Some contend that when a dealer buys goods Ile may do with them as he pleases. The attempt to dic tate what he shall do with things that he owns is said to be an unwarranted intrusion on his private affairs. This argument is answered in two ways. The manu facturer first, may say: "The retailer is not selling his own goods in his own way. He is selling on the strength of my name, my advertising, my guarantee, my reputation, .which are back of the article. Surely I have a moral right to fix the terms upon which it shall go to the public. If he were selling the same article simply on the strength of his own name and ad vertising, the manufacturer would not care at what price he sold; but when Ile makes use of the natne, trade-mark and reputation of the maker to effect the sale, it is idle to say the manufacturer has no interest to be protected." It does not follow, others say, that even if the article sold is the sole property of the merchant, he may do with it whatever he pleases. There may be a public interest to be protected. There are many things a man owns which must be used, not solely as he wishes, but as the public interest dictates. If it is for the public good that the manufacturer be permitted to name the resale price, the public interest must out weigh the selfish interest of the dealer.
13. Does price maintenance mean high The charge is made that the only purpose of fixing prices is to fix a high price, but this has not been proved. Manufacturers who wish to control resale prices want only to maintain a fair price that will in sure profits to dealers, keep their continual good-will, and build up consumer confidence in the goods. Moreover, the fixed prices must be fixed in the face of competition ; they cannot be too high or the public will not buy.
Lists of standard articles with their prices have been prepared at various times, showing in one column articles on which an attempt is made to main tain prices, and in the other column competing ar ticles on which dealers make their own prices. The general level of prices in both columns is usually about the same.
14. Are fixed prices unfair to argument of those who do not believe in price mainte nance applies not to the dealer who uses cut-price leaders to get people into his store, but to the mer chant who claims such unusual buying connections and such unusual efficiency in operation that he can always sell all of his goods below the normal prices in his community. Assume that on a nationally ad vertised umbrella the manufacturer asks dealers to maintain a uniform price of one dollar. At this price it returns a gross profit of twenty-five per cent of the selling price to the retailer. Assume also that in the usual store the average expense of doing business is eighteen per cent of sales. The average dealer would make a seven-cent net profit on the sale of the dollar umbrella. Suppose, however, that there is one dealer in town who has cut his average cost of doing business to twelve per cent. If he, too, were to sell the umbrella at one dollar, his net profit would be thir teen cents, as compared with the seven-cent profit of his competitors. It is contended that it is not fair to this dealer to force him to sell at the same price as his competitors ; he should be granted the competitive ad vantage of offering the lower price which his efficiency makes possible.
This is one of the strongest arguments for the op ponents of price maintenance. There are, however, very few dealers who have any marked advantage in selling costs. If it is admitted, for the sake of argument, that they can cut on standard goods prof itably, this advantage to a few dealers must be weighed against the injury done to many manu facturers by the price wars that may be started and by the antagonism of the other dealers who cannot meet the cuts of the few.
It may also be noted that the margin on standard goods is usually comparatively small—indeed, is made so just to prevent the dealer from giving away his profit. When a dealer makes a marked cut he often makes no profit at all on the standard goods. IIe takes a loss on them, with the expectation of making it up on his own private brands or bulk goods, on which there is usually a big margin despite the seem ingly low price. This contention of the friends of fixed prices is not always pertinent. That it suggests the actual situation in many cases, however, is indi cated by the fact that many cut-price dealers, even when offering all goods continually at low prices, try to switch the demand for standard goods to articles bearing their own private brand.
Finally, it is maintained that the dealer who wants to cut continually can find plenty of goods to cut on without injuring the business of a national adver tiser. If he must cut on everything he handles, let him cease handling standard goods on which the manufacturer wants to maintain the price. There always have been and always will be many manufac turers who do not advertise their goods and who have no interest in maintaining standard prices. If the cut-price retailer answers this argument by saying that his customers demand standard goods, and that he must carry them, the dealer confesses that he can not make his store successful without standard goods in stock; and standard goods are standard only be cause the manufacturer, by maintaining a uniform quality and a uniform price, has created public confi dence in them.
15. Are fixed prices unfair to the public?—The most serious charge of the opponents of price main tenance is that it is unfair to the public. The simple fact is that when price cutting is permitted, the pa trons of the cut-price stores are often able to buy a twenty-five-cent stick of some standard, nationally advertised shaving soap, for instance, for nineteen cents. If the manufacturer wanted to maintain. the twenty-five-cent_ price, and if he were permitted to enter into agreements with dealers to that effect, the consumer would have to pay more for the goods.
In answer to this statement of an unquestioned fact, it is contended that often the consumer really gains nothing from the cut price on standard goods, because the loss or decreased profit on them is fre quently made up on other less known goods. More pertinent, however, is the argument that continued and unrestricted price cutting may eventually lead to monopolized retailing (this is to be discussed in the next chapter) ; that it may discourage many manu facturers from improving products and putting them on the market; and that it is likely to result in the breaking down of the present system of identified merchandise purchases, which are the tharacteristic features of modern marketing.