standardize nonprice competitive factors that in the end the only effective competitive force is "price."

Advocates of S. 985 have talked about "rational decisions" based on price-perunit comparison between competing brands and sizes. They falsely assume that all competing products are alike and packaging serves only the purpose of switching purchasers from one brand to another with no tangible superiority. This concept has no basis in fact. In the first place, it is rare that competing consumer products are alike in all aspects. Second, different types of products compete to serve the same needs. Third, packages are not extraneous to the purchase; they are part of the value which the consumer buys.

Let's look at these three aspects. First: Among other factors, competing products differ in quality. For instance, in producing mayonnaise, our company goes to considerable expense to use whole eggs. Neither law nor regulation compels us to do this-it is done with the expectation that the housewife will recognize and prefer the quality of our product. And sales records indicate that our quality is recognized and preferred by housewives.

Similarly, we are very particular about the peanuts we use in our peanut butter. Peanuts grow in three geographic areas of the United States. Each area's peanuts have different properties; we have discovered that peanut butter from a blend is better than peanut butter made from just one kind of peanut. At considerable expense, we ship peanuts from one area to be blended with peanuts grown in other areas. This perhaps is not the most economical process if "economy" is solely what you seek. But we do it to maintain the excellent flavor and consistent quality of our product throughout the country so that all consumers benefit.

There is every indication that consumers recognize and are willing to pay a premium for quality products. They also recognize and want products that differ in flavor, color, aroma, and consistency-just two mention a few differentiating factors.

The second fallacy in the "competing products are all alike" theory is: Who is to say what are "competing products?" Products can be used in many ways; thus they have many competitors. Mayonnaise, of course, is used in salads and as an ingredient mixed in to make other foods taste better. But it is also used as a spread for bread (competing with margarine, peanut butter, and other spreads), and it is used as a dressing (competing with French, Russian, and Italian dressings; with catsup and mustard; and even with salt and pepper).

Dehydrated soup, as another example, competes with raw vegetables which the housewife chops up herself for homemade soup. It competes with condensed soups. It also competes as a dip ingredient, and it competes as a complete luncheon meal with meats, peanut butter, etc.

The third point is that packages themselves can add utility and value to products. The entire frozen food industry would not have been able to utilize distribution advances had appropriate packaging not been available. Aerosol cans have added convenience to the use of many products. So-called television dinners and the complete meal in a can are other examples of the value that packaging has added to the raw materials in the containers.

Now boil-in-bag packaging and foil paper cans are becoming significant sales factors because of the convenience they offer the busy housewife. Two-thirds of the 8,000 products now available at grocery stores represent new or improved products over those available 10 years ago. A significant number of these advances are represented by packaging improvements.

These three points illustrate the fact that price alone is not the sole factor on which products compete for the consumer's favor, and that these nonprice competitive factors should be encouraged and not eliminated.

But were you to ignore these realities and still prefer price competition to other forms, you nevertheless must find S. 985 inconsistent. There is little doubt as we shall show later-that this bill's provisions will add to the cost of manufacturing consumer products. These costs will have to be passed along to the consumer. Is it rational to put emphasis on price competition and at the same time to raise the price level of consumer products? What is the objectivea better deal for the consumer or regulation for the sake of regulation? Thus in looking as S. 985's underlying philosophies, we have seen that it would delegate substantive power to regulatory agencies-on the grounds of stimulating "rational comparison"-and it would standardize marketing practices in order to minimize nonprice competition. This would begin a trend in

Government control of our economic life that would restrict the freedom which has made our system the most successful one in serving consumer's needs.

Now, before we turn to the bill itself, let us examine a claim made by proponents of this legislation.

Advocates say that today the consumer cannot made a "rational comparison." They claim that she is "confused" by the variety and scope of products she is offered.

We are not in favor of confusion. However, we must recognize that there is a possibility of confusion in practically anything you do in life. If there is the slightest difference between two products, it is possible that someone could be confused.

Furtherfore, confusion often occurs for a time following innovation. For example, every time Congress passes an act, there is a certain amount of confusion. That is why we have the courts to interpret the meaning and application of the law. But-in the hope of avoiding the confusion that necessarily follows innovation-the proponents of this bill are willing to stifle the innovations of the consumer products' manufacturers.

Innovation will be restricted because manufacturers will be reluctant to become involved in administrative hearings to obtain permission for new types, designs, and designations of containers. Also, by the time the hearings are completed, all competitive advantage would have been lost, since competitors, alerted by the hearing procedure, would have time to develop offsetting tactics. Freedom to innovate has enabled the consumer products industries-especially the grocery products industry-to become a vital factor in the economic growth and physical well-being of our country.

Today, the consumer in the United States has a wider choice of highly nutritious food than at any other point in our history. She has been freed of much kitchen drudgery by the "built-in maid service" of our industry's products. It takes only 19 cents of the after-tax dollar to buy the family's food todayas compared with 26 cents in the 1947-49 period.

The

The industry which applies this food has grown manifold 20 years. industry has invested hundreds of millions of dollars in that time to research and to develop new products.

Innovation in modern packaging-packaging which makes the product more convenient to use, packaging which has esthetic appeal, packaging which reduces the cost of products-has made a vital contribution to the growth of our industry. It has helped the farmer by stimulating the consumption of his crops; it has helped the worker by providing more jobs. And it has helped the consumer by giving her products that stay fresher longer and save her time and energy.

The competition is keen. We in the industry realize not only are we competing for the dollar spent for consumable products, but we are also competing for a share of the entire discretionary-spending dollar. We are competing against the recreation industry and against the durable goods industry. For example, the decision to use more frozen foods may require a decision to buy a freezerand that decision can involve us in competition with a trip to Miami or a new stereo. These competing industries will continue to have the right to market their goods as they wish. We are competing for the same dollars. It is not fair to unnecessarily hamper us in this interindustry competition.

If we are to continue to compete effectively, we must have the freedom to innovate not only in the laboratory but in the way we package the product and in the way we bring the product to the consumer's attention.

And now we would like to comment on specific sections of the bill and their effect.

One vital point that we and others have made throughout the testimony is that there is ample existing power under present legislation to prevent practices which are truly deceptive.

We believe that both the mandatory sections and permissive sections of S. 985 are fundamentally unnecessary because regulatory agencies may now proceed against deceptive practice or failure to state net contents or to state them prominently. Products in interstate distribution are covered by sections 403. 502, and 602 of the Food, Drug, and Cosmetic Act, FDA regulations under that act, and section 5 of the Federal Trade Commission Act.

There are also 34 States' laws that require a declaration of quantity on packages of all commodities. Some 22 of these laws follow the model weights and measures law in their weight declaration requirement.

Therefore, insofar as sections 3(a) (1), (2), (3), and (6) of S. 985 call for the prominent listing of net quantity of contents or prohibit deception on the package, they are redundant. They merely duplicate existing Federal and State laws.

Turning to other points, we see that section 3(a)(5) would prohibit label statements by the manufacturer indicating retail price savings to the consumer— whether or not such statements are deceptive. Obviously, if such statements are deceptive, they would be prohibited by present laws and regulations.

Most sections of S. 985 would "license" and restrict nonprice competitive practices, thus encouraging price competition as the prime factor. Surprisingly, section 3(a) (5) would seem to be contrary to the bill's underlying preference for price competition. It proposes to prohibit one of the most competitive factors— manufacturer-stimulated cents off and similar price promotions.

Proponents of S. 985 have indeed indicated that section 3(a) (5) is primarily aimed at prohibiting the use of so-called cents off marketings by the manufacturer. Yet you have read the testimony in prior hearings on similar bills that proves housewives prefer cents off promotions to all other manufacturers' promotions. The Alfred Politz Research, Inc., survey showed that 61 percent of all women shoppers prefer cents off sales to all other forms of manufacturer promotions and 29 percent liked them second or third best. And 63.8 percent of all women shoppers did not think Congress should pass a law making cents off illegal. Fewer than 9 percent thought such a law should be passed and the balance had no opinion.

Why do manufacturers also prefer cents off promotions? Why do we feel that they are a reliable way of passing savings on to the consumer?

Promotions are fundamentally an incentive (in this instance, a price incentive) to get the consumer to try the product again at a particular time. When a cents off promotion is established, the manufacturer reduces his price temporarily to the retailer by the amount of the cents off. This is what he is telling the consumer-"I have reduced the price at this time." Why should he be prohibited from telling this truth in the most effective manner?

We have found that the most effective way to be sure the consumer gets the saving of a price concession by the manufacturer is to call it to her attention as part of the packaging. This can be done as a cents off label promotion; as a bonus bottle, where the buyers get, for example, an additional 3 ounces over the regular bottle; or two packages for the same price; or as a sale where 1 cent above the regular price of one package buys an extra package. All of these reach the consumer directly-and all have the purpose of getting her to try the product at a particular time.

Our own surveys have shown that most retailers pass cents off promotional savings on to consumers. We are not out to waste money. If we felt cents off offers did not get the savings to the consumer, we would be the first to discontinue them.

In any of these manufacturer-originated promotions, the consumer benefits because she has saved money and perhaps found a new product to serve her; the retailer benefits because he can expect additional profits from increased sales; and the manufacturer benefits because he can use the most effective promotional device to stimulate sales.

The Federal Trade Commission itself has said in its "Guides Against Deceptive Pricing":

"If the former price is the actual, bona fide price at which the article was offered to the public on a regular basis for a reasonably substantial period of time, it provides a legitimate basis for the advertising of a price comparison." If "cents off" and similar promotions are used deceptively, they can be proceeded against under present laws. If they are not deceptive, why eliminate a desirable promotional device that clearly constitutes active price competiton? Section 3(c) (1) would permit the specification of weights or quantities in which a product shall be packed.

We understand that the aim of this section is to require commodities to be packed in some conventional unit such as "1 pound," "1 quart," or "8 ounces."

Yet it is no easier to figure out the cost of three 16-ounce units for 79 cents than it would be to figure out the cost of three 15-ounce units for the same price. Surely, the advocates of 3(c) (1) are not yet proposing to regulate the prices at which commodities may be sold to the consumer so that prices are easily divisible by size units.

We believe that any attempt to prescribe rigid standards of weight and quantity will only result in higher costs to the consumer.

Let me give an example of how such regulations would affect us and could raise the cost of a product or restrict consumer choice. We presently pack nine kinds of dehydrated soups in a standard size package. Each kind of soup has a different weight of dry substance, so the contents of packages vary from 2% to 5% ounces. Pea soup, for example, is thicker than consomme with spring vegetables. But each package of ingredients will make 24 fluid ounces of ready-to-eat soupand that's clearly marked on the package.

Now if we have to pack the same number of ounces of ingredients in a standard package, each kind of ingredient would make a different quantity of finished soup. We know that would be confusing to the housewife. The alternative is to use a variety of package sizes; that will require additional packing lines beyond the present three lines. The cost of the additional packing lines plus the other additional costs of the inefficiencies of this method, would result in higher costs for us and therefore, for the consumer.

Let's look at another case. We are pledged to serve all consumers. We want to be able to package our products to serve the varying needs of the consumer. We cannot see why one person living in an apartment by herself should be forced to buy the same quantity of a commodity as the couple with six children or as the retired couple on a restricted diet.

That's why we shall introduce a product in one size, say, 16 ounces, then go to 24 ounces and perhaps, 6 ounces as the demand for the product increases among various groups. Furthermore, section 3(c)(1) permits controls on a commodity basis. But frequently, more than one commodity is packaged on the same packaging line at a plant. If we are forced to modify our equipment for one commodity, we may be unable to use it for commodities that we are required to package in some different size. That means that we would be forced to bring in additional equipment for other sizes. And it would be the consumer who eventually has to assume the burden of this cost.

In addition, since products compete with others in other generic classes, it will be impossible to standardize all competing generic classes at one time. One of the inequities of S. 985 is that a manufacturer whose packaging and labeling have been standardized within the purview of S. 985 may find himself competing with other manufacturers whose product lines have not been standardized.

Proposed section 3(c) (2) would permit the regulation of the sizes, shapes, and dimensional proportions of packages.

We believe that present laws are sufficient to control deceiving sizes, shapes, and proportions. Section 401 of the Food, Drug, and Cosmetic Act, and section 5 of the Federal Trade Commission Act together provide existing authority to prevent the use of containers that deceive the consumer on the amount the package holds.

As I have pointed out previously, the standardization that would be authorized under section 3(c) (2) would stifle initiative in developing improved containers that offer important benefits to the consumer.

As an example of this initiative, our company will have spent in excess of $400,000 to develop and to put into production a new easier to grip container for salad oil. Our surveys showed that housewives prefer this new container 3 to 1 over the conventional container, especially in the larger size. We believe this new container will increase the housewives' satisfaction with our product and result in greater sales for us.

In another example, we have spent large amounts to provide for the housewife wider mouth, shorter mayonnaise bottles so that she could avoid the "mayonnaise knuckle" she used to get trying to scrape the last bit out of the jar. In the past, the consumer wanted the jar to use for home canning; with the lessened interest in home canning, she wants the convenience of the new jar. We need the flexibility to give her what she wants.

Sometimes a new, nonconventional package provides a product of greater use to the consumer. For example, the aerosol can of Niagara starch lets the housewife starch just the collars and cuffs of her husband's shirt. That's certainly both easier and quicker than starching the whole shirt just to have starched collars and cuffs.

Similarly, Bosco milk amplifier in a pourable jar is not only easier to handle than the old spoon-it-out jar, it encourages children to use more of other nutritious products, particularly milk. Thus it makes mother's life easier.

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Innovation and promotion of new packages is a legitimate part of the "product mix" and the profitable performance of manufacturers. It results in benefits to consumers, to farmers, and to labor as well as to the manufacturer and his stockholders. All will be hurt by the standardizations permitted under section 3 (c) (2).

Please understand that we have no objections to voluntary standardization by an industry. We have participated in voluntary trade agreements on package sizes for margarines. But because it was a voluntary standard, when whipped margarine was developed, the manufacturer was able to move quickly to test market a new package size. There were no applications to be filed, no hearings to go through. That is the advantage of voluntary action.

Proposed section 3 (c) (4) provides for regulating the size of "servings" designated on packages.

Who,

The basic question is, "Who should decide the amount of a 'serving'?" for example, is to say how large a "cup" is? There are "cups" ranging from 4% to 10 ounces in size. Soup plates range from 6 to 10 ounces in capacity. And I, for one, do not eat the same size portion of vegetables as I do of pie or cake.

The best that can be done is to provide a guide for the consumer. Based on the experience of our home economists, we indicate a reasonable average serving or use. But we leave it to the housewife to decide what a "serving" is when her husband eats two 6-ounce bowls of soup, while her daughter eats only 3 ounces. She is used to making these "guestimates"; she had to do the same thing when she bought the raw ingredients herself.

We do not believe we can regulate the size of "serving," and we do not think the Government should try to either. It has to be an estimate based on consumer surveys and the results of the work in our test kitchens. The work we do must lead to acceptability by the housewife. However, since the housewife is going to hold us responsible in any event, we believe we should have the right to use our best judgment, rather than being forced to use the estimate of a Federal administrator.

SUMMARY

Before summarizing the reasons for our opposition to S. 985, we acknowledge that testimony on predecessor bills made the point that there has been some weakness in the self-policing of the consumer product industries. But-even if this were true-the answer is not in S. 985. For S. 985 is restrictive— rather than giving the consumer the opportunity for more rational choices, it will reduce her freedom of choice; rather than increasing fair competition, S. 985 will reduce it.

This is indeed a licensing bill, not a regulatory bill. It will permit the Government to require prior Federal approval of normal marketplace decisions. And in the name of promoting "rational comparison" by the consumer-a difficult, if not impossible, task in any event-it calls for an unprecedented delegation of Congress lawmaking power to nonelected officials.

What is to be accomplished by this licensing procedure? Little that is to the consumer's advantage. S. 985 unnecessarily duplicates existing Federal and State laws prohibiting deceptive packaging and requiring prominent indication of the net contents of packages.

In minimizing nonprice competition, S. 985 ignores the valid competition based on quality; it ignores competition among different types of products; it ignores competition based on more convenient packages; and it ignores the fact that there are legitimate reasons for multiplicity of sizes and shapes in packages.

Little wonder that there is growing industry opposition to the philosophies expressed in this bill. S. 985 would restrict the packaging innovations which have helped the consumer products industries play a vital role in the Nation's economic growth. And S. 985 would prohibit nondeceptive competitive practices which save money for the consumer at the same time that they create additional business for the retailer and the manufacturer.

Many of the product improvements which have benefited the consumer and which have contributed to Corn Products' growth would have been hampered in commercial development if an S. 985 had been the law of the land. This would be detrimental not only to us but to consumers, to labor and to farmers. Furthermore, if S. 985 is passed, it will lead directly to higher costs, which industry will have no choice but to pass on to the consumer-defeating one