Cochairman CELLER. They will be here and we will get their atti

tudes.

Mr. KEATING. They are going to testify? We do not have letters from them?

Cochairman CELLER. That is right.

The next witness will be our colleague Lee Metcalf from Montana.

STATEMENT OF HON. LEE METCALF, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MONTANA

Mr. METCALF. Mr. Chairman, I appreciate this opportunity to represent Montanans on behalf of legislation to return to the Federal Trade Commission its jurisdiction over unfair trade practices in the meatpacking and related industries.

If there were any doubts about this legislation, they were dispelled by the recent ruling of FTC Examiner Frank Hier in the Food Fair

case.

You will recall that Mr. Hier held that the Federal Trade Commission has no power to act against Food Fair stores, because this grocery chain operates a meatpacking plant. The Department of Agriculture has exclusive jurisdiction over meatpackers, Mr. Hier ruled, and this jurisdiction extends even to a packer's nonpacking operations.

Mr. Hier recommended dismissal of a 17-month-old FTC complaint against the supermarket chain for an alleged violation of the Robinson-Patman amendment to the Clayton Antitrust Act.

As I read the Packers and Stockyards Act of 1921, Mr. Hier ruled correctly. This act did take away from the Federal Trade Commission jurisdiction over unfair trade practices in the meatpacking and related industries and gave it to the Secretary of Agriculture.

As I read this law, and as Mr. Hier read it, a nonpacker can buy a packing plant and, by so doing, transfer his operations outside the jurisdiction of the Federal Trade Commission.

The Carnation Milk Co. did it. So did Food Fair, a supermarket grocery chain of more than 200 stores doing an annual business of almost $500 million. By investing $2,700,000 in a meatpacking plant, Food Fair took a corporation doing almost $500 million in business a year outside FTC jurisdiction.

As this law reads, the United States Steel Corp. could buy a packing plant and, by so doing, could remove many of its operations from Federal antitrust regulation, except by the Department of Agriculture. So could the Standard Oil Co. or any other company.

Now the Department of Agriculture does not have the authority to administer either the Clayton Act or the Robinson-Patman amendment. Furthermore, the enforcement provisions of the Packers and Stockyards Act relating to monopolistic acts and unfair competition were ignored by the Department of Agriculture until it became apparent that the sponsors of the legislation now before you meant business.

In the public interest, I would have each of the agencies concerned get on with its own business-the Federal Trade Commission exercising jurisdiction over unfair trade practices, the Agriculture Department retaining responsibility for supervising agricultural markets.

This existing loophole is a threat to our competitive free-enterprise system. This Congress should close it.

Our next witness will be Mr. E. F. Forbes who will address us on behalf of the Western States Meat Packers Association.

Mr. Forbes.

STATEMENT OF E. F. FORBES, PRESIDENT AND GENERAL MANAGER, WESTERN STATES MEAT PACKERS ASSOCIATION, INC., SAN FRANCISCO, CALIF.; ACCOMPANIED BY L. BLAINE LILJENQUIST, WASHINGTON REPRESENTATIVE, WESTERN STATES MEAT PACKERS ASSOCIATION, INC., WASHINGTON, D. C.

Cochairman CELLER. Mr. Forbes, if you have a statement would you care to read it without interruption?

Mr. FORBES. It will be all right to interrupt me. I am only going to read a portion of it.

Cochairman MACK. I thought it would be appropriate to include a statement of our colleague at this point following Representative Metcalf's testimony. I have a statement from our colleague E. Y. Berry, which I would like to have included in the record.

Cochairman CELLER. Without objection, the statement will be re

ceived.

(The statement referred to is as follows:)

STATEMENT OF HON. E. Y. BERRY, A REPRESENTATIVE IN CONGRESS FROM
THE STATE OF SOUTH DAKOTA

Mr. Chairman and gentlemen of the committee, I appreciate this opportunity to appear before the joint hearing of the Antitrust Subcommittee of the House Judiciary Committee and the Commerce and Finance Subcommittee of the House Interstate and Foreign Commerce Committee in support of my bill that would transfer jurisdiction over unfair trade practices in the meat packing industry from the Department of Agriculture to the Federal Trade Commission.

Out in the heartland of this great Nation is an area appropriately called the breadbasket of the country. The State of South Dakota is part of that great

area.

A principal topic of conversation out in the heartland these days is the cost-price squeeze that has caught many farmers and ranchers in its devastating grip. It has been caused by an increase in the price of things the farmer and livestock operator must purchase in order to operate and a reduction in the price of things the farmer has to sell.

It was Benjamin Franklin who, in talking about the weather, said that everyone talks about it but no one ever does anything about it. I am deeply interested in doing everything I possibly can as a Member of Congress to relieve the pressure of the cost-price squeeze.

In light of the poor economic position in which many livestock producers find themselves, it is imperative to provide as many marketing alternatives for producers as the nature of the industry will permit, for fair, competitive bidding gives producers the best possible prices and insures quality for the consumer. I wish to stress at the outset that the problem is not so much one of correcting monopoly, but rather preventing unfair trade practices which will serve to eliminate competition and thus create, or tend to create, monopolistic control.

According to the joint statement issued by Chairman Celler of the House Judiciary Committee and Chairman Mack of the Commerce and Finance Subcommittee of the House Interstate and Foreign Commerce Committee, your committee will hear testimony with regard to two problems, among others, which have arisen under the provisions of the Packers and Stockyards Act of 1921, as amended. The two problems are

(1) Whether the responsibilities of the Department of Agriculture relating to trade practices of packers should be transferred to the Federal Trade Commis

sion. At present, these responsibilities are merely incidental to a host of other responsibilities discharged by the Department. For years the Department of Agriculture has not received any appropriation earmarked specifically for the enforcement of the antitrust provisions of the Packers and Stockyards Act.

(2) The exemption of meatpackers from the provisions of the Federal Trade Commission Act was highlighted in an initial decision of a hearing examiner of the Federal Trade Commission on April 11, 1957, in the Food Fair Stores case (FTC docket No. 6458 (1957)). Under this decision the Federal Trade Commission would be ousted from jurisdiction over alleged unfair trade practices engaged in by a grocery chain because that chain owns an interest in a meatpacking plant. This would enable any company, no matter what its primary line of business, to escape from the provisions of the Federal Trade Commission Act and other acts administered by the Federal Trade Commission by making a minimal investment in a meatpacking operation.

In other words, the principal purpose of this bill is to place in the hands of the Federal Trade Commission the enforcement of the antitrust features without in any way affecting the Department of Agriculture operation and the regulation of the balance of the Stockyards Act.

Hearings held before Congress indicate that the United States Department of Agriculture has done a good job in regulating the stockyards and administering the balance of the Stockyards Act.

But the USDA is not equipped, and has not been equipped, to enforce the antitrust features of the Clayton Act or the Federal Trade Commission, and has not been able to do the job needed under the Packers and Stockyards Act. Testimony before the Senate committee last month seemed to emphasize the need for enforcement being left to an enforcement group which is trained and has the background and the detachment necessary to carry on the work of this kind. The Packers and Stockyards Division of the Department of Agriculture has only four persons to regulate the third largest industry in this country. The Federal Trade Commission, on the other hand, prior to 1921, at which time the transfer of enforcement authority was made to the Department of Agriculture, was vigorously investigating monopolistic practices among the packers and presently has the staff and experience to do the job most efficiently for the taxpayers.

The transfer of jurisdiction from the Federal Trade Commission to the Department of Agriculture was made in 1921 when proponents argued the meatpacking industry was the largest in the Nation and deserved a governmental division of its own. Prior to 1921, the Justice Department brought antitrust suits against the Big Five packers and since that time there have been no proceedings, and many of the packers find themselves requesting the transfer of enforcement authority to protect small packers, cattlemen, and the consumer from unfair trade practices.

I wish to stress that my testimony should in no way be construed as an attack on big business, which has provided many of our living comforts through economies of production and the ingenuity of the free-enterprise system. But big business must not use superior bargaining power and economic resources in a manner not consistent with the public interest, and it is the responsibility of Congress to see that adequate safeguards are taken providing for necessary law enforcement of the packing industry.

The history of this legislation is briefly this: Back in 1915 Congress became determined something should be done with the meatpacking industry that would prevent the Big Five packers from fixing prices to the stockmen on the one hand and prices to the housewife upon the other. The situation at that time was similar to what has evolved today with the packers growing so strong that the little operator disappeared to a large extent. The integrated operations controlled the stockyards at the beginning of the chain of business and controlled the distribution of the finished meat product in the butcher stores of the Nation. Just before 1920 the Federal Trade Commission started several actions against the principal packing companies of the Nation on the grounds of restraint of trade. These actions were pending when the Packers and Stockyards Act was passed in 1920, at which time section 2 was inserted into the law providing that jurisdiction over the meat packing and distributing industry would be taken from FTC and assigned to USDA.

Since that time, over 30 years, not one single action has been commenced by the Department of Agriculture against any phase of the packing industry charging any of the companies with restraint of trade.

With this background and in connection with the so-called cost-price squeeze, which I mentioned earlier, it is interesting to make a comparison between falling receipts of the producer and the increasing profits of the processor.

The facts pointed out in the April issue of the Economic Indicators, published by the Government Printing Office for the Joint Economic Committee of the House and the Senate by the President's Council of Economic Advisers, shows, for example, that the farmers' income has been steadily falling from $15.9 billion in 1948 to $11.8 billion in 1956.

If we compare the farmers' net income with the national income, which is the national income of all businesses and all individuals, we find that in 1946 the farmer and rancher had 9.7 percent of the national income. Today the farmer has found his proportion dropping by 50 percent-not 9.7 percent of the national income, but 4.7 percent of the national income is what the farmer and the rancher get now. This is a drop of 5 percent in the actual amount which the farmer receives, and of course it represents a 50-percent reduction over the past 10 years.

In addition to these figures, the figures shown on page 3 of the Economic Indicators for the month of April 1957, have great significance. The proprietors' income fell from over $15 billion to something over $11 billion. While that was falling, corporate net profits were increasing. On page 3 of the same publication, under the heading "National Income," we find that in 1948 corporate profits amount to $30.6 billion. In 1956 they amounted to $40.9 billion. The profits before taxes increased from $30.2 billion in 1948 to $43.4 billion in 1956.

With these facts as they are, it is incumbent upon Congress to do everything possible toward insuring that competitive marketing outlets will exist for the farmers and ranchers of this country unless the pressure of the squeeze becomes even more acute.

In cosponsoring H. R. 5454, I do not intend to cast reflection upon any particular firm now doing business in the slaughtering or meat processing industry. Rather I have been prompted to join in sponsoring this legislation for two major reasons:

First, in light of the poor economic position in which most livestock producers find themselves, and the tremendous increase in direct buying from livestock producers, I believe it is imperative that proper scrutiny be maintained over the trade practices of firms slaughtering livestock and processing and distributing meat products so as to permit the existence of as many marketing alternatives for producers as the nature of the industry will permit. Fair competitive bidding should give producers higher prices than otherwise would be the case. And such competition can exist only where producers have marketing alternatives.

Second, I believe it is in the public interest that FTC control be extended over packers which enter into other sideline businesses-businesses which now escape such control because of USDA inaction, but whose competitors are subject to FTC control. The same need for public control applies to food firms, especially food chains, which now can acquire packing plants, or a substanial interest in one, and thus escape FTC supervision over their entire operations.

I shall discuss these two reasons in some detail at this point:

Several million farmers, ranchers, and stockmen produce meat animals for market. With respect to cattle, the bulk of such animals are marketed during a period of a few weeks each fall. Most producers, especially in the great western range States, as you know so well, must market their animals at that time regardless of the prices offered, because they either do not raise enough feed to carry the stock until prices are more to their liking, or they cannot afford to buy feed for that purpose. A great number-essentially the small operators must sell at that time in order to meet pressing financial obligations. As you know, most ranchers operate on a basis of "borrow it in the spring and pay it back in the fall." Still others must sell during the fall marketing season in order to meet the costs of daily living.

In recent years, these forced fall marketings have been even heavier than normal, because of the effects of drought and the cost-price squeeze. High livestock numbers, caused by excessive feed grain production on lands diverted from wheat and cotton production under the price support and acreage allotment and marketing quota programs, also have contributed to heavier marketing nd low prices. These factors combined, have served to virtually eliminate any

bargaining power which producers might have had under more normal conditions. Especially is this true in light of the increase in direct buying over the past 10 years from livestock producers. For example, whereas in 1946 the largest overall packer purchased directly from producers 20 percent of the cattle it slaughtered, this figure had increased to 32.7 by 1956. Whereas the same firm purchased directly 37.1 percent of the calves it slaughtered in 1946; in 1955 it purchased directly from producers 52.1 percent. There has also been a marked upward trend in direct buying by the next 9 largest overall packers during the past 10 years.

On the buyers' side of the market, by contrast, we find that less than 500 federally inspected plants-which for the most part are not individually owned firms, I might add-and less than 1,000 nonfederally inspected plants are engaged in slaughtering and meat processing. It also should be noted that 10 national concerns which own the bulk of these plants, slaughter approximately 50 percent of the cattle, 66 percent of the calves, 70 percent of the hogs, and 77 percent of the sheep coming under Federal inspection.

My statement is not to be construed either as a criticism of the personnel of the Trade Practices Section of the Packers and Stockyards Branch of the Department of Agriculture. For many years there has been an almost complete lack of action to comply with the congressional mandate given the USDA in 1921 to prevent unfair trade practices in the meatpacking industry.

The simple facts are that the Packers and Stockyards Branch has no enforcement staff for administration of the fair-trade practices provisions of title 11 of the act relating to packers. Testimony given to this subcommittee by a former head of that branch indicates that it cannot even investigate complaints, let alone take effective action. The Packers and Stockyards Branch does not even require packers to submit reports containing data which is most essential in the detection of unfair trade practices.

As the Department indicated in its report on the Packers and Stockyards Act: "The annual reports of meatpackers are received by the 20 district offices that are maintained by the Packers and Stockyards Branch * * *. Information contained in these reports is primarily concerned with ownership, organization, and financial condition ***" The annual reports of the top four packers are forwarded to the Washington office of the branch where they are retained in a permanent file.

Although the anual reports of packers are received, there is no tabulation or statistical analysis made of the information contained in them for the purpose of determining industry trends, problems, or conditions.

One might logically ask, as a result: For what purpose are these reports reviewed? Why are they not reviewed for the purposes of determining industry trends, problems, or conditions: Why even require reports in the first place unless they are reviewed in order to carry out specific objectives of the Packers and Stockyards Act?

As concerns title II, the Department is charged with the responsibility of preventing unfair trade practices by meatpackers, yet these reports do not even require packers to show losses on their meat, nonmeat food products, and nonfood product operations. Yet such information generally is essential to determine whether a firm is absorbing losses in one area in order to eliminate competitors, but making up the loss in other areas where it already dominates the market. If none but the reports of the top four packers are sent to Washington, how could the Department ever detect various market-sharing arrangements which limit competition for livestock and mean lower prices to producers? The odds are that it could not make such a detection, let alone produce evidence sustainable in a court of law.

There has been another abuse in the basic law in that food chains and other nonpacker firms have been purchasing small interests in packing plants or similar processing facilities so as to become exempt from FTC jurisdiction by placing themselves under control of the Packers and Stockyards Branch.

Such a situation is well illustrated by the United Corporation, et al. v. FTC, case (110 Fed. (2d) 473). In this instance, action was brought against the corporation which then was engaged in the sale and distribution of canned meat products. After the FTC had filed its petition, the defendant corporation acquired an interest in several packing companies. It then filed a motion for dismissal of the FTC complaint on the grounds that it was a packer, and thus not subject to the jurisdiction of the FTC. The court granted the defendant's petition, saying that Emmart Food Products Co., by acquiring stock in Montel, Inc. became a packer within the meaning of the Packers and Stockyards Act