Again, I would state that I see, from my standpoint, some implications here that I think are dangerous. I think they are counter to our American policy and our American philosophy. No. 1, as it relates to-we didn't get into it, and started to the "cents off." I think this again is a matter of certainly a prerogative of mine as a manufacturer to price my products and to promote my products, as long as I do it in an ethical fashion.

This is what I attempted to do.

Senator Bass. Any further questions of Mr. Gamble?

Senator LAUSCHE. Let's call the next witness.

Senator Bass. Mr. Gamble, thank you for your appearance before the committee.

The committee will now hear the witness who was not present and scheduled to appear first, Mr. Blue Carstenson, executive director of the National Farmers Union.

STATEMENT OF BLUE CARSTENSON, EXECUTIVE DIRECTOR, SENIOR MEMBER COUNCIL, NATIONAL FARMERS UNION, WASHINGTON, D.C.

Mr. CARSTENSON. Thank you, Mr. Chairman.

Senator Bass. Mr. Carstenson, I see that your testimony, probably if read in toto, would consume more than the normal 10 minutes that has been allotted to each witness in the formal testimony. We would appreciate it very much if you would summarize your statement and keep it within the 10 minute limit.

Mr. Carstenson. I will do so.

(Prepared text follows:)

TESTIMONY OF THE NATIONAL FARMERS UNION BY BLUE CARSTENSON,
EXECUTIVE DIRECTOR, SENIOR MEMBER COUNCIL

I am here to testify on behalf of the families of rural America who are both producers and consumers of food. We are aware that the problems in food packaging are only a part of the larger picture. We see the practices in packaging as a logical extension of the practices in the rest of the food processes and distribution system.

The prices paid for food by the consumer have increased 34 percent since 1935, but the prices paid to the farmer have dropped 15 percent. A lot of people are beginning to wonder about where the record $80 billion they paid for food last year went. We know that farmers netted about $12 billion out of the $80 billion.

Well, a big chunk went into the net profits for the food companies and the chainstores who netted a total of $37.5 billion last year or three times as much as all the farmers put together. How much of the food dollar went into hoodwinking and fooling the consumers by these corporations will never be known. We do know they are succeeding in fooling the consumer when the American housewife is fooled into paying more for bologna than she pays for round steak. Yes, she is paying from 89 cents to 97 cents a pound for round steak-less on the specials--and pays 33 cents and 43 cents for 6 ounces for the "economy meat” bologna. The packagers often cover the bologna with a pretty picture of a richer bologna as a coverup for the just plain old bologna in order to help the illusion. They force the housewife to make "blind man's bluff" purchases with their complex "cents off," odd weight, odd size, confusing packages.'

I have several brands of coffee here and I ask the committee to tell me, without using paper and pencil or computer, which is the best buy. I stood for 45 minutes in the supermarket and I couldn't.

In short-the same giants and generals of the food industry which are squeezing out the family farmer by unethical practices are also gouging the consumer.

It is the profit-monopoly system gone wild with controls and unethical practices like those of the stock market in the 1920's. The profits over investments in these food companies are tremendous, matched only by those of the drug industry and those companies involved in the race for the moon and space. The drug industry has not been known for its ethical advertising or its generosity in sharing lower costs with the consumer. The extent of profitmaking by a few of the big food and chain corporations is shown in the accompanying table. The tangled arms of these food giants are not content with these big profits but they want more. Their latest moves have been to start taking over the farm production. They have already forced out many of the small- and middle-size food producers, many of the small independent grocers, many of the small and independent distributors, many of the small- and middle-size meatpackers and many of the small shippers. The feed companies and other off-the-farm corporations control 95 percent of the chicken production. They have erected chicken factories where a million chickens are raised at a time without ever seeing the sun or touching the earth except by accident. They are manipulating the cattle markets with their feed lots in order to drive the cattle raisers out of business. Today the chains dominate our food markets. The big chains do over one-half the food retail business-even more in metropolitan areas. In Denver, our headquarters city, four chains do 90 percent of the food business. The big chains have vast purchasing power, warehouses, packaging operations, own products operations, food processing plants, and even feed lots.

Meat is a good example of how some of these chains operate. The price of beef is set by these chains every Wednesday in most markets. The leading chain lets the packer or middle-man know what he will pay for beef carcasses on that day and the price becomes the price for the other large purchasers. Domination of the market is facilitated in some instances by feedlot operations which allow the chains to get in or out of the market regardless of the supply and demand. The retail steak prices are practically divorced from the price of beef cattle.

For example, in December 1962 the National Tea Co., the third largest chain in the United States (Big D Stores) and part of a mammoth international food combine reaching into four continents and headed by W. Garfield Weston, decided to use its economic power to manipulate prices.

Normally, National Tea purchases approximately 1,500 head of cattle a week from the Government-regulated stockyard. Suddenly, it got out of the market, purchasing in 1 week as few as 11 head. Presumably it utilized cattle from its own feed lot which has a capacity of 75,000 head. The result was a catastrophic decline in the price of beef cattle which fell from 30 cents to less than 20 cents in a few weeks. As a result, thousands of feeders and ranchers were wiped out. Consumers did not benefit. The retail price of steaks and other cuts remained the same during the period.

If

The market power of the chains in the United States has become so great that they dominate the price of many food commodities. They use their power to switch from one similar commodity to another in their sales promotions. chickens are high they push beef, or pork, or lamb, and when excessive supplies of broilers and other poultry push the price down they buy up these supplies at below cost of production. Feed companies having taken over poultry production now find themselves being squeezed by the chains. The big fish in America have eaten the little fish-and now are eating the medium-sized fish.

Is there any wonder that the big chains allow such practices as false colors on the picture of processed meats? Is it any wonder that they allow meats to be packaged to conceal fat or gristle? Is it any wonder that they manipulate the price of meat so that the cost of bologna is more than the price of round steak? Is it any wonder that they push sirloin steaks at a loss as "come-on" for the housewife so that she can make her other purchases in the maze of packaging? According to one source, 70 percent of all purchases in a supermarket today are unplanned, spontaneous impulse purchases. That is where the big money is→ in those attractively deceptive packages and confusingly priced items. The chains and food giants promote the idea that they are efficient and clean, but the court records show that their ethics leave much to be desired. Here are a few other examples of the ethics of these giants:

The Department of Agriculture found that Swift & Co. was using a recently acquired meatpacking plant in Boise, Idaho, to break the market and the small independent meatpackers in the area by purposely selling at a loss. They es

caped prosecution because in the name of the “great god of efficiency" they had destroyed their key records every 6 months.

National Dairy Products, operating in four continents with a United StatesCanadian sales of $1.5 billion, was caught by the courts in a price-fixing conspiracy in western Missouri in 1959. They were conspiring and working out agreements designed to artificially drop the price of milk, then stabilize the price, then raise the price in order to break the small milk producers. Even while National Dairy Products were in the courts, they were conspiring to cheat the Government through the elimination of competitive bidding on the milk being supplied to U.S. military installations.

Since 1920, over 7,000 small milk production distributors have been swallowed up by mergers, takeovers, and bankruptcies. Price wars and price manipulation have helped speed the process. Price wars in Missouri, for example, have driven the price of milk down to as low as 8 cents a quart. Today, eight dairy and milk chains sell one-half of the milk in the United States. Their practices are rough, to say the least.

BORDEN'S

The Supreme Court of the United States found the Borden Co., guilty of violating the Robinson-Patman Act on June 25, 1962. Justice Clark said: “Free enterprise is not free when monopoly power is used to breed more monopoly. That is the case here unless store-by-store costs are used as the criteria for discounts. This case is thus kin to that in Moore v. Mead's Fine Bread Co., 348 U.S. 115, where the lush treasury of a chain was used to bring a local bakery to its knees. Here, as there, the chains obtain a 'competitive advantage' not as a result of their skills of efficiency' but as a consequence of other influences. There price cutting was the weapon. Here it is the discount. Each leads to the same end-the aggrandizement of power by the chains and the plowing under of the independents. The antitrust laws, of which the Robinson-Patman Act is a part, were designed to avert such an inquest on free enterprise."

On December 10, 1962, the Federal Trade Commission ruled that the Borden Co., 350 Madison Avenue, New York City, had engaged in unlawful price discrimination by charging substantially higher prices for its "Borden" label evaporated milk than for milk of like grade and quality sold under its private lebels (FTC Docket No. 7129).

Borden is engaged in the manufacture, processing, distribution, and sale of an extensive variety of food, dairy, and chemical products in the United States and abroad. Its total sales in 1957 amounted to $931,220,662.

The unlawful activities of Borden severely injured Dairyland Cooperative and other mid-West competitors. TopCo, the chainstore buying organization, was one of the beneficiaries of the price discriminations. Competitors of Borden lost sales of about 250.000 canned milk cases of business during a 2-year period. Apparently, Borden drove many of its competitors completely out of the canned milk business.

On April 22, 1964, the Borden Co., because of its violation of antitrust laws and to prevent prosecution, consented to a Federal Trade Commission order forbid. ding it to acquire any domestic manufacturer, processor, or seller of certain dairy products without prior approval of the FTC for the next 10 years (FTC Consent Order No. 6652). Borden was ordered to sell eight firms it had acquired in violation of the law. Borden had been charged with violations of both section 7 of the Clayton Act and section 5 of the Trade Commission Act, which broadly prohibits unfair competitive activity.

FOREMOST

On May 23. 1963, Foremost Dairies, Inc. was ordered to stop discriminating in price, which substantially injured competition (FTC Docket No. 7475). Fore most Dairies is a New York corporation which sells fluid milk and other dairy products throughout the United States. In 1960 its sales were $437,706,220. It owned on June 30, 1959, 59 processing plants located in 24 States.

THE CASE OF MILK KICKBACKS IN PITTSBURGH

A widespread conspiracy in violation of the U.S. antitrust laws and the Pennsylvania milk control law was recently uncovered by the Bureau of Internal Revenue. (See Pittsburgh Press, Feb. 7, 1965.) This conspiracy, resulting

in the cheating of farmers and consumers of millions of dollars, was effectuated by a widespread system of kickbacks and rebates.

Two of the dairies involved have been prosecuted for tax evasion, and others may be involved. The kickbacks, which result in higher consumer prices. were made without the knowledge of farmer-members of the cooperative. In some instances milk was sold outside the State of Pennsylvania at low prices and brought back in the State and sold at high prices. There is a tremendous spread between what the producers get and what the consumers pay in Pennsylvania. Milk in Pennsylvania sells for 51 cents a half gallon and in other areas as low as 38 cents. In some instances milk sales in other States and its return sale in Pennsylvania was entirely fictitious. The milk was not moved at all, although a mythical transaction was recorded on the books.

BREAD

The Federal Trade Commission on December 15, 1964, denied a petition of the Continental Baking Co., of Seattle, Wash., that the Commission reconsider its decision and order of February 28, 1964, prohibiting Continental Baking Co. and others from fixing bread prices (docket No. 8309).

The headquarters of the Continental Baking Co. is in Rye, N.Y. It owns and operates more than 60 bakeries in 29 States and the District of Columbia. It had sales of $350 million in 1960, and 27,000 employees. Also charged with conspiring to fix prices was Safeway Stores, Inc., with headquarters in Oakland, Calif. Safeway operates some 2,000 grocery stores in 28 States. In 1960 it had more than 63,500 employees and sales of $2,468 million.

Meanwhile, bread prices in the United States have risen 63 percent since the 1947-49 period. The wheat farmer's share of the 1-pound loaf now selling for about 21 cents has dropped from 2.7 to 2.5 cents during the same period.

WARD BAKERY PRODUCTS

In an undated complaint, Ward Baking Co. and others were charged by the Department of Justice in the U.S. District Court, southern district of Florida, Jacksonville division, with conspiring and agreeing to defraud and injure the United States beginning as early as 1957, by obtaining or aiding in the payment of false, fraudulent, and fictitious claims under contracts awarded them for the sale of baking products. In furtherance of the conspiracy, the defendants allocated among themselves the business of supplying bakery products to the U.S. naval installations in the Jacksonville area, and submitted noncompetitive, collusive, and rigged bids and price quotations for supplying the naval installations. Representatives of the defendants held meetings and conferred by telephone in furtherance of the conspiracy. Allocations were made so as to provide each defendant with business for a designated quarterly period of the year. Agreements were made by defendants to rig high prices so that the designated person would be awarded the contract. As a result of the conspiracy the United States was compelled to pay higher prices for bakery products than if competition had not been destroyed.

Safeway

THE CHAIN STORES

On December 31, 1959, Safeway Stores, Inc., and others were charged by the Department of Justice with violation of the Sherman Act, which prohibits conspiracies and monopolistic acts. The coconspirators, according to the complaint, had engaged over a period of years in a "combination and conspiracy to establish, maintain, and stabilize arbitrary and noncompetitive prices, terms, and conditions for the sale of groceries to consumers in the San Diego, Calif., area in unreasonable restraint of commerce."

The conspiracy included agreements to not advertise groceries at less than the agreed-on prices; to induce suppliers to cooperate in enforcing such minimum prices; to induce and coerce retail grocers to adhere to such minimum prices; to threaten grocers that failure to maintain prices would involve such grocers in price wars, and to falsely represent that California law prohibits sales below cost even where there is no intent to injure or destroy competition. The result of the conspiracy was to destroy competition and to exact arbitrary charges from consumers in excess of $500,000 a year of that which they would have paid for groceries had free competition existed.

A. & P.

On March 15, 1963, a grand jury charged in a criminal proceeding in the U.S. District Court of Massachusetts that the Great Atlantic & Pacific Co. had engaged in a combination and restraint of trade in violation of section I of the Sherman Act with H. P. Hood & Sons, and that A. & P. had made an illegal agreement with Hood that A. & P. would sell milk to consumers in the Greater Boston area at prices set by Hood; that Hood would set the prices at which A. & P. would sell milk to consumers in the Greater Boston area at levels designed to eliminate the sale of milk by jug handlers in said area; that Hood would attempt to coerce, persuade, and induce jug handlers to raise their milk prices to consumers in the Greater Boston area.

The indictment also charged A. & P. guilty of price discrimination which was carried out by means of a secret agreement whereby Hood agreed to pay secret rebates on all purchases of milk by A. & P. in consideration of A. & P. continuing to purchase milk from Hood. The secret agreement discriminated against competitiors of A. & P. and Hood in that such rebates were not available to such competitors. Such rebates, the grand jury charged, were in violation of the Robinson-Patman Act.

CONCLUSION

Is there any wonder that the National Farmers Union joins with other consumer organizations in supporting the truth-in-packaging bill proposed by Senator Hart and many of the other fine Senators. We know that this will help curb some but not all the excesses and the frauds now being carried out within the food industry.

We also know that these companies are not about to police themselves.
We support the truth-in-packaging bill.

Food Fair stockholder's equity as of Apr. 27, 1963 and May 2, 1964, respectively.
Source: Moody's Industrials and other financial reports.

Mr. CARSTENSON. Mr. Chairman and members of the committee, my name is Blue Carstenson. I am the executive director of the Senior Member Council of the Farmers Union.

I am here to testify both on behalf of the families of rural America who are both the producers and the consumers of food. We see this problem of packaging as a part of some of the larger problems that exist in the food industry, and as they relate to the family farmer. As most of you know, the farmer is getting less and less of the share of the consumer dollar. I have given the staff member a chart which shows the consumer price and the prices paid by farmers.