Fair Enterprise

Readers of those full-page Free Enterprise ads were in for a shock. For months they had been reading about how government interference with the free enterprise system would lead to the desecration of their altars, the destruction of their electoral system, and the demise of their free press. "Handout strings," according to the ads, would turn out to be the chains of a police dictatorship. But then suddenly last week a new series of ads appeared, calling for Congressional passage of a bill designed to destroy retail price competition by government intervention. They were endorsed by no less than twenty-four leading business association.

These associations were supporting the McGuire Bill (H.R. 5767) which binds all retailers within a state to a sales price agreed on by only one retailer and a manufacturer. To do this, the bill overrides last year's Supreme Court Decision forbidding the enforcement of price-fixing contracts against those who don't sign them. Amendments to the McGuire Bill even make it illegal to advertise goods at less then the fixed prices in any state where manufacturer-retailer price fixing contracts are allowed. It is a cynical comment on the current state of business thinking that this bill is referred to as "Fair Trade" legislation by its supporters.

The main argument given for this attempt to secure government enforcement of price-fixing is that it protects retailers from "loss-leader" advertising. (Large stores sometimes offer a standard brand product at low prices as bait to attract customers.) McGuire Bill proponents say that this price cutting "fences in" other retailers and they develop this into the argument that Fair Trade is good because it restores freedom of opportunity. IN this special sense it may be "fairer" to the small retailer to enforce price levels on everybody else that are profitable for him. But the McGuire Bill certainly makes terms like free enterprise a hollow mockery. It also how serious implications for the consumer, who cannot enjoy the lower prices offered by more efficient retailers-and for the freedom of press and radio, by setting restrictions on what and how they can advertise. Ironically enough, this legislation will probably multiply business failures in the long run. Government assurance of high markups in retailing can make the field attractive to more entrants than the volume of trade will support. Business failure of drug retailers, for instance, is higher in states which have price-fixing laws than in those which avoid them.

For these reasons, the McGuire Bill is a poor piece of legislation in its own right. It's difficult to have much sympathy with business groups who support this type of coercive price-fixing, and then yap about "Socialism" when some other pressure group demands similar government underwriting of its own interests. The retailers my get their protection, but if government controls and restrictions come in its wake, it will be their own responsibility.