Mr. CONTE. Why do you have to put it in bread?

Dr. JACKEL. Most breads do not have it. There is only a very, very unique type of bread that was developed in recent years, and that is being promoted in particular by one of these giants because of some new circumstantial evidence that appeared that more fiber was necessary in the American diet. Now, there are many different ways of getting fiber in the American diet. This particular company very innovatively went about taking out the cellulose from the lumber industry. So, they developed it.

It is only a special, particular loaf of bread. We do not use sawdust or fiber in the breads that we are talking about.

Mr. CONTE. Now, you kept mentioning the new labeling as opposed to the old labeling, and you kept saying, Dr. Jackel, "Well, I do not know whether this is going to help the consumer." Can you tell the committee whether these new labels are going to have a health advantage to the consumer as opposed to the old labels?

Dr. JACKEL. Congressman, it is my very, very sincere belief that it will have either no effect or, if anything, a negative effect for the following reason: The breads are not changing. The breads are basically the same breads as they were before. The labels are changing. The label is what is making the bread change. It is the same bread that we are talking about. They have no health problems. For 37 years we have been labeling it a certain way. We do not know of a single case of a consumer who got sick because of the label. I could not think of a food as more basic or safe in the American nutritional diet as bread. So, changing the label is meeting not a health requirement but more of a legal or regulatory type requirement in an effort administratively to develop a uniform code of labeling that encompasses the entire food. industry.

To me it would appear that these steps have been taken not so much for consumers particular health benefits but rather because of an administrative determination that foods should be labeled a certain way. Now, a new thing has just come to my attention that this subcommittee might find of value, an unforeseen development. I have had bakers tell me that they were against adding additives in the past because they did not necessarily like the sound of anything else on the label. Now, once their labels are going to be complicated, what difference does it make? They will use whatever additives as long as it is approved and safe and suitable. They are no longer fighting the battle of keeping bread soft.

Mr. CONTE. I buy all my bread in Pittsfield on Sunday morning, and service is over the counter. Are they going to have to label?

Mr. Borry. If they package. If they do not-that is what Mr. Cohen is up against here. That was not brought out, Congressman. You can go to every one of the supermarkets. If you do not think they are competitive-those instore bakeries do thousands of dollars a week. Their hard rolls are rye bread-as long as they do not put it in a bag they do not have to be labeled.

Mr. CONTE. That is a good point. It was mentioned by Mr. Cohen that the independents filed a complaint with the FTC in January. If the FTC has responded to that will you necessarily know about it? Mr. COHEN. Normally we get a probe on it.

Mr. CONTE. And has the FTC made any general response to anyone about those?

Mr. COHEN. No.

Mr. CONTE. What other correspondence have you had, you or your association, with the FTC with regard to the regulations?

Mr. BOTTY. I think I can handle that. Bob Pyle, our executive director, and I went to the FTC on this. We went to a Mr. Newberry. He was in charge. Bob, what was the name of that man? This fellow did not have the complaint and he said, well, he did not know anything about it. Newberry knew nothing about it. We sat there about a half hour to three quarters of an hour when they dug out a complaint that had been filed by the ABA, American Bakers' Association. It is a national organization which you might be familiar with. The ABA did file all of this but nothing was done with it. Nothing at all. They gave it to us, and I believe they told us how to go about it.

Mr. PYLE. They suggested we file another complaint.

Mr. BOTTY. Also come to you people and have you hear our side of the story.

Mr. CONTE. This is just verbal? You do not have correspondence? Mr. PYLE. We do, just with Mr. Newberry.

Mr. CONTE. Will you please supply those to us?

Mr. BOTTY. We will see that it is supplied to you.

[Correspondence referred to above is being retained in the subcommittee files.]

Mr. CONTE. Then you mentioned the 100-route wholesale baker. Would you define what a 100-route wholesale baker is?

Mr. BOTTY. We are one of the last of a breed. We are the only ones that supply a product-it is a perishable product-to the consumer and consequently, we use driver salesmen. They have a prescribed route with a route book. Now, we have Mr. Cohen over here. Do you go into the stores?

Mr. COHEN. Yes; we handle stores.

Mr. BOTTY. They go into the chains and fast foods, but, that is what is known as a route, and he has a route salesman.

Mr. CONTE. You mentioned the figure of $44,460 to comply with the regulation. Is this a one-shot affair?

Mr. BOTTY. Everytime there is a change in the label, everytime there is a change.

Mr. CONTE. And that would be another $44,000?

Mr. COHEN. May I add to that? We have seasonal adjustments going from winter to spring to summer to fall. We continually change our product.

Mr. CONTE. But in any case you would get your labels for fall, winter, spring, and summer and then next year you can dig out your labels. Mr. BOTTY. It does not work like that.

Mr. CONTE. It does not work like a woman's coat?

Mr. BOTTY. Let us say you have a whole week of humidity. You might be putting more preservatives in this week than next week or last week. We would be in violation according to this because they want the amount of ingredients in descending order of importance. So, if we say we are putting in 2 percent and we had 3 percent or maybe down to 1.5-it could happen in one week.

Mr. COHEN. Even with changing the equipment-you might be making a specific dough that will operate with a certain machine and let

us say you replace that machine then you would have to modify your machine to operate that.

Mr. CONTE. One last question. You, Mr. Cohen, said that the independents are against the loss leaders yet both practices are engaged in by national chains on which this committee has had very very extensive hearings. Have the independent bakers or the FTC filed Robinson-Patman suits against the national chains for such practices and have you brought this to the attention of the Federal Trade Commission?

Mr. COHEN. I was not in on that.

Mr. BOTTY. I will answer that. Yes, yes, I tell you, IBA was born out of the violations of the Robinson-Patman Act. We have a lawsuit that is still on, as a matter of fact, against ITT-Continental. The FTC has a lawsuit. There is one in Dallas by Goldman Baking Co. in which Goldman won. We had one in Denver, which was against Continental Baking Co., in which Homestead won after the bakery went out of business.

We have been to the FTC time and time again. The FTC will not follow up on the original complaints. We had the FTC at our meeting on June 8 and 9. They presented to us what the FTC is doing and how they are doing it. We got the speech from Mr. David I. Wilson. If you want to see that speech we will be very happy to let you have it. They will tell you what they are doing and how they are doing it. They are not going to take limited moneys and spend it on something that is small. They want big, big cases so they can justify the expenditures that they are making. They will get a lot more credit if they can bring an ITT case than if they go against one small bakery who comes in with a complaint. We have been to the FTC repeatedly.

Mr. CONTE. Let me say that as a kid I sliced and wrapped a lot of bread 6 nights a week, hurt a lot of fingers. I did not have any fancy gadgets like this. We did not have a label on anything, and people were a lot healthier then than they are now.

Mr. BOTTY. You know, at one time, the bread industry made the bread standards. Bread did not even have a label on it.

Mr. CONTE. I remember we used to have heavy waxed paper.

Mr. BOTTY. What do we do now? Let us take a loaf of bread that goes directly to an institution, a hospital. As you said, they put waxed paper on it and sent it to the hospital. Do you have to put the legend on that? What happens to fast foods?

Mr. IRELAND. How about describing, if you would, how-you touched on something in answer to one of Mr. Conte's questions, the fast food industry, McDonald's, across the country. How are they being served in the bakery business in relation to your cooperatives and the majors?

Mr. BOTTY. It is the same way. They have the big buying power. They pit one bakery against the other. You serve them the same way. You serve them on a route.

I ran a bakery in Milwaukee. I had several of those. They drove us crazy because on a weekend they can go anywhere from 500 to 1,000 dozen buns. They will not supply any storage. They are small. Everything is on the supplier. We used to have to put storage bins in our semitrailers and keep the surplus in there. Now, they work in

such a way that they reduce the point where the average baker does not want them, but it was mostly the effect on the rest of your customers because in those days you were selling them at 29 cents. You sold McDonald's so you had to sell to them at 27. Everybody knew that. They are still serving them, but McDonald's has captive bakeries making their buns and rolls. There is one out in Worcester, one in Baltimore, one in Florida, one in Atlanta, one out on the west coast, Los Angeles, Greensboro. Now, they are pretty much on their own as a source of supply. They get a baker. The baker works on cost-plus. Mr. IRELAND. And that is typical of the captive kind of thing you referred to?

Mr. BOTTY. Yes; your captives are using bread, and they have been since time immemorial, as loss leaders. They are kicking the hell out of the industry in total.

Mr. IRELAND. Let me ask you about the back to the whole area of ingredients. There are a number of ingredients listed on the new label there that could easily be impure even through listed. So, either under the old way or the new way you are still dealing with ingredients, whether you call it by its chemical name or by something else. That is a pure ingredient with or without a certain name. Is it not?

Mr. BOTTY. Doctor, do you want to handle that?

Dr. JACKEL. The FTC has done a very thorough-the regulations in writing require that ingredients used be safe and suitable. Now the safe and suitable meets the definition that the FDA established and the FDA established a very, very rigorous and healthy testing program that each ingredient that is to be used in a food product has to go through before it is approved. I am aware of this in great detail because we represented a particular ingredient manufacturer who had a new ingredient that he wanted to introduce into the bread industry.

The FDA required, before they would even seriously consider it, that he first go through an enormous toxicity testing program to guarantee its safety. We went through 4 years of animal feeding programs and the expenditure of $400,000 in order to satisfy the FDA that this is a safe and suitable chemical. At that time they cleared it for use as a food ingredient and then for specifics or standards of identity, such as in the case of bread-there was additional documentation and studies necessary to prove it was suitable and safe in bread.

Now, this has not changed. These regulations have been in existence for many, many years. Whether they were labeled or they were not labeled any food manufacturer, including the baker, had to be certain that the ingredients he used were approved previously as safe by the Food and Drug Administration so that the labeling does not do anything to change that aspect, the health aspect, the safety aspect of the product. They have not been changed by the label declarations.

Until very recently the existing standards of identity spelled out only those ingredients that could be used and any new ingredient that came along had to go through the entire hearing process at the Food and Drug Administration. The new standards of identity which become mandatory on January 1, 1978, have reduced the little flexibility in introducing new ingredients, but in turn they must be safe and suitable which basically means that the entire testing must still be followed.

So it is our duty that they be safe and proven as safe from day No. 1, whether they were labeled or not. Labels do not in any way improve that picture.

Mr. IRELAND. Being a freshman Congressman, I was sure that these gentlemen would know what that means. We were supposed to go into session at 12 o'clock, and this is 5 of 11. The only thing is, it must be a nuclear attack so they say. They are just playing with the bells.

Mr. Fox. I would like to make one brief statement. I think that all of this is sort of a matter of degree. The baking industry is not fighting labels per se but it is the degree to which we have to go and the inflexibility that the new requirement is going to place on us. To what extent will these increased restrictions hurt the independent baker is what we are talking about. You have to keep one thing in mind: all regulations must ultimately be paid for by the consumer no matter who puts them on.

Mr. IRELAND. Well, it is indeed a classic example of a lot of other things that go on around here.

Mr. BOTTY. It is just an impossible situation. I cannot see the practicality of it. I do not know who dreamed this up. Why do they not have hearings on this, such as the dough conditioners? It is arbitrary. I think that is illegal for them to do that. I think they are taking upon themselves something they should not. Are they allowed to do that? You people, you lawyers, are they allowed to do that?

Mr. JENSEN. Well, I was going to redirect the question to you.

Mr. Fox. It is impossible for my company to comply with the strict intent of the new labeling regulations because of one of the ingredients, water. The chemical analysis of the water in Wilmington, N.C., changes every day.

Mr. IRELAND. I do not believe Congressman Conte has any additional questions. I think we have had ample information, and I would particularly underline what Congressman Conte said. Prior to our interview with the FDA it would be helpful to have whatever correspondence in that record so that we can move from there and any rocks that you can turn over between now and then, and if there is any other

comment

Mr. BOTTY. The only other comment is that we need help and I hope we can get it.

Dr. JACKEL. May I say this, we in the bakery industry, we are preparing these labels. This is not something we are stalling on. We are law-abiding citizens. If this is the law we are going to abide by it. However, in doing that we are discovering all of these problems and we are discovering that we are not accomplishing what the hope was for this label, but instead we are opening up many, many negative areas that will make it more difficult for us to do our job for the consumer so that we are not fighting anybody. We are just flinging information on the table that was not considered in the past and that was not even investigated in the past.

Mr. LYNCH. Could you provide us with something outlining the innovations that independent bakers have made over the years as opposed to giants?

Mr. BOTTY. I do not know of anything that the giants did. Well, I tell you, that is difficult. That is nothing but opportunists. There are people who want a loaf of bread to do everything. Now, let me tell you,