Break for the Consumer

No one has battled harder to enforce Fair Trade around the U.S. than giant General Electric Co., which gets an estimated 35% of its $4 billion annual sales from its consumer products. Last week G.E. threw in the sponge. To dealers and distributors went a letter canceling Fair Trade contracts on the company's prices. Said G.E.: "We have abandoned our policy because we have found it inoperable." Within three days, half a dozen other diehard Fair Traders, including Sunbeam Corp., McGraw-Edison Co. (Toastmaster), Ronson Corp., and Schick Inc., followed G.E.'s lead, dealing the hardest blow yet to the list price as a factor in U.S. retailing.

All this touched off a wave of frenzied price cutting in many cities, as everyone tried to undercut the competition. Manhattan stores sold $39.95 G.E. clock radios for $27.95; Los Angeles retailers chopped waffle irons from $22.95 to $15.88; Chicago's Sol Polk cut his discount prices on electric skillets from $12.95 to $9.98, and hurried to order another 10,000 small appliances. Yet in many other U.S. cities, the news stirred hardly a ripple. In Washington, D.C., Detroit, Dallas, Denver and dozens of other markets, Fair Trade on these items has long since died. Said a Milwaukee department-store executive: "This is hardly news. We've been selling $28.50 Ronson razors for $6.03 plus trade-in right along."

Lost Cause. G.E. had been leading a lost cause ever since 1952, when the federal McGuire Act legalized Fair Trade laws. In Fair Trade states, manufacturers, exempted by the McGuire Act from antitrust prosecution, were permitted to fix minimum prices for an entire state so long as they signed a contract with one dealer; all others were bound, whether they signed or not. Yet no sooner were the laws on the books than retailers started breaking them, cut prices far below company minimums. In five years G.E. alone spent almost $5,000,000 tracking down violators, brought suit against more than 3,000 price cutters. Yet the pressure against Fair Trade grew so strong that by last year it was enforceable in only 31 states. In 1954 G.E. stopped tagging major appliances with suggested list prices; two years later it gave up on TV sets.

Congratulations. Last fall G.E. took the knockout punch. It had brought suit against Manhattan's Masters Inc., whose 44-year-old boss, Stephen Masters, has built a $45 million-a-year discount business, selling everything at 20% to 45% off list. After G.E. won the suit against Masters in New York. Masters opened a mail-order discount business in Washington, D.C., which has no Fair Trade law. Masters offered merchandise for sale anywhere, including Fair Trade states. G.E. sued again, but when the U.S. Supreme Court refused to review a lower-court decision in favor of Masters, G.E. was licked.

At week's end the reduction on G.E.'s lines and those of the other Fair Traders hit 50% in some stores, but retailers thought they would soon settle down to the 25%-to-35% discount pattern U.S. consumers have come to accept as standard for appliances. Said Discounter Masters: "I congratulate G.E. on finally recognizing the truth of what we've been saying for years--that Fair Trade is unfair to consumer and manufacturer alike."

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