MEATPACKERS THURSDAY, JUNE 6, 1957 HOUSE OF REPRESENTATIVES, ANTITRUST SUBCOMMITTEE OF THE COMMITTEE ON THE JUDICIARY, AND SUBCOMMITTEE ON COMMERCE AND FINANCE OF THE COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE, Washington, D. C. in room The subcommittees met, pursuant to notice, at 10: 10 a. m., 346, Old House Office Building, Hon. Emanuel Celler (chairman of the Subcommittee on Antitrust) and Hon. Peter F. Mack, Jr. (chairman of the Subcommittee on Commerce and Finance) presiding. Present: Representatives Celler (cochairman), and McCulloch; Representatives Mack (cochairman), Moulder, Dollinger, Jarman, Bennett, Avery, and Alger. Also present: Herbert N. Maletz, chief counsel, Kenneth R. Harkin, cocounsel, Subcommittee on Antitrust of the Committee on the Judiciary; and Kurt Borchardt, counsel for the Committee on Interstate and Foreign Commerce. Cochairman CELLER. The committee will come to order. I understand that our colleague, Representative Dixon, has a statement which he wishes to place in the record. Am I correct in that, sir, or do you want to submit the statement now? Mr. DIXON. I would like a few minutes to testify. Cochairman CELLER. We will be glad to hear you. Members of Congress always have preference and we are very glad to give it to you. STATEMENT OF HON. H. A. DIXON, A REPRESENTATIVE IN CONGRESS FROM THE FIRST CONGRESSIONAL DISTRICT OF THE STATE OF UTAH Mr. DIXON. Gentlemen, I shall try to summarize briefly my statement and then ask for unanimous consent to place it in the record. Cochairman CELLER. You have consent to extend your remarks in the record. Mr. DIXON. My interest in this subject arose from almost a unanimous demand from the livestock people in the State of Utah. My district covers 25 counties. And wherever I went there was considerable dissatisfaction with the livestock transactions and complaints from livestock people that they thought there was not free trade and a free market. I am glad to support H. R. 5282, because I believe that the transfer of control of the packers and stockyards to the Federal Trade Com mission would be a big improvement and an improvement that the livestock people want. Now to summarize the chief reasons, I shall say as follows: First, that the meatpacking industry is an important industry in the American economy with a long antitrust history. Second, the American livestock producers are in a poor economic condition and need protection. Third, the Federal Trade Commission will be a more effective and economical enforcement agency than the Department of Agriculture. Fourth, the Federal Trade Commission actively defends primary producers, in other areas, and it would in this one. Fifth, the meatpacking industry is heavily concentrated and has high monopoly potentials. Sixth, the meatpacking industry has a history of market sharing. Seventh, the meatpacking industry is not a low profit industry. Eighth, the meatpackers engage in feeding operations and this is one that disconcerts our growers. The meatpackers engage in feeding operations which should be carefully examined. And, ninth, many firms not primarily packers, escape the supervision of the Federal Trade Commission by taking refuge under the existing Packers and Stockyards Act. This ninth one about escaping the supervision of the Federal Trade Commission, is another very important reason for this legislation. Now, first, as far as the meatpacking industry being a major industry is concerned, I shall hurry to say that nearly 4 out of every 5 farms raise livestock; that the consumer spends nearly 5 to 6 percent of his income for meat; that the Swift Co. is the seventh largest industrial corporation in America; and Armour is the ninth. Cochairman CELLER. Mr. Dixon, do you care to give us an idea of the nature of the unfair trade practices by meatpackers in the country buying of livestock? Mr. DIXON. The part, Representative Celler, that our people complain about most is the feeding operations. Cochairman CELLER. To be more specific, what do you mean by that? Mr. DIXON. They have feed lots and maintain that it is necessary to have these feed lots in order to get a steady flow and supply of meat, whereas our livestock people feel that they use these feed lots to manipulate the prices. Cochairman CELLER. Give us examples of such manipulation. Mr. DOLLINGER. Will you tell me what a feed lot is? As a farmer from New York, I do not know what it is. Mr. DIXON. They take what we call unmarketable grass fed or feeder cattle as they come from the range and put them in feed lots where they are fed grain and corn for fattening. Sometimes they are kept there a month, sometimes two, for fattening, usually not longer than 3 months in our area. Mr. DOLLINGER. They build them up? Mr. DIXON. And fatten them. And through the large numbers that they have in the feed lots they could, to a certain extent, control the market. When the market seems good but threatened with a decline they can push their own cattle into slaughter. Then they can buy in from the farmers when it is bad. Mr. DOLLINGER. In other words, they have the facilities or the money to hold out as long as they want to, unless there is a good market. And the farmer ordinarily cannot do that because he has not any facilities, and has to get money with which to farm; is that it? Mr. DIXON. Exactly. When our farmers get their cattle in from the mountains, they have nothing to do with them as a rule but to dispose of them almost regardless of the market. This was especially true of the 19 drought-stricken counties in Utah where there was little winter feed. Mr. McCULLOCH. I would like to ask about this. How many head of cattle in your State are fed out to packer-owned feed lots? Mr. DIXON. I am sorry, Representative McCulloch, I do not have the figures. Mr. McCULLOCH. There are a substantial number in your State, though, is that not right? Mr. DIXON. I believe I have in the testimony here data about the amount that Armour held in their feed lots. And I do know not only the packers but the chainstores do that. Safeway does it. We held a meeting with the Utah Cattle Growers Association officials in the capitol in Utah, and it was on this problem. While the meeting was in session Safeway's attorney came in and told us that Safeway had sold three of their packing plants and feedlot establishments. Mr. McCULLOCH. You feel then, do you, that there is some monopolistic danger in this vertical integration of large organizations? Mr. DIXON. That is what all of our growers feel, and the chainstores buy nearly 60 percent of our meat there. Mr. McCULLOCH. How many independent packing companies do you have in Utah, if you know? Mr. DIXON. We did have a large one at Ogden, Utah, the Ogden packing plant, but that was taken over by Swift. And that tendency is going on rather rapidly for these large companies to absorb this volume. We have one at Salt Lake City. McFarlane's. Mr. McCULLOCH. So you have few, if any, independent packing companies in the entire State of Utah; is that right? Mr. DIXON. I think there are a few, possibly three or four, smaller ones. Mr. McCULLOCH. Thank you. Cochairman CELLER. Following up the question of our distinguished colleague from Ohio, Mr. McCulloch, I would like to ask this ques tion: If the packers are operating these feed lots for the purpose of manipulating the prices, would not the Department of Justice have jurisdiction to proceed against them under the Sherman and Clayton Acts, because such processes tend to monopoly and to lessen competition? And that being so, the Department of Justice should go after these malefactors, if I may put it that way. Mr. DIXON. Someone should do it. I am not sufficiently informed on the legal problems. I understand that the packers are the only people that are not under the Federal Trade Commission. All of our other industries are. Cochairman CELLER. There are acts on the books already, the Clayton Act, and the Sherman Act, which cover these very practices, such as manipulations for the purposes of controlling prices. Those laws should be invoked against packers who are indulging in such practices. Mr. DIXON. Yes; I believe they should. But our growers all feel that they are not getting protection. Safeway, for instance, has a big plant at Boise now and feed lots and packing plants. Our cattlegrowers are suspicious of those things. Safeway, I think, intends to go out of that. I hope so but they haven't, done it entirely yet. Cochairman CELLER. Do you know whether the people that you are speaking for have ever made complaints to the Department of Justice? Mr. DIXON. No; I do not. They have to me, every place I go. Cochairman CELLER. I think that it might be well for you to take it up with the Department of Justice. Mr. DIXON. Thank you, I think I should, too. I want to become better informed on just the machinery to take care of these things. Cochairman CELLER. I might say this. I have no right to speak for the Interstate and Foreign Commerce Committee, but I can say that our staff will be very happy to cooperate with you and help you along those lines. Mr. DIXON. Thank you, Representative Celler. Cochairman MACK. So will the Interstate Committee. Our staff will be available to you, to cooperate with you, and with the other staff. Mr. DIXON. It comes about due to the fact that the livestock people have to dump their cattle, their feeder cattle so quickly on the markets. They do not have much of a way to protect themselves. Mr. AVERY. May I ask a question at this point, Mr. Chairman? Mr. AVERY. I would like to ask a question at that point. You bring these cattle out of the mountains when, in August or September? Mr. DIXON. In September and October, early part of October. Mr. AVERY. Are they normally put on feed at this time or are they fat cattle? Mr. DIXON. They are not considered such. They would not be accepted as choice or prime at all. And the chainstores will not take anything under the "choice" grade. Mr. AVERY. All right. Let us go on from there. Is the problem then that the only market you have is the feed lots that the packers and the chainstores maintain? Normally cattle of that class would go to the stocker and feeder markets of Denver, Kansas City, or Omaha or cities on the west coast. Why are you restricted to that one particular market? Mr. DIXON. I did not want to infer that we were restricted to that one market, Representative Avery. I imagine maybe the bulk of them go to different centers to be fed and fattened. Mr. AVERY. But this market at Salt Lake City-and we will confine this to Utah, now, and I thought you said Ogden-there is no central market as such there. It is just like you sell eggs in the store, you can take your cattle and offer them in the commercial feed yards there, or do they have an open market where you have different bids? Mr. DIXON. They have an open market. Mr. AVERY. Similar to Denver or other places? Mr. DIXON. Yes. And we have cooperative livestock producers, the Livestock Producers Cooperative. Mr. AVERY. You have a market, but you do not have very many buyers, is that the point? Mr. DIXON. That is it. The principal buyers that we have to rely on are in the packer field and, possibly, the chainstores; they are the two principal sources of outlet. The chainstores take about 60 percent. Now my second proposition is that the livestock producers are in poor economic condition. Beef in April was 75 percent of parity and hogs were 74 percent of parity. Our livestock people, in my opinion, have been greatly discriminated against through our support on all basic commodities, because they have no protection. They have been independent and want to operate on the free market. And they have suffered greatly. The Utah Cattle Growers Association and the National Wool Growers Association support this legislation that is before the committee right now. The third proposition is that the Federal Trade Commission would be a more effective and more economical enforcement agency than the Department of Agriculture. Our present Secretary of Agriculture, Secretary Benson, should be commended as he appears to be the only Secretary of Agriculture since 1925 who has indicated any noteworthy willingness to enforce title II of the Packers and Stockyards Act. He has promised to make a budget request for increased personnel for this purpose. Now, the Trade Practices Section of the Packers and Stockyards Branch has not been supplied with sufficient personnel to do the job. That is, in the Department of Agriculture. At present there are only 2 marketing specialists, and 1 secretary employed in the Washington office. Few of the field-office personnel of the Packers and Stockyards Branch are regularly employed in enforcing title II of the act. Most of the field personnel are doing a commendable job in enforcing title III of the Packers and Stockyards Act. That is, the weighing and seeing that the purchases are reliable, that the farmers get their money, and the carrying out of regulations. Furthermore, the Department of Agriculture does not request information which would be essential to an analysis of the market's manipulation. For example, the president of Western States Meat Packers Association wrote the Department of Agriculture last August 6 urging that they instruct packers to report information on such things as the profit or loss on fresh-meat operations, profit or less on edible packinghouse products, profit or loss on nonedible packinghouse byproducts, profit or loss on food operations, and so forth. The Department does not get this information. It is deleted from the questionnaires. So let us briefly consider an allegation that might be made that certain packers are losing money on fresh meat and packinghouse operations for the purpose of injuring competition and are sustaining their losses by profits on various other activities, such as ice cream, |
