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PART D

THE BELOW COST STATUTE AND FAIR TRADE LAW:

NEED FOR REPEAL

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The Commission has recommended elimination of the Below Cost Statute as it applies to milk. This recommendation is incorporated into the Milk Control Commission Bill (Exhibit 3).18 The Commission believed that total abolition of the Below Cost Statute, M.G.L.A. c.93 $ 14F, as amended, or the Fair Trade Law M.G.L.A., c.93, 88 14A-14C, as amended, was not within the power delegated to it. However, for several reasons this Commission strongly recommends that both laws be repealed.

Chapter 93, section 14F, is part of the Unfair Sales Act and prohibits the below cost sale of all items. In effect, this inhibits effective competition at the retail level, due to the breadth and vagueness of its provisions and the uncertainty surrounding its enforcement. It is arguable that there was a need for this statute when it was originally conceived some 30 odd years ago. However, stimulating low cost sales will increase competition, provide the consumer with better value and generate sales and sales tax as well. Yet the retailer would still be protected from unfair sales practices by the provisions. of the Consumer Protection Act, M.G.L.A. c.93, & 1 and 2. If a retailer wishes to increase competition and sales by lowering the price of his goods, there is not sound reason why he should be prohibited from doing so.

Joined with the Below Cost Statute is the Fair Trade Law which allows companies to dictate the price of retail goods. Sections 14A and 14B of Chapter 93 give this practice statutory sanction. Setting minimum prices for products can only harm the consumer, by forcing him to bear the brunt of contracts made between retailers and manufacturers.

The Fair Trade Law also eliminates any vestige whatsoever of competition, because it establishes price rigidity from store to store. As in the case of the Below Cost Statute, the Fair Trade Law is a creature of the depression when such steps may have been necessary in order to protect business. But with prices rising dramatically, consumers can no longer afford the luxury of these so called "protective laws”, which protect business and not the consumer. Little or no negative impact would result from the abolition of this law, since it simply means that prices now frozen by manufacturers would

be allowed to seek a level established by an open and fair competitive system.

13 See p. 249.

The Commission strongly believes that unless this statutory Fair Trade Law, as well as any common law based fair trade laws are repealed, consumers will continue to pay excessive prices for products in the open market. It is the Commission's considered belief that the State should remove these statutory controls as soon as possible. EXHIBITS

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