First, in 1955, dairy farmers received $1.3 billion from the sale of beef and veal for slaughter from their herds. This constitutes approximately 25 percent of the farm income from all cattle and calf marketings.

The Department of Agriculture is rendering an important and valuable service to livestock producers in this respect. It is the agency best qualified to administer the stockyards portion of the Packers and Stockyards Act. We would like to see its staff and funds increased so it could do an even more effective job and could extend its supervision to all stockyards covered by the act. Consideration should be given to extending the coverage of the act to additional yards. We believe sincerely that the interests of livestock producers will be better served if the Department concentrates its efforts and funds in this field, unhampered and undiverted by responsibilities in a field more nearly related to that of the Federal Trade Commission.

Congress is looking for ways to reduce the budget-not increase it. The Federal Trade Commission handles these cases in their regular course of business. It is obvious that the Department of Agriculture would have to establish a unit which would involve many people and would certainly require an additional appropriation to do this job.

It is difficult to escape the conclusion that those who support this position that additional funds must be raised to do a duplicate job in the Government must have some ulterior motive when they desire business to be regulated under two administrative departments of the Government.

Second. We are concerned directly with the oleomargarine advertising amendment to the Federal Trade Commission Act (15 U. S. C. sec. 55 (a) (2)). That amendment, in effect, prohibits the use in oleomargarine advertisements of dairy terms and phrases which represent or suggest that oleomargarine is a dairy product.

The object of that legislation is to require oleomargarine to be advertised and sold on its merits, without trying to capture the consumer acceptance and goodwill of the dairy farmers' product. It provides a special standard, and a very good standard, for oleomargarine advertisements. The Federal Trade Commission is doing an excellent job of administering this law; and, as a result, most oleomargarine advertising is now on a higher plane.

The Federal Trade Commission has ruled, in a case against Armour & Co. involving the advertising of Cloverbloom 99 oleomargarine, that packers are not subject to the oleomargarine advertising provisions of the Federal Trade Commission Act. Although there are general provisions in the Packers and Stockyards Act relating to unfair and deceptive practices, these provisions are not as strong and specific as those relating to oleomargarine advertising in the Federal Trade Commission Act. While it may be that the Department will be able to regulate oleomargarine advertising by packers, and an effort along that line is being made, we are concerned that the degree of regulation may be less effective. This could result from a difference in the wording of the law under which the Department acts or from the lack of adequate staff and funds in the Department for enforcement.

After the Armour case was dismissed by the Federal Trade Commission March 30, 1956, the file was referred to the Department of

Agriculture for consideration under the Packers and Stockyards Act. It is our understanding that the Department has investigated the case and is considering the issuance of a complaint to test the effectiveness of that act.

Thus, we are faced with a condition under which nonpacker advertisers may be under one set of rules while packer advertisers may be under a less restrictive law. We believe that all oleomargarine advertisers, packers and nonpackers alike, should be subject to the same rule, administered by the same agency. The rule prescribed in the Federal Trade Commission Act is fair and effective, and the Federal Trade Commission is well equipped through years of highly specialized experience to handle its enforcement.

Third. Dairy cooperatives are in competition with packers and chain stores in the merchandising of dairy products. They are protected by the Federal Trade Commission against unfair trade practices by competitors other than the packers and such of the chain stores as qualify as packers under the Packers and Stockyards Act.

Competitors who qualify as packers are immune from action by the Federal Trade Commission, and the Department of Agriculture has been hampered in its enforcement of somewhat similar provisions in the Packers and Stockyards Act by lack of adequate funds.

Dairy cooperatives are themselves subject to the Federal Trade Commission Act and find themselves subject to a degree of regulation not applicable to their packer competitors.

The ice cream cases furnish a current example of the harm that can result from such a situation. The Federal Trade Commission began an action in 1954 to force a discontinuance of such trade practices as the furnishing of credit, cabinets, discounts and so forth, by ice cream manufacturers to retail outlets. Large and well-financed companies, by such practices, are in a position to attract customers away from smaller companies unable to offer similar services. In like manner, if the packers are permitted to use these practices while nonpackers are not, the packers are placed in a position to undermine the business of their competitors.

Complaints were issued by the Federal Trade Commission in February 1954, and hearings have been held beginning in 1954 and extending down to the present time. No initial decisions or orders have been entered as yet in any of these cases. The Department of Agriculture issued a similar complaint against Swift & Co. under the Packers and Stockyards Act in January 1955. Hearings on this complaint are expected to begin June 18. Thus we have 2 different agencies conducting 2 different investigations under 2 different laws to stop the same unfair trade practices.

The most effective way to correct this, it seems to us, is to make all ice cream manufacturers, packers and nonpackers alike, subject to the same law, administered by the same agency. You will hear, or no doubt have heard, that all agricultural products should be taken care of, and various regulatory provisions dealing with agricultural products administered, by the Department of Agriculture, and not by another agency of the Government.

This argument, it seems to us, must have some hidden meaning since it is applied only to the Packers and Stockyards Act. Why is it that only some of the large packers are unhappy with the Federal Trade Commission's regulation of trade practices? The food industry gen

erally is willing and happy to be regulated by the Federal Trade Commission and a great number of food industries have or will testify before this committee to that effect. What motive can some of the packers have for wanting to be regulated by the Department of Agriture? One reason must be that these groups realize the Department of Agriculture does not have the money, that there is very little likelihood that the additional funds will be forthcoming, and that, therefore, they will remain unregulated with respect to trade practices.

Possibly one of the strongest arguments in favor of this legislation is the strong opposition of the big packers.

One of the arguments being advanced in opposition to this legislation is that the Secretary of Agriculture needs to control the marketing and other activities of packers to enable him better to enforce the stockyards provisions of the Packers and Stockyards Act. We are unable to see the merit of this argument. Although the provisions of title II have been available, the Secretary's report of April 4 does not disclose that any great use has been made of them in the last 35 years. The exemption they give the packers from FTC control is much too high a price to pay for any effectiveness they may add to the livestock provisions of the act. If more authority is needed for effective control of livestock marketing, the authority should be provided directly by strengthening the livestock provisions of the act.

Now, it was testified before the Senate Judiciary Committee that a transfer of title II would take from the Secretary the authority he needed to police and regulate country buying plants. It was also testified by the Department that a very small, minor adjustment and amendment to title III could readily remedy this situation. We would like to have the Department suggest the amendment that they feel they need. We would strongly support it just so long as it did not affect the Federal Trade Commission's actions with respect to trade practices.

Increased activities in the unfair trade practices field by the Department of Agriculture are being planned and additional funds for administering title II are to be requested of Congress in the Department's next budget request. We believe it would be a mistake to build up a "little FTC" within the Department of Agriculture, partly because it would be wasteful duplication and partly because it would still leave unresolved the inequality inherent in different laws administered by different agencies.

Substitute legislation in the form of H. R. 7743 has been introduced and is now pending before the Agriculture Committee.

This bill does not reach the real issue before you, namely, what to do about the exemption from the Federal Trade Commission Act which the big packers have enjoyed for 35 years. The big packer exemption is fully preserved in H. R. 7743, unmolested in the slightest degree. Packers "with respect to any activity" would remain subject to the Packers and Stockyards Act and be free of FTC control.

One provision of H. R. 7743 would remove the FTC exemption for chainstores, although a subsequent provision appears to restore it. One of the results of taking the chainstores out of the exemption would be that it would stop focusing attention on the packer exemption.

H. R. 7743 would retain for the Secretary of Agriculture control over packing plants where the corporation owning or operating the plant is principally engaged in the packing business, but the Secretary

would not have control over plants not principally engaged in the packing business. This would further aggravate, instead of correcting, the situation by extending the unequal application of different laws administered by different agencies to packing plants, some plants being subject to control by the Secertary and some to control by the FTC.

We are particularly concerned with the proposal in H. R. 7743 to extend the Packers and Stockyards Act beyond packers and live-poultry dealers to include "any other person with respect to buying livestock or live poultry for purposes of slaughter."

This would appear to make it possible for any corporation to become subject to the Packers and Stockyards Act by the simple expedient of buying a few chickens or livestock now and then for purposes of slaughter and sale in interstate commerce. The only control which the Secretary would have over such a corporation would be related to buying the livestock or live poultry, and there are no enforcement provisions in H. R. 7743 even for this limited control.

Having thus made itself subject to the Packers and Stockyards Act, the corporation would automatically become exempt from the Federal Trade Commission Act under section 5 (a) (6) of that act (15) U. S. C., sec. 45 (a) (6)). The FTC exemption applies to the corporation and not just to the matters covered by the Packers and Stockyards Act. The unfair trade practices of the corporation, therefore, would be free of control by either FTC or the Secretary.

It has been suggested that the Federal Trade Commission be authorized to proceed against unfair trade practices under the Packers and Stockyards Act when requested to do so by the Secretary of Agriculture. But no action could be brought against a packer unless the Secretary gave his permission. We are unable to see that this would accomplish anything. What is needed is to make meatpackers subject to the Federal Trade Commission Act and to the Federal Trade Commission action whenever they violate the law.

In conclusion, we would like to see the Department of Agriculture continue to concentrate its funds and efforts in administering the stockyards provisions of the Packers and Stockyards Act. There is much work that yet remains to be done in this field. It is our belief that the interests of farmers will be better served if the Department's activities are unhampered and undiverted by responsibilities in fields that are more properly the province of the Federal Trade Commission. At the same time, the inequity that currently exists from the freedom from regulation enjoyed by the packers and some of the chainstores must be terminated. The practical and effective way to do that is to make them subject to the Federal Trade Commission Act and to Federal Trade Commission action on equal terms with their competitors.

We urge these committees most earnestly to approve legislation to accomplish these objectives.

Thank you.

Cochairman MACK. You referred several times to the Secretary's report of April 4. I think that is the report on current activities and problems under the Packers and Stockyards Act.

Mr. NORTON. Yes, sir.

Cochairman MACK. I think it would be advisable to include it in the record at this point.

Mr. NORTON. May I request that you do so.

(Mr. Norton's prepared statement and the document referred to are as follows:)

STATEMENT OF E. M. NORTON, SECRETARY NATIONAL MILK PRODUCERS FEDERATION

The National Milk Producers Federation is a national farm organization. It represents over half a million dairy-farm families and some 800 dairy cooperative associations which they own and operate and through which they act together to process and market at cost the milk and butterfat produced on their farms.

Federation policies reflect the thinking of American dairy farmers. Our bylaws require that at least 75 percent of our board of directors must be actively engaged in dairy farming, the remainder being officials of farmer-owned and farmer-controlled dairy cooperatives.

Our resolutions on national issues are developed and adopted at annual membership meetings. Dairy farmers reflecting the viewpoint of all sections of the United States and all phases of the dairy industry attend and participate in these meetings.

Dairy farmers and dairy cooperatives are directly affected by the legislation being considered at this hearing. The matter was discussed at our last annual meeting and a resolution adopted favoring the extension of the Federal Trade Commission Act to the activities of packers other than those activities relating to livestock transactions.

Forty years ago, in 1917, Congress was concerned with the problem of monopoly in the meatpacking industry, and hearings were held in both Houses on bills to restrict the activities of the dominant packers. Although no legislation resulted from those hearings, the problem was brought to the attention of he public, and the President ordered an investigation to be made by the Federal Trade Commission.

The report of the Commission indicated that the big meatpacking firms had almost complete control of the trade, from the producer to the consumer. The Department of Justice instituted action as a result of which the large meatpacking firms entered into a consent decree in 1920 which required them, among other things, to divest themselves of their stockyard properties, to get out of the retail meat markets, and to refrain from the buying and selling of fresh milk and cream.

In 1921, Congress passed the Packers and Stockyards Act giving the Secretary of Agriculture authority to regulate stockyards and at the same time conferring upon him authority to police the trade practices of the packers. Packers were thereupon exempted from regulation by the Federal Trade Commission.

As a result of this legislation, Congress achieved a part of its objective in that regulation of the stockyards has brought about many important and beneficial results at the level of livestock sales. But in a very important sense, the Packers and Stockyards Act defeated its own purpose by granting to the packers immunity from the Federal Trade Commission Act.

This immunity the packers have enjoyed for more than 35 years. How much harm may have been done, and how much farmers and consumers alike may have lost as a result of it, can hardly be estimated.

In a case upholding the validity of the Packers and Stockyards Act (Stafford v. Wallace, 258 U. S. 495, 42 S. Ct. 397) the Supreme Court said: "The chief evil feared is the monopoly of the packers, enabling them unduly and arbitrarily to lower prices to the shipper, who sells, and unduly and arbitrarily to increase the price to the consumer, who buys."

Although the Packers and Stockyards Act vested in the Secretary of Agriculture the authority to regulate the unfair trade practices of packers, appropriations have been inadequate and the primary concern of the Secretary has been in the administration of the provisions applicable to stockyards. As a result, for over 35 years, unfair trade practices of packers have received only minor and secondary consideration.

Thus, by an odd set of circumstances, the very act enacted by Congress to provide special curbs for the big packers has served for 35 years to shield them against effective regulation by the Federal Trade Commission.

A report issued April 4, 1957, by the Department of Agriculture shows that during the first 2 years under the act, 1922 and 1923, an organization was built up sufficient not only for regulation of the stockyards but also for a substantial