ourselves, who have filed prices have had to set higher minimums than they desired in some instances. The committees are not permitted, supposedly, by law to dictate what the minimum prices shall be but they are doing just that by refusing to approve contracts containing prices which do not give the retailer what they consider to be a fair-profit margin. In most cases the committees are insisting on a mark-up of at least 20 percent and usually 33% percent" (Printers' Ink, vol. 180, No. 9, August 26, 1937, p. 6). "Fair-Trade Committees, composed of independent retailers for the most part, have been organized and the manufacturer who wants to avoid trouble will work through these groups. Some of these committees, particularly in the drug field, have copies of model contracts which bear their official approval. Members of the retail associations which these committees represent may refuse to sign any contracts that do not carry the official approval of the committees. This usually means that manufacturers with nonconfirming agreements may have difficulty in getting cooperation and their sales may start sliding down.

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"Not only is the Illinois Pharmaceutical Association, through its FairTrade Committee, scrutinizing manufacturers' agreements and awarding its stamp of approval as to 'form' but it is also actively campaigning against manufacturers who have failed to file minimum prices under the State law. As a part of the campaign, six meetings have been scheduled in various parts of the State to 'let Illinois druggists know who their friends are and their enemies, too'" (Printers' Ink, vol. 180, No. 8, August 19, 1937, p. 80).

"A poster containing the salutation, 'Good Morning! Fair Trade,' and listing the names of manufacturers and wholesalers under fair trade contract in the state, has been mailed to every druggist in California by the fair trade committee of the California Pharmaceutical Association.

"The poster also contains four reasons why druggists should support the firms listed. A resolution requests them to place the poster in a conspicuous spot in their stores, so that it may be referred to daily."

"Louis J. Fischl, president of the state association, whose picture appears on the poster, said: 'We believe the poster will serve to awaken the druggist to the need of cooperating with those firms who give him a fair margin of profit. It also gives recognition to these firms, and in this way promotes the cause of fair trade.'" (Drug Trade News, August 16, 1937, p. 2.)

"I shall quote from the August 28 issue of BUSINESS WEEK: 'Most importantly, it set up the National Association of Retail Druggists as a power which in three short years was to roll up a record of accomplishment unmatched by any other pressure group in the country's history.' BUSINESS WEEK states further: 'Having won the resale price maintenance fight in the face of the most overwhelming obstacles, the National Association of Retail Druggist is entitled to take rank as the Nation's most powerful trade association today.'”

"During the last twelve months, the N. A. R. D. has become even more firmly entrenched as the national spokesman of American pharmacy in its commercial aspects. The prestige of the N. A. R. D. in Washington and in the Congress has continued to grow until we have at last reached the time when the office of every Senator and every Congressman is open to the representatives of the N. A. R. D., as well as every department of our national government." (Report of the Secretary by John W. Dargavel, N. A. R. D. Journal, Oct. 7, 1937, p. 1632.)

"EXHIBIT NO. 526" appears in full in the text on p. 3382.

"EXHIBIT NO. 527", introduced on p. 3383, is on file with the committee.

"EXHIBIT No. 528", introduced on p. 3383, is on file with the committee.

"EXHIBIT NO. 529", introduced on p. 3383, is on file with the committee.

"EXHIBIT NO. 530", introduced on p. 3384, is on file with the committee.

EXHIBIT No. 531

[Program and Report on Public Relations for the Institute of Distribution, submitted by Miss Persia Campbell]

FOR THE CONFIDENTIAL ATTENTION OF MR.

Herewith, a copy of the Program and Report prepared in accordance with the following Resolution, offered by Mr. Ward Melville, President of the Melville Shoe Corporation, seconded by Mr. F. G. Coburn, President of the McLellan Stores Company, and unanimously approved by the executives of the 25 companies represented at the luncheon-meeting of the Institute of Distribution, held at the Hotel Astor, New York City, on November 30, 1936.

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"That the Managing Director of the Institute of Distribution be and hereby is instructed to prepare a detailed, comprehensive program of public relations for the direct distributors of America * and, as well data and budget suggestions estimating the probable costs of various alternatives therefor * * in addition to, and in expansion of, the initiating program of consumer contact placed before and endorsed by this meeting and that said all-industry public relations program, when completed, be referred for action to a future meeting to be called at the invitation of those present at this November 30 meeting and to be extended, on their behalf, to any other executives of companies in direct distribution who, though absent from the instant meeting may, nevertheless, be sufficiently interested to attend."

The meeting to discuss the vital problem underlying the above Resolutionand the data and planning prepared in response to it-will be held on Monday, March 15, 1937, in the East Ball Room of the Hotel Astor, New York City. starting promptly at 10 a. m. Luncheon will be served at p. m. The meeting will end at 3:30 p. m., if it has not previously ended, thereby permitting the executives going out of town to make train connections, and local executives to keep necessary appointments.

In the belief that "taking a few hours time out" to consider this problem that so vitally affects all direct distributors will pay real dividends, you are invited by the 25 direct distributors concurring in the above Resolution to meet with them at that time, and to luncheon with them, for a frank and open discussion of the subject.

The purpose of the meeting is primarily to provide an interchange of ideas. Accordingly the attached summarized-and also detailed-analysis of the material brought together in response to the foregoing Resolution is offered merely to supply an initial basis for discussion.

It comes to you now so that you may have an opportunity to go over it before the meeting.

SUMMARY

This Outline of Direct Distribution Public Relations--with the Consumer Speaking is based on these four fundamentals:

One. That a public relations program, like all selling, is most effective when built around some compelling theme-service to consumers of modest incomes being the outstanding one in the case of Direct Distribution.

Two. That the case for Direct Distribution is most effectively stated in terms of consumer interest instead of company or trade statistics and arguments.

Three. That service to the consumer provides Direct Distribution with a case so undeniable and so irrefutable, that it can be relied upon without hesitation or qualification.

Four. That any effective program of public relations involving an entire Industry, and particularly an Industry made up of trades with varying characteristics-as is the case with Direct Distribution-requires both a contralized handling of certain activities that can be most economically done jointly, and a bringing-together of qualified executives in a position to obtain decentralized action thereby calling into harmonious play at least the larger

companies' tremendous opportunities to create and strengthen improved public relations.

The Outline then undertakes to satisfy these fundamentals with:

One. A national consumer organization.-The League of Women's Buyers and Taxpayers-made up of women representing homes with incomes of $2,500 a year or less: the women who predominately support Direct Distribution and handle the expenditures of the majority of all consumers.

Two. A national consumer rallying point-Consumer Foundation, Inc. Three. A national consumer mouthpiece or voice-“Consumers News," or any similar publication acting for the consumer organizations mentioned above, and, as well, all other suitable consumer organizations or related organizations. Four. A facilitating organization to handle these steps which can most economically be done jointly: The Institute of Distribution, Inc.

Five. A committee intended to bring together qualified executives of the larger companies and representatives of all other interested concerns, organizations, and individuals.

Six. Detailed suggestions for public relations activities of the usual sort, but with opportunities to utilize the consumer angle, in order to gain greater effectiveness, indicated.

Seven. A plan such as would undoubtedly be necessary for immediate operative purposes is also presented.

A plan for the customary steps in a public relations program would not be a contribution of any unusual importance. Many organizations and individuals are available with extensive technical experience in such work.

If, however, the public relations program for an Industry, particularly an Industry made up of trades with varying characteristics, and a public relations program built around a central theme that will give it real punch, call for more than the usual company public relations program, the following suggestions may at least prove challenging to those who feel that the time for speaking out on behalf of Direct Distribution-for energetically placing its case before those whose verdict counts-is already long overdue.

WHEELER SAMMONS,

Managing Director, Institute of Distribution, Inc.

I. THE PROBLEM FACED AND THE OBJECTIVE SOUGHT IN THE
CONSUMER BACKGROUND WORK

The immediate problem involved.-To develop a method for effectively interjecting the consumer into the discriminatory tax legislative situation, particularly in states, and particularly in a manner counteracting the physical appearance before committees and legislative sessions of middlemen or independent merchants in numbers and groups.

The underlying objective.-To provide a tangible basis for gauging and testing the practicalities of widespread consumer mobilization and continuing consumer education, and the possible reactions thereof on national legislation.

II. THE PRELIMINARY CONSUMER BACKGROUND STEPS ALREADY TAKEN

1. Door-to-door surveys were made in a number of typical communities in a variety of selected localities.

2. These surveys demonstrated:

a. That consumers predominately favor Direct Distribution and find it satisfactory (except, of course, those in competition with chains or connected with middlemen-about 20% ;)

b. That consumers, unless so informed, do not understand that discriminatory taxation penalizing Direct Distribution is levied on direct distributors' outlets only, and therefore may become a tax and a higher living-cost element falling on them;

c. That consumers are keenly responsive to the "pocketbook nerve"-regula tory measures and discriminatory levies which become hidden taxes; savings in buying; restrictions on distribution which raise living costs—and welcome facts thereon;

NOTE.-The door-to-door checkings revealed an 81% (over-all average) approval of Direct Distribution. Even the lowest percentages among those averaged-53% for a community in which the local independent merchants had 124491-39-pt. 8-13

been carrying on an intensive anti-direct-distribution drive and 47% in California after the passage of the discriminatory retail tax law-were just above or very little below the 50% line, showing that a very slight degree of direct and effective consumer education was required to put the percentage well over 50%. As to taxes that might affect their living costs, consumers were found to be even more antagonistic-but of course they must be warned of specific instances.

d. That women are more responsive than men to the subjects mentioned in (c) above, and particularly the housewives buying for homes with $2500-orless-a-year-the homes which account for over 75% of the consumers and even a larger percentage of the nation's purchases of necessities, and the homes almost all of which trade more or less with direct distributors' and their outlets.

3. Based on the above, experiments were undertaken to find out whether or not housewives in the $2,500-and-less-a-year group could be singled out in sufficient numbers to:

a. Establish the background necessary to make effective the appearance of selected housewives typical of the $2500-or-less-a-year group before legislative committees and meetings of state legislators-and

b. If the selected groups to so appear could be obtained.

4. These experiments were finally centered on the formation of a state group of women of $2,500-a-year-or-less households as the League of Women Buyers and Taxpayers-this to be, in other words, the background mentioned in (3-a) above which would have as its stated purpose, consumer education on the subjects mentioned heretofore in (2-c), of course on a nonpolitical and nonsectarian basis. Because it was felt wisest, during the formation of the grouping, to lead up to specific discriminatory taxation and restrictive distributive regulations through broader tax and cost-of-living matters, general hidden tax and cost-of-living indirect taxation, as well as state and local governmental costs, were used to supply the detailed matter necessary to the routine involved. 5. This initial state experiment was successful to the extent that it demonstrated:

a. The background availability of housewives in the particular group selected and at a cost within reason;

b. The availability of selected housewives for appearances made logical and effective by the group background.

6. The state experiment was next attempted on a national basis, and as a result it was:

a. Confirmed that a national duplication—The League of Women Buyers and Taxpayers of the Nation, Inc.-of the state results was possible at better than estimated costs.

7. The continuation of the above activity toward a national background sufficient for actual use In Connection With the Original Objectives Listed has been more successful than anticipated. It is apparent that an adequate initial level-200,000 or thereabouts as members of the national league will actually be obtained early in 1937.

This 200,000 membership listing is national throughout the 48 states, the District of Columbia, and the Hawaiian Islands. This is considered sufficient to provide the necessary starting background for the direct work which is the final objective.

Experience to date demonstrates, however, that it can be expanded to direct membership listing of any size desired up to several millions at approximately $6,000 per 100,000 direct cost-aside from overhead-and $10,000 per 100,000 per year servicing on a satisfactory minimum basis. (There are over 6,000,000 consumers, of the type involved, available in organized form of one sort or another for direct or indirect extension work.) Indirect expansion (that is, through other organizations in bulk) is available in almost any quantity desired at merely whatever servicing expense it might be decided to involve.

The actual state split-ups of the 160,000-odd members affiliated with the league as of November 4th of last year demonstrate a continuous and progressive growth of such memberships in every state in which a league division existed.

The current 200,000 membership of the League is the starting background necessary to effective direct state consumer appearance against discriminatory legislation, as mentioned above as a primary objective. It is also a starting point for other consumer activity of various sorts, if and when undertaken.