different name brands at the same time.

Mr. HALVERSTADT. No, sir, we did not.

Senator COTTON. As they, one by one, were put on the market by your company, did the original name brand that had become established, increase so that there was a saving to the purchaser who bought the new name brand?

Mr. HALVERSTADT. Absolutely not.

Senator COTTON. I don't know that that is now the practice in cigarettes. I don't want to get in the position of making a charge against anybody. This was 20 years ago that this occurred. But it did occur to me in this respect. You can absolutely testify that there is no juggling of prices to capitalize on the adherence that certain housewives have to a certain name brand by advancing the price and making them pay more for that preference?

Mr. HALVERSTADT. To my knowledge we have never, never, never done that.

Senator COTTON. Thank you.

Senator SCOTT. Madam Chairman.
Senator NEUBERGER. Senator Scott?

48-222-65--17

Senator Scorr. Would you be good enough, first, to restate what you said as to what provision in the proposed law would require you to use four or eight packages of different size as against your present one package which you use for a number of products?

Mr. HALVERSTADT. As I understand the proposed law, there would be discretionary power on the part of the appropriate Federal agency, whether it was the Food and Drug Administration or the FTC to establish sizes which would be standardized in various commodities for the consumer.

Senator Scorr. Under that discretionary policy you would be required to produce a number of different size packages. I am asking you, in your opinion wouldn't that serve to confuse the housewife or, even more, the housewife's husband, as a Saturday shopper?

Mr. HALVERSTADT. That is my point, sir. If package laundry products were regulated so that they had to come in 1-pound boxes, for the eight brands of ours, we would have this size, this size, and this size. They are all different. Under the new regulations they would all weigh a pound. But they are all different products and they are going to have very widely varying prices.

I submit that the housewife can be faced with a conglomerate mess if she were faced with such a situation. Not only among our brands but all other brands in the industry.

And that would apply, if I may extend this just a little bit, not only to this one size which is the 1-pound, but there are some women who like a 3-pound size.

Here we would have four different sizes in the 3-pound size.

Mr. CHALOUD. We didn't wish to glue these because they would take too much space. They are of the same relative size difference.

Mr. HALVERSTADT. There would be a great difference of sizes in the 5-pound sizes. For example, if the regulation said laundry detergents should be sold in 1-pound boxes, 3-pound boxes, and 5-pound boxes to accommodate the consumers who want smaller sizes or the larger sizes, we would just have a very, very confusing situation, and that is the point I am trying to emphasize here.

In addition is the fact that the cost of packing our laundry detergents, in 1-, 3-, and 5-pound sizes, would result in our having to spend $10 million for different packing equipment, or packing equipment modifications. And on top of that, the extra cost due to inefficiency would result in a recurring cost each year of $3 million for these brands.

Senator SCOTT. It seems to me that the housewife who is not simply following advice on television, but is going in to buy what she thinks is best, is liable to do the very thing that the Government says it is trying to protect her from, and she would pick the biggest package of these pound packages. As I see it, the bill proceeds first on the basis that the housewife is dumb, which I deny, being married [laughter] and would deny anyway. [Laughter.]

It does seem to me that the beneficience of the Government, that you are now going to guide the housewife down the supermarket aisles, is serving further merely to confuse her. If you are required to package all your 1-pound packages in such a way that some of the pound packages are going to be bigger than other pound packages, and then

the next development of that is that somebody will come back here and say let's pass a law to prevent this discrimination which the Government caused in the first place, or deception is the word, rather. Mr. Dixon testified here that the producer's interest is toward product differentiation.

Mr. HALVERSTADT. He testified what?

Senator SCOTT. Mr. Paul Rand Dixon's testimony has the following reasoning in it, and it is on page 5 of his testimony of the other day. He makes the point first that the producer's interest is toward product differentiation, they want to catch the eye of the consumer walking down the aisle of the supermarket and therefore is inclined to make packages of different sizes and shapes, and that this makes problems for the retailer and so on.

Mr. Dixon goes on to say that if the producers themselves were to try to remedy this situation and move from package differentiation to attempt to achieve standardization or uniformity of product, they might run afoul of the antitrust laws.

So the Government has created for you a dilemma, in other words, which says if you follow the free enterprise concept, and attempt to differentiate your products which is treated somehow in this testimony as if it were in itself wrong, that nevertheless you are liable to do it.

If you try not to do it, the antitrust man will get you.

Therefore his third point is that the only solution is for the Government to take care of all your problems. Since you don't want to get into the hands of the antitrust people, and they don't want you to have too much leeway in free enterprise, they propose a further solution, and that is, that the Government will provide all the regulations with the usual saving clause of a minimum consistent with achieving the purposes of the bill.

But they say in arriving at this conclusion, "Thus we find an area providing unique advantage for Government intervention to aid both the producer and consumer."

That is the groundwork of what I want to follow up.

This bill, as I see it, proceeds down two pathways. There are two separate purposes involved in the bill. And both the purposes are justified on the ground that we have had other labeling acts and other consumer protection acts. But there are two kinds of things the bill seeks to do:

One, to pass a law saying you must put certain things on the package or you must stop putting "five cents" off on the package, which could be done simply by passing a law. If they want to get at any given abuse, they can prohibit the abuse.

The other purpose of the bill, however, is regulatory. This isn't enough to say we will prohibit those things which we think are clearly wrong.

There is another area where we don't know whether it is wrong or not, but we basically distrust business.

Government assumes that you are guilty, as an Alice in Wonderland verdict first and trial afterwards. The Government assumes you are guilty. Then they provide that the Government shall have the power to make any regulations to cover anything they think you may do and

may plan to do, other than-and we go back to his earlier statementother than unfairness or deception.

Mr. Dixon says, "In the absence of unfairness or deception, the Commission is not presently authorized to take action."

Some of us believe that that is what we are trying to prevent, unfairness and deception.

Mr. Dixon's argument goes further than that, and if it isn't unfair or deceptive, there is still something wrong with it, and the power should be there. But he goes on to say the bill is wrong because it puts the power in the hands of the HEW. That obviously is wrong because for one Bureau testifying to the concept that some other Bureau may enlarge its empire is of course itself a dreadful thought.

So Mr. Dixon proposes to enlarge his empire by saying that this really has nothing to do with the health and safety of the consumer, thereby running afoul of the concept of some of the sponsors, I am afraid. But it really is an economic thing. In other words they are trying to get at you economically. I am one of those who is going to make them prove it all the way. All the way.

This is going to get me some attention in some of the columns as you can well imagine. But what I am getting at is, have I said anything in my attempt to reason out this testimony-and I won't ask you to adopt my statement-is there any need that you know of, honestly, in the industry, for a further power beyond unfairness or deception to control and regulate every step of this packaging industry from the beginning of the industry to the making of the boxes and the labeling; are there any widespread abuses or any abuses of a serious nature of which you are aware?

Mr. HALVERSTADT. None whatsoever.

Senator SCOTT. Does your mail indicate a complaint of one out of five persons? We have heard some of that testimony, that one out of five people are dissatisfied with packaging practices and the way the goods are presented to them. Do you have anything like the 20percent indication, either in your polls, surveys, or your letters, or your studies?

Mr. HALVERSTADT. As I mentioned earlier, we received during the past year 87,092 letters, and answered them. The figure was 343 per working day. We cut out the holidays, and calculated it just as carefully as we knew how.

Out of all those letters which we received, and which we answered, actually only 36 of them complained of packaging as such. Thirtysix letters out of over 87,000.

You said, I believe a moment ago, you used the adjective "widespread." I am not trying to put a halo around our company. I said, I believe I said, that I knew of no widespread deceptive packaging and labeling problem. I will not say that instances can't be found where a question in a particular instance may not seem questionable. But in the marketplace I think there is absolute honesty in packaging. By absolute honesty I mean throughout, for example, the supermarket.

Senator SCOTT. In your industry have any members of the industry in the last-in your memory-or if you prefer, in the last 10 years been found guilty by the Federal Trade Commission as a result of

action of the Federal Trade Commission of unfairness or deception in the packaging or marketing of your product, as contemplated by this law, in the frame of reference of this proposed law?

Mr. HALVERSTADT. I do not know of any such case.

Senator SCOTT. I think that is all.

Senator NEUBERGER. I am curious to know what was in the other letters. Did they all write and tell you how much they loved you? Mr. HALVERSTADT. I am very pleased to say that some of them did. Senator COTTON. Most of them complained about having their television programs interrupted. [Laughter.]

Mr. HALVERSTADT. We get letters on a variety of

Senator NEUBERGER. It is so unusual for people to sit down and write to a firm how much they love them and how everything about them is so great. In my business, I hope that a lot of people think what I am doing is great, but they are the ones who don't write me. They just assume I know it. The ones I get are the complaining ones. And this is just the opposite in your business?

Mr. HALVERSTADT. We get letters on a variety of subjects. I can recount some of them if you would care for me to.

Senator NEUBERGER. I am curious. It is the antithesis of our experience here. I want you to continue in just a minute. But I am curious about the cost thing.

You haven't convinced me that it doesn't cost you a lot of money to have all those different competing products and that you get them all in that one box. You make a great deal of the point that some czar might make you do this other thing. It is not in the law that you have to do this.

Mr. HALVERSTADT. I understand that.

Senator NEUBERGER. You know that. You are building up, I think, a bogeyman there, because it is not in the law. And I didn't hear you answer Senator Scott that it was anywhere, because I know it isn't there.

All the people, grocery manufacturers and so on, tell us how much it is going to cost them, provided somebody does come along and set up these standards. But they themselves vary their packaging. It costs you millions of dollars to advertise that Cheer has different qualities than Oxydol, and vice versa.

I am left rather cold by the fact that you are going to have this great cost. You brought it on yourself by assuming that you wanted to capture a certain amount of the market, by having these competing products.

I admit that there is a shortcoming in the consumer who is swayed by the fact that Cheer is better than Oxydol, or what-have-you, and is persuaded by this by buying at 60 cents an ounce some ammonia, or some bleach, that she should be able to buy for 2 or 3 cents an ounce. I am not persuaded that there is that much variety in the actual contents of this package.

What makes the difference in density? If we were to take a little square paper and empty out each of these detergents on it, would they feel differently? Would the granules be larger in some and smaller in others? Is that the thing that make the difference in density?

Mr. HALVERSTADT. I think Mr. Chaloud can answer that more authoritatively than I.