Blow Against Price-Fixing

John Schwegmann is a 38-year-old New Orleans grocer who quit school at 14 to go to work, first at odd jobs, later in his family's grocery. Now he puts in seven days a week (twelve hours weekdays, six Sundays) at his job. With two brothers and a friend, he operates two stores, one the huge Schwegmann Bros, supermarket, which he proudly calls the "largest in the world." By selling everything from crayfish to shotgun shells--and everything as cheaply as possible--the Schwegmanns will take in close to $7,000,000 this year. "If I do a good job by keeping prices low," says John Schwegmann, "the public will reward me by buying more."

But keeping prices too low landed the Schwegmanns in court. They refused to sign a fair-trade agreement with Seagram and Calvert distillers, and sold their liquor at cut rates, despite Louisiana's fair-trade law that made such price-cutting illegal. Last week, after three years of battling right up to the U.S. Supreme Court, John Schwegmann triumphantly hung a sign in the middle of his supermarket: "We Won."

The victory was the U.S. Supreme Court decision striking out the "non-signing" clause in the Louisiana fair-trade laws, and thus, in effect, those of 44 other states.* The court did not bar manufacturers from fixing prices on products they sell by making contracts with individual retailers, but ruled that the fixed price does not bind other retailers who, like the Schwegmanns, refuse to sign the contract.

The ink on the decision was barely dry when a rash of price-cutting began on fair-traded items. Manhattan's R. H. Macy & Co. announced its cuts in full-page newspaper ads: "Now you can buy 5,978 'price-fixed' items at less than price-fixed prices --at Macy's." In New Jersey, Kings Super Markets slashed prices on brand products as much as 30% and promised to cut more. Grocer Charlie Hawkins of Stockton, Calif., a long-standing fair-trade enemy, chalked up his new prices, said: "The little independent guy will now be able to make competition for the big chains."

The American Fair Trade Council argued that the decision applied only to items in interstate commerce. Then it pointed out that Congress could bind non-signers by an amendment to the 1937 Miller-Tydings Act, which made state fair-trade laws possible by exempting fair traders from prosecution for price-fixing under antitrust laws. But chances for such an amendment are slim; fair-trade now has a lot of enemies it did not have in 1937.

The Federal Trade Commission and Department of Justice are convinced that the Schwegmann decision will mean lower prices for consumers and freer competition among retailers. In all, about 5% of the brand-name merchandise sold in U.S. retail stores is fair-traded.

*Excluded: Missouri, Texas, Vermont and the District of Columbia, which have no fair-trade laws.

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