Mr. LILJENQUIST. Mr. Poage, our association has not drawn a policy on that particular problem, but we have drawn a policy on keeping the big packers out of the wholesaling and retailing of groceries, because of the vertical integration that you are speaking of. We feel that would give them such a tremendous advantage over small packers that they would eliminate competition.

Mr. POAGE. You would not keep Hormel out?

Mr. LILJENQUIST. So far they have not evidenced any interest in getting into that business.

Mr. POAGE. Let us be frank. Where would you draw the line? Mr. LILJENQUIST. I would draw it, I believe, at the point where the public would be injured.

Mr. POAGE. Where would they be injured, when we pass legislation we have to have some guide lines, or we cannot pass intelligent legislation. You tell us to pass legislation for everything good, and to oppose everything bad. What is good and what is bad? That is fine philosophy.

Mr. LILJENQUIST. I would say that the problem that you have raised would require a great deal of consideration that I have not given to the problem.

Mr. POAGE. I cannot find fault with you. I do not think Mr. Specht could give us an answer, either. I think that is a question of which we should have information.

Mr. LILJENQUIST. I think at least

Mr. POAGE. About that matter of feeding livestock, I don't think he gave me an adequate answer. I do not think we have to have an answer. I would like to have you present it for us as for your clients. Do they feed cattle?

Mr. LILJENQUIST. I think, Mr. Poage, that the meatpackers ought to get out of the feeding business as rapidly as possible.

Mr. POAGE. All right. All of them?

Mr. LILJENQUIST. Yes.

Mr. POAGE. Big and little?
Mr. LILJENQUIST. Yes.

Mr. POAGE. I agree with you.

Mr. LILJENQUIST. Yes.

Mr. JONES. Isn't it the ambition of every small packer to try to expand his business and to try to reach the point where he can utilize the byproduct of his slaughtering plant and to get into a bigger business?

Mr. LILJENQUIST. That is true.

Mr. JONES. Then if he gets bigger, he just automatically gets into this vertical integration, does he not?

Mr. LILJENQUIST. Well, some companies have grown pretty large without getting into vertical integration, such as Oscar Mayer and Hormel. They are not diversified like Swift and Armour. Swift is one of the biggest producers of ice cream in America. That business isn't directly related to meat packing. Oscar Mayer has perhaps the best profits of any company in the packing business. To my knowledge they are almost strictly a packing house.

Mr. JONES. It is the ambition of most of them to try to get bigger and to try to get into these lines, if they can realize something from the byproducts, either in fertilizer or pharmaceuticals, it will help

their business, and enable them to produce their other products cheaper?

Mr. LILJENQUIST. Yes.

Mr. JONES. We do not want to stifle that, do we?

Mr. LILJENQUIST. Well, the recommendation that was made here today would be that those nonrelated activities of the meatpackers be separated from those firms.

Mr. JONES. Well, is fertilizer nonrelated?

Mr. LILJENQUIST. Well, that is semirelated at least.

Mr. JONES. Pharmaceuticals, that is related, isn't it?

Mr. LILJENQUIST. Yes.

Mr. JONES. I do not mean there is any relation. All I can see from the distribution standpoint is that they could probably utilize their facilities.

Mr. LILJENQUIST. There would have to be some point, if the packers were separated from their nonmeat businesses, where you would have to determine the diminishing direct relationship, because there could conceivably be some kind of a relationship between all agricultural products.

Mr. JONES. When we take away those related activities, do not we automatically increase the price of the base price?

Mr. LILJENQUIST. Not necessarily.

Mr. JONES. That is all.

The CHAIRMAN. Proceed.

Mr. LILJENQUIST. Title II of the Packers and Stockyards Act is vague and ambiguous. Its provisions have not been tested in the courts. Its value in controlling unfair trade practices in merchandising is doubtful.

USDA laxity in policing the meatpacking industry for unfair trade and monopolistic practices was conceded by USDA officials on May 21 before the Senate Antitrust and Monopoly Subcommittee. Assistant Secretary of Agriculture Earl Butz said title II of the Packers and Stockyards Act, which gives USDA exclusive regulatory authority over packers, "has not been adequately enforced."

In 36 years there were only 3 court cases and 11 cease-and-desist orders regarding packer trade practices in meat merchandising. Of these few cases, none have occurred in the past 18 years.

Under the definition of a packer in the Packers and Stockyards Act, an FTC examiner has ruled that FTC has no jurisdiction over any of the activities of a firm that owns a 20-percent interest or more in a meatpacking or processing plant. Placing the trade practices of meatpackers under FTC control will make it impossible for firms to escape FTC jurisdiction by merely acquiring the stock of a packing company.

Mr. POAGE. You find it objectionable, this decision which the Federal Trade Commission examiner made, but you agree that it is good. Mr. LILJENQUIST. I agree that it is in accordance with law.

Mr. POAGE. Yes; and I am not disagreeing about that. You feel that from another standpoint it is unfortunate that this is the policy of the Government?

Mr. LILJENQUIST. I think it is just as unfortunate for those firms to escape Federal Trade Commission jurisdiction as I believe it is unfortunate for the packers to escape Federal Trade Commission jurisdiction.

Mr. POAGE. You would then be in favor of correcting that particular loophole in the present law?

Mr. LILJENQUIST. By means of the Dixon bill which would put both the packers

Mr. POAGE. That is what I want to find out. Do you only want to correct it by means of a certain bill? Isn't it your desire to correct it, period, or is it your desire to correct it only in the event you can do it a certain way?

Mr. LILJENQUIST. My one objective and the objective of our association is to put the packers under the Federal Trade Commission, where they were prior to 1921, so we can get some relief in our industry. Mr. POAGE. I know.

The CHAIRMAN. That is the problem of Mr. Poage's suggestion. Mr. POAGE. I am discussing the Hill bill, whether you would favor or oppose the Hill bill?

Mr. LILJENQUIST. The Hill bill is a maneuver as I size it up to take away one of the arguments for passing S. 1356 and similar bills including the Dixon bill which would correct the whole problem by putting all processors of agricultural products under the same rules and same degree of enforcement.

Mr. POAGE. Did you intend to say that someone introduced legislation deliberately for the purpose of getting it into the hands of other than the Agriculture Committee. You do think that was done, don't you?

Mr. LILJENQUIST. I would say, Mr. Poage, that that statement was made here this morning by Mr. Hill. I heard him make it.

Mr. POAGE. I beg your pardon. I was thinking that you made it. I beg your pardon for putting the words in your mouth but you will agree that that is true, will you not?

Mr. LILJENQUIST. Well, sir, there were 2 bills introduced a year ago this spring, 1 by Senator Watkins that went to the Senate Agriculture Committee, and 1 by Senator O'Mahoney that went to the Judiciary Committee.

Mr. POAGE. Certain bills were introduced in the House and were they not deliberately so phrased they would not come to this committee?

Mr. LILJENQUIST. I couldn't say altogether because they were identical bills to the Senate bills.

Mr. POAGE. You think that they were not so phrased as to try to avoid this committee?

Mr. LILJENQUIST. I wouldn't say how they were written, Mr. Poage. Mr. POAGE. At least, they went to other committees ?

Mr. LILJENQUIST. Yes.

Mr. POAGE. One went to Judiciary and one to Interstate and Foreign Commerce.

Mr. LILJENQUIST. Correct.

Mr. POAGE. As I understand, they are not identical, that they did put wording in each one of them to attempt to pick the committee that they wanted to go to.

Mr. LILJENQUIST. That may be true-probably so.

Mr. POAGE. This committee has not made an issue of the jurisdiction. Why shouldn't those committees go on and open it up and let them fight it out in that forum? Why should this committee now come in and try to grab the bills away from those committees? They wanted

it in that committee. They got it where they wanted it. Why don't they try their case in the court where they filed their lawsuit.

Mr. LILJENQUIST. We had hoped, Mr. Poage, that you would amend the Hill bill to do the whole job.

Mr. POAGE. It is filed in the other court. You wanted it filed in the other court, didn't you?

Mr. LILJENQUIST. I was not adverse.

Mr. POAGE. All I am saying is why not go there to fight the case. Mr. LILJENQUIST. Mr. Poage, the bills not only make changes in the Stockyards Act, but as a matter of fact, they also affect the Federal Trade Commission Act which comes under the jurisdiction of Interstate, and they, also have to do with the antitrust laws which comes under Judiciary. The parliamentarian refers the bills.

Mr. POAGE. I have not objected to what the parliamentarian didnor has this committee, nor has the chairman objected to it. This committee has raised no protest about it. We are not contesting the jurisdiction of the other committees. Why should we contest it now?

Mr. LILJENQUIST. Only in the interest of doing the whole job. Mr. POAGE. Let the other committees do the whole job. Why do we have to do it for them? Let them do the job. We have a responsibility for this particular part that is our own.

The CHAIRMAN. Do you wish to complete your statement now? Mr. LILJENQUIST. Yes, sir.

I have completed, I think, the part that I would like to read, Mr. Cooley, in the interest of saving time.

I will conclude my testimony with the recommendation that the Hill bill be modified to do that which needs to be done, so that the packing industry will no longer be discriminated against with respect to an opportunity for fair competition.

Thank you.

The CHAIRMAN. Thank you very much.

You have filed your statement, haven't you?
Mr. LILJENQUIST. Yes, sir.

(The prepared statement is as follows:)

STATEMENT OF L. BLAINE LILJENQUIST OF THE WESTERN STATES MEAT PACKERS ASSOCIATION, INC.

Chairman Cooley, and members of the committee, my name is L. Blaine Lilenquist. I am Washington representative of the Western States Meat Packers Association, Inc. I have served in this capacity since 1946, when the association was formed. There are 467 member firms in the association. The majority of our member companies are located in nine Rocky Mountain and Pacific Coast States and the western part of Texas.

SUMMARY

(1) H. R. 7743 introduced by Congressman Hill, of Colorado, is similar to Senator Dirksen's amendment to the O'Mahoney-Watkins bill, S. 1356. The Dirksen amendment was voted down by the Senate Judiciary Committee on Monday, July 8, 1957. Both the Dirksen amendment and the Hill bill contain no provisions to correct the mistake of 1921 which authorized the big packers to slip out from under the jurisdiction of the Federal Trade Commission on their merchandising practices. The Department of Agriculture has little or no interest in regulating the merchandising practices of meatpackers as evidenced by almost total inactivity in this area of its responsibility over a period of 36 years.

(2) On the other hand, the bill introduced by Congressman Dixon of Utah, H. R. 8536, would place meatpackers together with firms which acquire 20

percent interests in packing plants, under the same rules and same degree of enforcement in the Federal Trade Commission.

(3) Every segment of American industry and business will benefit by the passage of H. R. 8536 introduced by Congressman Dixon. Similar bills were introduced by Congressmen Celler, of New York; Berry, of South Dakota; Metcalf, of Montana; and Bentley, of Michigan; but of these bills only the Dixon bill was referred to the House Agriculture Committee. The Dixon bill is important to every person interested in maintaining fair competition and preventing monopoly. Livestock producers and farmers as well as small businessmen and consumers are among those who will be helped by the adoption of this legislation.

(4) Twenty-four associations and farm groups are sponsoring legislation to restore control over the merchandising practices of meatpackers to the Federal Trade Commission. The dairy co-ops with 800,000 members are strongly for it, and many other farm and business groups are coming out for the shift. (5) All other agricultural processing industries are under the control of the Federal Trade Commission. Only the meatpackers are effectively shielded from enforcement of unfair trade practices.

(6) When the packers were placed under USDA control in 1921, the Congress believed they were putting the packers under more stringent regulation than they had been under the FTC.

(7) A 2-year FTC investigation completed in 1919 showed the 5 biggest packers were unfairly and illegally using their monopoly powers to manipulate livestock markets; restrict food supplies; control prices of dressed meats and other foods; defraud producers and consumers; crush effective competition; secure special privileges from railroads, stockyard companies and municipalities; and profiteer.

(8) The big packers, after signing the consent decree of 1920, to avoid criminal prosecution by the Justice Department, got out from under the control of the FTC the following year by means of the Packers and Stockyards Act.

(9) The transfer of packer control to USDA was a great victory for the big packers. USDA is not an enforcement agency like the FTC, and has practically no money or staff for regulating unfair trade practices relating to the merchandising of meat. USDA officials in recent years have blocked every attempt of the Packers and Stockyards Branch to obtain an appropriation for the proper regulation of packers under title II of the Packers and Stockyards Act.

(10) Proper regulation of unfair trade practices in the Department of Agriculture has been impossible because the enforcement responsibility is inconsistent with the regular functions of the Department which require close cooperation with the packers in many activities including market news reporting and Federal meat grading.

(11) The Department of Agriculture has relegated the Packers and Stockyards Branch to a commodity division in the Agricultural Marketing Service, where four supervisors in the chain of command, without specialized training in monopolistic acts or unfair trade practices, can veto the enforcement recommendations of the Packers and Stockyards Branch.

(12) The big packers are able to sell meat and packinghouse products at a loss to expand their business in any given trade area. The big packers can make up these losses in other geographical areas or from their profits in nonmeat activities. They are widely engaged in hundreds of diversified business operations including ice cream, sporting goods, plant foods, soybeans and cottonseed oils, eggs, poultry, cheese, peanut butter, soap, detergents, adhesives, glycerine, curled hair, chemicals, and pharmaceuticals.

(13) The two largest packers, Swift and Armour have absorbed smaller companies at a rapid rate. Between 1930 and 1955 Swift acquired 147 smaller companies of all kinds while Armour merged with 68. There is no record or official report that USDA ever investigated a single merger during the 36 years it has had responsibility to regulate the packers.

(14) The high degree of economic concentration in meatpacking emphasizes the need for proper enforcement of trade practices to prevent monopoly and assure fair competition. In 1955, 2 companies, Swift and Armour, handled 40 percent of the United States slaughter in plants under Federal supervision. An FTC survey in 1950 showed Swift, Armour, Cudahy, and Wilson had approximately 47 percent of the industry's employees. An FTC survey in 1947 showed the 8 largest companies owned 77.6 percent of the net capital assets of the meat