So I would hope in this study there might be some way, at least, to give some attention to the tax structure as it would involve the assessment of farmlands.

I think that is about all I have to say, except to point out again how wonderful it is to see this consensus in favor of this bill.

I have thoroughly enjoyed the comments of all of the witnesses. Mr. POAGE. Thank you, Mr. Matthews.

Mr. Purcell.

Mr. PURCELL. Mr. Chairman, I have no questions. I think I can save the time of the committee by using the good judgment of my friend from Florida in subscribing wholeheartedly to what Mr. Matthews has said this morning.

I will let you have the rest of my time, Mr. Chairman.

Mr. POAGE. Thank you, Mr. Purcell.

Mr. Rosenthal.

Mr. ROSENTHAL. I have one question that I would like to ask Mr. Shuman and Mr. McDonald.

Do you think that the Commission when finally it gets started ought to look into the question of the integrity of the family farmer and how that is involved so far as the purchasing power of the retail chains and their associations are concerned.

Mr. SHUMAN. I do not know what you mean by the "integrity of the family farmer."

Mr. ROSENTHAL. Yes. Maybe I should put it another way. How is the future being affected by this concentrated purchasing power of the family farm which is diminishing in importance and numbers.

Mr. SHUMAN. It seems to me that the whole purpose of the Commission is to see whether or not the operations within the food industry are providing adequate compensation to the family farmer, in accordance with this resolution. So it seems to me that is it.

Mr. ROSENTHAL. Mr. McDonald, do you have a thought on that subject?

Mr. McDONALD. Ninty-five percent of agricultural production is accounted for by the family farmers. I would think that it would be inevitable that the welfare of the family farmer would be paramount in the minds of the Commission.

So far as the National Farmers Union is concerned, that is our reason for being. That is our purpose: to preserve and foster the family farm.

Mr. ROSENTHAL. Thank you. That is all.

Mr. POAGE. Thank you.

Mr. Olson.

Mr. OLSON. Thank you, Mr. Chairman. I have one question to ask. I would like to make a comment preceding that.

I am happy to see that there is no dispute concerning the establishment of this Commission. One example of the questions that need answering is what has become of the $2.5 billion that our domestic beef producers have lost? Where has the $2,500 million gone?

I am sure that the technology that has been so well pursued in the food industry has had its merit. I must however conclude that I doubt they have been so far remiss in their financial calculations that they needed $2,500 million additional income in 1 year.

All of my figures support-and everyone else's seems to indicatethat the retail prices have not gone down at least not appreciably. There is agreement that we need to determine the answers to questions such as these.

The one question that I have is this: Mr. Long, I believe you are the only representative representing a livestock commission firm to appear in behalf of this legislation. I would like your comments as to what the feelings are of the other commission people in regard to establishing such a Commission.

Mr. LONG. The livestock marketing organizations are very much. in favor of this type of investigation. We feel that the question of elimination of competition in the industry is showing even in our marketing area. That is something that needs to be looked into. We think that we see enough evidence to warrant such a thorough investigation. We have our own ideas, but I think, without very much contradiction, the majority of our associates in this field, in this cooperative field-the general livestock markets in the country-are almost unanimously in favor of this type of an investigation and are concerned.

Mr. LATTA. No questions.

Mr. POAGE. Thank you.

Does anybody want to ask any more questions?

Mr. SHORT. There is one question. I think this is rather an important one. I would like to ask Mr. Shuman and Mr. McDonald this question: Do you think, Mr. Shuman, that to wait until 1966 is too long a time? I will put it this way. Do you think that much time is necessary for this Commission to complete its study?

Mr. SHUMAN. I do not think it is necessary to give them that much time. It is rather customary when you get the work done to make the report. I think this can be done before. They can get the answers before July of 1966.

Mr. SHORT. Mr. McDonald.

Mr. McDONALD. Mr. Short, I call your attention to the resolution adopted by the executive committee a few days ago in which they endorsed Mr. Cooley's bill as is. As to what length of time is necessary, I am unqualified to say, but, apparently, the National Farmers Union feels that the bill in its present form is OK.

Mr. SHORT. In this situation, particularly with regard to beef, it is rather critical and inasmuch as it, also, seems to me that a lot of this information is readily available with hearings going on now on the Senate side, that will develop some of the information, I would assume, at least, that will be pertinent to the work of this Commission and it would seem that the sooner a thorough report could be made by this Commission the more desirable it would be to do so.

Mr. McDONALD. We would, certainly, agree with that last thought that the investigation get on as speedily as possible.

Mr. SHORT. Thank you. That is all.

Mr. POAGE. Thank you, Mr. Short.

Mr. Findley.

EXTRACT FROM THE MINUTES OF THE CALIFORNIA STATE BOARD OF AGRICULTURE MEETING OF JANUARY 21, 1963

"PERISHABLE FRUIT AND VEGETABLE MARGINS COMMITTEE

"Chairman Kovacevich reported that he had checked with various segments of agriculture as to their feelings in regard to the proposed study of the spread between farm prices and consumer prices. All those contacted were in favor of the study.

"A list of the commodities for survey has yet to be determined.

"Mr. Steinberg suggested it should be a 12-month survey-from May to Mayto provide a round-the-clock study of spring, winter, and fall crops of the same category.

"Mr. Kovacevich agreed that it should be a 12-month survey. However, because of the freeze damage this year he believed a starting date of June would give a truer picture.

"Director Paul stated Mr. Kuhrt had done some research in the matter and that he believed the survey could be handled reasonably well with the present personnel and within the department's budget.

"The following resolution was moved by Mr. Kovacevich, seconded by Mr. Herrington, and carried:

"Whereas it has come to the attention of the California State Board of Agriculture that in the marketing of fresh fruits and vegetables the producer share of the consumer price is declining, with resultant hardship upon producers; and "Whereas price declines to producers are often not reflected in consumer prices, and price increases are generally reflected promptly in producer prices; and

"Whereas current accurate data on the spreads between the farm price and the consumer price are not available: Now, therefore, be it

"Resolved, That the California State Board of Agriculture, meeting in Sacramento, on January 21, 1963, hereby requests the director of agriculture and appropriate staff members to make a study of the spread between farm prices and consumer prices for fruits and vegetables during 1963, commencing in the month of June, such study to be based on actual price situations rather than average prices and margins."

EXTRACTS FROM THE FINAL REPORT OF THE COMMITTEE ON SMALL BUSINESS

3. It is recommended that the Packers and Stockyards Act of 1961 be amended to strengthen independent competition in the sale of meat and meat products by making it unlawful for packers and retailers to integrate their functions in the processing and the marketing of meat and meat food products in excess of an aggregate annual volume where competition would be adversely affected by the integration of such functions.

Since the issuance of the meatpacking decree of 1920, the principle has been well established that the large packers may not vertically integrate "downward" into retailing. The provisions of this decree have served the public interest well in curbing this threat to competitive markets. In recent years, however, large retail food chainstores have been integrating "upward" into the feeding, slaughtering, and preparing of livestock. Many small, independent businesses are being destroyed in this process.

Representative James Roosevelt, chairman of Subcommittee No. 5, introduced H.R. 10392 to protect these small businesses by preventing further integration of the functions of packers and retailers.

Testimony adduced at hearings and continuing investigations have fully established the necessity for this legislation. Large packing concerns continue to strain for recision of the 1920 decree; the giant food chains continue to enlarge their slaughtering operations. The independent meatpacker is caught in a pincer between the two.

4. It is recommended that the Federal Trade Commission Act be amended to prohibit vertical integration in the food industry where the integration of the functions of processing, wholesaling, and retailing of food would have the effect of substantially lessening competition or tending to create a monopoly in any line of commerce.

As a result of extensive hearings held during the 86th Congress and continuing investigations during the 87th Congress respecting small business problems in food distribution, it was found

(1) That the 10 largest chain food stores in this country account for almost 30 percent of all U.S. food sales; and

(2) That the three largest chain food stores in this country account for approximately 47 percent of the total of all chain food store sales;

(3) That there is evidence that, if left unchecked, a decreasing number of food stores will obtain an increasing share of the market; and

((4) That retail chain food stores have so vertically integrated their operations that they are now engaged in business at every stage-from control of the basic foodstuff or related commodity, through its manufacture, processing, or other preparation, to its retail sale to the consumer; and

(5) That as a result of this vertical integration, many independent operators of businesses at all levels of the food industry have been eliminated. The committee feels that, as shown by these facts, vertical integration of the food industry is developing at a rate destructive to free competition. To permit this development to continue unchecked would be to deny the economic principles upon which the antitrust laws are based.

This measure will make it unlawful and an unfair act and practice in commerce within the meaning of section 5 of the Federal Trade Commission Act, for any person, partnership, or corporation engaged in the retail sale of merchandise through food or grocery stores, in or affecting commerce, to engage in the manufacturing, processing, or preparation of any food or related merchandise for sale through food or grocery stores, where the effect of the integration of the retailing of such merchandise with such manufacturing, processing, or preparation may be to substantially lessen competition or to tend to create a monopoly in any line of commerce.

5. It is recommended that legislation be enacted to provide for prenotification of proposed mergers of firms within the jurisdiction of the Federal Trade Commission by giving to the Federal Trade Commission and to the Antitrust Division of the Department of Justice notice of and information concerning the proposed mergers before they are consummated.

6. The Department of Justice and the Federal Trade Commission should determine whether contract growing of poultry is diminishing through the cooperative and voluntary efforts of the various segments of the broiler industry. If it is found that the practice is not diminishing, the Department of Justice and the Federal Trade Commission should actively investigate, under the antitrust laws, the legality of the contract growing of poultry.

Every effort should be made to do away with contract growing. If possible, this should be attempted through the cooperative efforts of the various segments of the broiler industry. Farm organizations and the U.S. Department of Agriculture should actively assist such voluntary measures. If this proves impossible, however, the Department of Justice and the Federal Trade Commission should actively investigate the legality of contract growing under the antitrust laws.

Under section 3 of the Clayton Act, tying contracts, full-line forcing, and exclusive dealing arrangements are illegal if they substantially lessen competition or tend to create a monopoly. Broiler-growing contracts contain provisions similar in function to these prohibited practices. For example, requiring a grower to patronize a particular hatchery or processor could be said to approximate a form of full-line forcing or exclusive dealing if the contractor owns either of the businesses. A requirement to use only a designated type of feed and chick might be considered a tying arrangement or full-line forcing. Similarly, restriction on the use of feed by a grower could possibly be deemed an illegal exclusive dealing practice under the theory of Standard Oil of California v. United States (337 U.S. 293 (1949)), particularly since there appears to be a trend toward greater concentration in broiler-growing operations. Finally, contract growing might be found to run afoul of section 5 of the Federal Trade Commission Act where unfair methods of competition are declared invalid. The reasoning enunciated in Federal Trade Commission v. Motion Picture Advertising Service Co. (344 U.S. 392 (1953)) might be considered applicable here. (a) The Department of Justice and the Federal Trade Commission should examine the operations of food chainstores to ascertain whether unlawful buying practices of poultry exist.

LIST OF CASES INVOLVING PRICE RIGGING, PRICE DISCRIMINATION, PRICE FIXING, AND SIMILAR PRACTICES

Central Arkansas Milk Producers Association, Inc. (FTC Docket 8391). Respondent guilty of unlawfully coercing processing plants.

Bakers of Washington, Inc. (FTC Docket 8309, 1962). Respondent trade association guilty of price fixing.

Washington Crab Association (FTC Docket 7859, 1963). Association guilty of unlawfully restraining competition.

National Macaroni Manufaturers Association (FTC Docket 8524, 1963). Members had violated section 5 of Federal Trade Commission Act by concerted action resulting in a per se illegal effort on prices.

U.S. v. Carnation Co. of Washington. Civil damage action for alleged bid rigging.

U.S. v. H. P. Hood & Sons, Inc. Civil double damage suit alleging bid rigging. U.S. v. H. P. Hood & Sons, Inc. Indictment charging attempt to drive milk dealers out of business.

U.S. v. H. E. Koontz Creamery, Inc. Companion criminal and civil actions alleging conspiracy to fix prices and eliminate competition in the sale of milk. Carvel Corp. (FTC Docket 8574, 1963). Alleged restrictive soft ice cream. North Texas Produce Association v. Young. 308 F. 2d 235 (5th Cir. 1962). Affirmed a district court judgment based on Sherman Act, sections 1 and 2. Swift & Co. v. U.S. (7th Cir. 1963). Upheld a Department of Agriculture judicial officer's ruling that Swift discriminated in the sale price of hams to competing customers.

National Tea Co. (FTC Docket 7453, 1963). Dismissed charges that National had violated section 7 of the Clayton Act by acquiring 23 concerns subsequent to December 29, 1950.

National Dairy Products Corp. (FTC Docket 6651, 1963). Consent orders prohibited future acquisitions.

Consolidated Foods Corp. (FTC Docket 7000, 1962). Divestiture case resulting from conglomerate merger.

Borden Co. (FTC Docket 7129, 1962). Price discrimination.

Borden Co. (FTC Docket 7474, 1962). Area price discriminations.

Pacific Molasses Co. (FTC Docket 7462, 1963). Guilty of price discriminations. Foremost Dairies, Inc. (FTC Docket 7475, 1963). Price discrimination. U.S. v. National Dairy Products Corp. 372 U.S. 29 (1963). Selling milk in certain markets "at uinreasonably low prices for the purposes of destroying competition."

Hruby (FTC Docket 8068, 1963). Unlawful brokerage or discounts.

Flotill Products, Inc. (FTC Docket 7226, 1963). Hearing examiner ordered respondent, a canner of fruits and vegetables, to stop paying illegal brokerage and discriminating among customers.

Exchange Distributing Co. (FTC docket 8061, 1962). Wholesale distributor of citrus fruit, vegetables, and produce was ordered to stop accepting illegal allowances.

Dixie-Central Produce Co. (FTC docket 8475, 1962). Food wholesaler was ordered by the FTC to stop accepting illegal brokerage.

Western Fruit Growers Sales Co. (FTC docket 8194). The FTC adopted an initial decision ordering a citrus fruit distributor to stop paying unlawful brokerage.

J. A. Folger Co. (FTC docket 8094, 1962). payments.

Granting discriminatory promotional

Fred Meyer, Inc. (FTC docket 7492, 1963). Supermarket chain violated Robinson-Patman Act by inducing suppliers to grant discriminatory price concessions and promotional payments.

Foremost Dairies, Inc. (FTC docket 7475, 1963). Local price discriminations. North Texas Producers Association v. Young (5th circuit 1962). Group boycotts and individual refusals to deal.

U.S. v. Ward Baking Company (M.D.F.). Consent judgment prohibiting collusive or rigged bids to Government. In companion case one firm was convicted criminally.

U.S. v. San Diego Grocers Association, Inc. (S.D.C., 1962). Agreement held to be fixing of prices in violation of Sherman Act.