It is true if they are advertising and merely saying that they want to find a wholesale distributor, and you might find such an advertisement in the want ad sometime, but you would never find it in the Saturday Evening Post or the American magazine. You would find that hidden away somewhere in the want ads.

That could be strictly related to wholesalers. But if it seeks to procure retail purchases, then it seems to me that is a retail transaction.

It is clearly under jurisdiction of either party.

If Swift & Co. puts a coupon with that ham, and Swift & Co. redeems that coupon, then Swift & Co. is trying to influence the retail

sales.

Mr. HAGEN. They are trying to influence, but they are not engaged in retail sales.

Mr. POAGE. If they influence it, they are engaged in it. They are taking a part in it.

The CHAIRMAN. Do you have any other statement you wish to make? Mr. LILJENQUIST. Yes, sir. I would like to explain our position just a little further, Mr. Chairman.

In our industry, the meat industry, we have a great deal of economic concentration. As was pointed out earlier, 2 companies have 40 percent of the meat that is eligible for interstate commerce, that is produced in federally inspected plants. They are Swift and Armour. Ten companies have 66 percent of that business.

Now, we contend, we small independent packers, that these big companies, through price discriminations in any given area of their choosing, can increase their business and drive out competition by the result of having so much economic power, and due to the fact that they are engaged in so many other business activities that they can sell their meat at cost or at a loss, and injure competitors.

It is that type of price discrimination that we want to be able to correct. We have not been able to correct that sort of thing in the Department of Agriculture, because Agriculture has been concerning itself with livestock transactions with the limited appropriations they have had available.

But we complain that they have not tried very hard to get appropriations for title II enforcement, because every time the Branch has tried to get funds to employ some personnel for enforcement under title II in the merchandising field, the Department itself has excluded such funds from the budget. They have not requested the Bureau of the Budget for such funds, or the Congress.

Now, we would like to have, and we feel that this is a fair request, to be able to take our complaints to the Federal Trade Commission, just the same as every other agricultural processing industry can do today, and have the same degree of attention as they can get.

We think that it is unjust to have the merchandising practices of the packing industry regulated by the Department of Agriculture under a different set of laws and a lesser degree of enforcement. And we do not believe that the situation in Agriculture is likely to change very much in the future.

The Department has placed the Packers and Stockyards Branch in a Commodity Division. It is part of the Livestock Division of the

Agricultural Marketing Service. There is not even a separate enforcement agency in the Department.

Livestock and farm organizations have asked the Secretary of Agriculture to set up a separate enforcement agency in Agriculture. But the Department refuses to establish a separate enforcement agency. The Packers and Stockyards Branch is relegated to a division that must cooperate with packers on a number of other activities. Proper administration of the law could not be expected under such circumstances.

We do not need a separate law or separate enforcement where we already have this work concentrated in the FTC, an arm of the Congress established in 1914, that has no job except to enforce laws that relate to fair competition.

The CHAIRMAN. Well, where would you draw the line in dividing the responsibility between the two agencies of the Government?

Mr. LILJENQUIST. I would just change this bill to include the words "wholesale and retail activities of packers."

One other thing, if I may: In addition to the 20 organizations that issued the leaflet "What Is So Different About Meat," which describes our position, I would like to say that the transfer of the wholesaling activities of packers to the Federal Trade Commission is also supported by the National Wool Growers Association, the National Association of Retail Grocers, the National Food Brokers Association, and now, more recently, the Montana Cattlemen's Association has endorsed the transfer. The Pure Milk Association that operates in Wisconsin, Illinois, and Indiana; the Iowa Swine Producers Association; the Georgia Dairy Association, and the Kansas Ice Cream and Milk Institute have also endorsed our position.

So, there are now 28 organizations asking that this one further thing be done, giving the wholesale practices over to the Federal Trade Commission.

Mr. POAGE. We understand you want all of it turned over to the Federal Trade, but assuming you cannot get that, would you rather have this bill, or would you rather have the present law?

Mr. LILJENQUIST. I would suggest that concurrent jurisdiction would be

Mr. POAGE. I did not ask you anything about concurrent jurisdiction. I asked you if you would rather have this bill or the present law.

Mr. LILJENQUIST. Excuse me, Mr. Poage.

This law definitely is an improvement over what we have had, but it still does not do the main job that we have been aiming at. The CHAIRMAN. We shall have to recess.

We will meet again at 2:30. We will hear the other witnesses then. (Whereupon, at 12: 15 p. m., the committee adjourned, to reconvene at 2:30 p.m., of the same day.)

AFTERNOON SESSION

The CHAIRMAN. The committee will please be in order.

Mr. Quinlan, counsel for the United States Wholesale Grocers' Association, Inc.

STATEMENT OF WILLIAM A. QUINLAN, GENERAL COUNSEL, UNITED STATES WHOLESALE GROCERS' ASSOCIATION, INC., ACCOMPANIED BY ROLAND H. ROWE, VICE PRESIDENT AND SECRETARY

The CHAIRMAN. Will you identify yourself, please, for the members of the committee, and for the record, Mr. Quinlan?

Mr. QUINLAN. Mr. Chairman, my name is William A. Quinlan, and I appear here as general counsel of the United States Wholesale Grocers' Association, Inc., a national trade organization of wholesale food and grocery distributors, with headquarters in Washington, D. C.

If I may, Mr. Chairman, I would like to have with me Mr. Roland H. Rowe, our vice president and secretary, who has been with this. association and its predecessors since 1919, and has a lot of background.

The CHAIRMAN. We are delighted to have you with us. Do you have a prepared statement?

Mr. QUINLAN. Yes, sir.

The CHAIRMAN. Mr. Quinlan, we shall be glad to hear you now, sir.

Mr. QUINLAN. Thank you, sir.

We are here in opposition to the mimeographed bill which the committee released on July 29 with an invitation to interested persons to testify today concerning that bill, including the changes proposed by your subcommittee today.

We respectfully submit that this is a bad bill both in general principle and in its details.

The most fundamental objection is that it violates the basic principle of practical fairness and legal due process that any given business activity, regardless of what persons engage in it, should be subject to the same rules of fair play and enforcement agency, as to all such persons.

In our appearance before you on July 10, with Harold O. Smith, Jr., our executive vice president, as our principal witness, we said that the basic fallacy in the present statute is that of determining the rules to be applied, and the agency to apply them, according to persons rather than functions.

The Department of Agriculture and others who would perpetuate that fallacy, we said, want one class of persons (consisting of those who may have an interest to one degree or another in meatpacking or live poultry dealing) to be subject to one set of rules and enforcement agency, and other persons to be subject to another set of rules and agency.

Thus, the two classes of persons are to be subject to different rules and agencies even when they are doing the same things, in competition with each other. Thus, there is to be a specially privileged class of persons-those who are classified as meatpackers and live poultry dealers according to the definitions in the Packers and Stockyards Act-which may go about as it pleases, into various forms of industry or enterprise, without complying with the requirements of fair dealing with which all others in that industry or enterprise must comply.

Under the present statutory provisions, that is so as to almost all kind of industries and enterprises. Once a business firm becomes a "packer" (by acquiring 20 percent or more of a packing plant) or a "live poultry dealer or handler" (by engaging "in the business of buying or selling live poultry in interstate commerce for purpose of slaughter ***"), or a stockyard owner or dealer, it is then free to go into any kind of business activity, other than banking or for-hire transportation,1 without being subject to jurisdiction of the Federal Trade Commission as are others engaged in that activity.

Mr. Chairman, I have some footnotes in my statement, and I would appreciate it if they might be incorporated in the transcript. The CHAIRMAN. They may be incorporated.

Mr. QUINLAN. The new bill on which the committee has invited comments would preserve that basic fallacy and inequity, although reducing the scope of its practical application.

Under the bill, once a firm becomes a "packer" or a "live-poultry dealer or handler" as defined, it would then be free to go not, as now, into every kind of business activity other than banking or forhire transportation-but into wholesaling of “** *2 meats, meat food products, livestock products, ***2 or poultry products," without being subject to jurisdiction of the Federal Trade Commission as are others engaged in such wholesaling businesses.

From a practical standpoint, wholesale grocers, for example, who are subject to the jurisdiction of the Federal Trade Commission and to the provisions of the Federal Trade Commission Act and the Clayton Act, as amended by the Robinson-Patman Act, in their wholesaling of “*** meats, meat food products, livestock products, * * * or poultry products," still would be confronted in such wholesaling with competition from firms which are technically "packers" or "livepoultry dealers or handlers" and, therefore, not subject to the same agency or statutes.

The bill, thus, is as bad in principle as the present statute. It merely limits the practical area of inequity to wholesaling of "*** meats, meat food products, livestock products,*** or poultry products."

Those terms encompass thousands of food and grocery products. When I say that, Mr. Chairman, I take into consideration not only the various types of products, but also the many brands of each. The area of inequity would still be great.

I might interpolate, Mr. Chairman, that it could be said in a sense that this bill in one respect does not even remove the inequity to the degree that Mr. Hill's bill would, because the Hill bill would involve only those "principally" engaged in meatpacking, and that might be construed as 51 percent or more, although, as we said before, we are not sure that it would be, but at least that seemed to be the intent of this committee, that would leave the loophole available only to firms who are "principally" engaged in meatpacking, whereas this new bill will, although in a narrower area commoditywise, still leave the loophole as it is now available, to any firm which wanted to acquire as much as a 20 percent interest in a meatpacking plant.

1 See subsec. 5 (a) (6), Federal Trade Commission Act.

The bill, in sec. 202 of the act as amended, refers also to "livestock" and "poultry, but sellers of livestock and poultry, with certain limitations, are subject to titles III and V of the act, and therefore exempt from Federal Trade Commission jurisdiction regardless of the provisions of the bill.

There is an illustration that I think might help to point up the inequity which would still exist, and that is the case, for example, of a company which might qualify technically as a packer by acquiring such a 20 percent or greater interest in a meatpacking plant, and might be engaged in producing and distributing spaghetti, both spaghetti without meat balls and spaghetti with meat balls. It would appear under the provisions of this bill that the spaghetti without meat balls would be under the jurisdiction of the Federal Trade Commission, and that with meat balls would be under the jurisdiction of the Secretary of Agriculture.

Another example which has come to our attention is that of H. J. Heinz Co., which is listed as a packer, subject to the Packers and Stockyards Act, in an official list published by the Department of Agriculture dated June 17, 1957. The Heinz company, for example, under the provisions of this bill, in making tomato soup and chicken soup among other types of soup, would appear to be under the Federal Trade Commission as to tomato soup and under the Secretary of Agriculture as to chicken soup.

Such examples, we believe, only tend to dramatize the fact that the bill is basically in error in trying to preserve the distinction, in any field of commodities, based on persons rather than functions.

The amendment which the bill would make to subsection 5 (a) (6) of the Federal Trade Commission Act points up again the basic error of attempting to apply certain regulations to certain persons, regardless of what they do, instead of applying certain regulations to what is done, regardless of who does it.

That subsection now exempts from FTC jurisdiction "persons" who are engaged in banking or for-hire transportation or who are subject to the Packers and Stockyards Act. The bill would amend that subsection so that it would exempt, not "persons" who are subject to the latter act, but "matters" which are subject to the latter act. The trouble then, however, is that in looking back to section 202 of the latter act as it would be amended by the bill, we find that its applicability is not entirely on a basis of "matters," but instead still partly on a basis of persons. That is to say, section 202, purporting to regulate trade practices, does not apply to all wholesaling of meats, and so forth. Instead, it applies only to wholesaling of meats, and so forth, by persons who are technically classified as "packers" or "live poultry dealers or handlers."

That inconsistency within the bill is one which would offer new opportunities for evasion of unfair trade practice regulation. A person who is not technically a "packer" or "live poultry dealer or handler" and who is engaged in wholesaling of meats, and so forth, could contend that he is under jurisdiction of neither the Secretary of Agriculture nor the Commission. Clearly, by definition, he is not under the former, because not within those classes of persons defined as "packers" or "live poultry dealers or handlers." And, he would contend, under the wording of the bill, he is not under the Commission because he is engaged in "matters," that is, wholesaling of meats, and so forth, which have been "made subject to the Packers and Stockyards Act." I do not think the courts would finally agree with that contention, but the provisions of the bill could be a source of confusion and litigation.