Summary of disposition of complaints pertaining to Packers and Stockyards Act received from persons referred to Secretary of Agriculture by the Federal Trade Commission, June 1, 1956, to May 3, 1957 1

1 Pp. 62-63, report on hearings before the Subcommittee on Antitrust and Monopoly of the Committee on the Judiciary, U. S. Senate, pursuant to S. Res. 57 on S. 1356. May 1, 2, 3, 7, 8, 9, 10, 15, and 22, 1957.

The CHAIRMAN. If there are no further questions, we thank you very much for your appearance.

Mr. DAVIES. Thank you.

The CHAIRMAN. We will call Mr. Angus McDonald, of the National Farmers Union.

STATEMENT OF ANGUS MCDONALD, COORDINATOR OF LEGISLATIVE SERVICES OF THE NATIONAL FARMERS UNION

Mr. McDONALD. Mr. Chairman and gentlemen, I am Angus McDonald, and I am assistant legislative secretary of the National Farmers Union.

We are appearing here in support of those parts of the legislation under consideration here which would expand the jurisdiction of the Federal Trade Commission in regard to violation of the antitrust laws. However, we would like to emphasize that the bill would not touch the real evil which the Watkins-O'Mahoney, Dixon-Hagen bills are designed to eliminate.

According to our information, meatpacking, and related activities, is the only segment of the food industry which is not subject to enforcement of the antitrust laws as administered by the Federal Trade Commission. FTC, in our view, is one of the most vital regulatory bodies in our dynamic society. As we understand its functions, they are predicated upon the idea that the policy of our Government should be directed toward preservation of our free enterprise system.

Our free enterprise system has been responsible for the tremendous growth of our agricultural and industrial economy and has been the main drive toward efficiency and progress ever since our country has existed as a nation. Although our organization believes with Jefferson that the best government is the one which governs the least, we are also of the view that regulation is a necessary evil if our free economy is to survive and if we are to survive as a free nation. The alternative to regulation would be a continuation of the trend toward monopoly which would result in a few gigantic corporations taking over our entire economy and eventually our democratic institutions. A long time ago certain foresighted individuals foresaw that if the Government did not step in and check the trend toward monopoly that our free-enterprise system would be doomed.

Accordingly, the Sherman antitrust law was passed in 1890 which outlawed conspiracy against free competition and later the Clayton antitrust law and the Federal Trade Commission laws were enacted. Later on the Robinson-Patman Act was enacted in 1935 which implemented and helped close loopholes in the Clayton Act. Although administration of these laws has been notoriously lax and while procedures have been slow and cumbersome, we feel strongly that their administration as exercised is better than no regulation at all and we always live in the hope that regulation will be made more efficient. and that enforcement of the laws will be more speedily administered in the future.

We call attention to one of the abuses which has arisen during the last few years in regard to a loophole in the present law. By making monopoly practices in meatpacking and related activities solely a problem for the Department of Agriculture, the law automatically

exempts a firm from FTC scrutiny, even though its meatpacking activities comprise only a small part of its activity.

I refer specifically to a number of cases which were originally considered under the jurisdiction of FTC and were subsequently dismissed for lack of jurisdiction. Chainstores, margarine manufacturers, and others have escaped FTC action on the ground that they were also packers and are therefore under the exclusive jurisdiction of the Secretary of Agriculture.

Included among those firms which have avoided jurisdiction of FTC is Food Fair, a gigantic chain retail grocery organization of more than 200 units. Although the business of Food Fair amounts to several hundred million dollars annually, it was able to escape jurisdiction of FTC by making a relatively small investment in a packinghouse.

The CHAIRMAN. May I interrupt you right there?

Mr. McDONALD. Yes, sir.

The CHAIRMAN. Could you give us that information, or could counsel for the Federal Trade Commission? I do not recall any instance such as that to which you have referred. Give us the cases, if you can. You say that these packers have escaped jurisdiction of the Federal Trade Commission merely by showing that they were packers. Mr. McDONALD. I said chainstores, Mr. Chairman. They have escaped.

The CHAIRMAN. They escaped the provisions of the Federal Trade Commission merely by showing to the Federal Trade Commission that they were also engaged in the packing business?

Mr. McDONALD. Yes, sir.

The CHAIRMAN. We only have one before us. That is the Food Fair case, and that has not escaped the Federal Trade Commission. It has not escaped anybody. It is before the full Commission of the Federal Trade Commission. The statement you have is very broad and impressive but we would like to have some evidence.

Mr. McDONALD. Well, according to my information, the following companies, that include Food Fair, have escaped.

The CHAIRMAN. Including Food Fair?

Mr. McDONALD. Including that case. As I understand it, of course, the General Counsel of the Federal Trade Commission is here, and he knows the case. I do not know it. But it is my impression that Food Fair did escape.

The CHAIRMAN. No they did not.

Mr. McDONALD. Up to this point.

The CHAIRMAN. We have the present status of it. It is now before the full Commission. The final judgment has not been rendered. Numerous companies have escaped you say?

Mr. McDONALD. According to the decision of the hearing examiner I think they did escape.

The CHAIRMAN. Every hearing examiner renders an initial decision. Mr. McDONALD. The case is appealed, but Food Fair won the case in the first instance.

The CHAIRMAN. What?

Mr. McDONALD. Food Fair won the case in the first instance. The CHAIRMAN. Sure, they have won the first inning. Read your statement. If you will go back, if you don't mind, we do not want anything in the record that is not justified.

Mr. McDONALD (reading):

Chainstores, margarine manufacturers, and others have escaped FTC action on the ground that they were also packers and are therefore under the exclusive jurisdiction of the Secretary of Agriculture.

The CHAIRMAN. All right. That is a broad statement. I would like to have something definite for the committee.

Mr. McDONALD. Food Fair is one of those companies. The CHAIRMAN. Food Fair-we know all about that. to some others.

Let us go

Mr. McDONALD. Other companies which have avoided enforcement of our antitrust laws, include the following-with case reference: United Corporation, et al. v. F. T. C. (4 C. C. A., 110 F. 2d 473 (1940)); Armour and Company (1956) (FTC Docket No. 6409); Carnation Company, et al. (1956) (FTC Docket No. 6172); Renaire Corporation (1957) (FTC Docket No. 6458); and case of Blanton Co., St. Louis, Mo. (1957).

The CHAIRMAN. You say that they escaped the provisions of the Federal Trade Commission Act under the antitrust law merely because they said they were packers?

Mr. McDONALD. That is my information.

The CHAIRMAN. I do not recall that in the document I placed in the record, dating back to 1950, any such thing appeared.

Mr. McDONALD. I have the docket numbers here, and I will read them, if you wish.

Mr. POAGE. Carnation Co., are they a packer?

Mr. McDONALD. According to my information.

Mr. POAGE. Did they claim they were a packer, or did they ever claim to be a packer?

Mr. McDONALD. According to the Federal Trade Commission docket No. 6172; yes, they did. Unless I am mistaken in my material. The CHAIRMAN. Will you give us the number? We have the General Counsel of the Federal Trade Commission here.

Mr. McDONALD. That is a 1956 case.

The CHAIRMAN. I think that the committee should know, and we would like to know how many companies have escaped through that 20-percent provision in the law.

Mr. McDONALD. I have all of this documentation here, Mr. Chairman. Unfortunately, I have only one copy of my statement, but I will give it to you.

The CHAIRMAN. Put that in the record and we will have the Federal Trade Commission check it.

Mr. McDONALD. Yes, sir.

Facts developed in these cases furnished very compelling evidence for the enactment of the Watkins, O'Mahoney, Dixon-Hagen legislation. It is seen that any corporation, presumably one not even concerned with food, could exempt itself from the FTC Act and the Clayton Act merely by purchasing a small meatpacking establishment. Such a purchase would free a company to engage in false, misleading advertising, unfair competition, and all kinds of monopolistic practices in violation of our antitrust laws. Two such examples are the United Corp., which engaged in false and misleading advertising, and the Carnation Co. which it was alleged violated section 5 of the Federal Trade Commission Act.

Mr. POAGE. Did they ever claim they owned a packinghouse, the Carnation Co.? I asked if he explained that the Carnation Co. alleged they were a packinghouse.

Mr. McDONALD. According to my information; yes, sir.

Mr. POAGE. Who is this other, the United Food Corp.?

Mr. McDONALD. The other one is United Corp., but I am talking here

Mr. POAGE. Who are they?

Mr. McDONALD. In this paragraph about misleading and deceptive practices.

Mr. POAGE. What are they engaged in-what were they producing? I don't know the United Corp. What were they producing? Mr. McDONALD. I don't know.

Mr. POAGE. Do they make automobile tires; do they make telephones? Who is the United Corp.? What do they do? Where are they?

Mr. McDONALD. I don't know. It is one of the companies that got into trouble down at the Federal Trade Commission because of this instance that I mentioned.

Mr. POAGE. You allege that the United Corp. claimed that they were engaged in the packinghouse business; is that right?

Mr. McDONALD. Apparently so.

The CHAIRMAN. The name is not furnished on this list.

Mr. POAGE. Mr. McDonald, as a matter of fact, isn't it true that what the Carnation Co. claimed was that they were selling dairy products?

Mr. McDONALD. Well, all I know Mr. Poage, is that I went through our files and I got a list of the cases which got into trouble on account of this.

Mr. HAGEN. Carnation claimed that they were under the jurisdiction of the United States Department of Agriculture because they owned a milling company which in turn owned two dog-food companies.

Mr. POAGE. Claimed the dog-food companies were packinghouses? Mr. HAGEN. Yes. Their motion was denied by the examiner. However, they still have recourse they still have the opportunity of going into the Federal courts and advancing their contention.

Mr. POAGE. Then you would not join the statement that they had escaped Federal Trade Commission jurisdiction?

Mr. HAGEN. They have potential escape. It has not been fully adjudicated. The only case that I know that went to the court was this United Corp case, involving a company which was principally a seller of other people's manufactured products.

Mr. POAGE. Let us take one side or the other. I will take either side. You said that Food Fair had escaped, although they are still in court because

Mr. HAGEN. It has not been determined yet finally whether or not they did.

The CHAIRMAN. I think we are beating a dead horse. I do not know anybody on this committee who wants anyone to escape the penalties of the antitrust laws. We want to find out whether it has transpired in a small or large number of cases. Every member of this committee