landlord injuries, shareholder injuries, labor union injuries which have been traditionally rejected by the courts in decisions antedating both Illinois Brick and Hanover Shoe.

Senator HATCH. We appreciate your testimony here today. It has been very good and we appreciated having the viewpoint, I take it, of most of the attorneys general in this country. There are a number of them who have expressed some concern about this to me, especially with regard to the right of the State to bring actions where it may in and of itself be an indirect purchaser and of its own consumers and the fact that maybe the parens patriae actions are severly curtailed as the result of Illinois Brick. On the other hand, I think there are some questions that are not easily answered such as duplicative recoveries, multiplicity of actions clogging the court, et cetera, that have to be addressed here and may not be by this legislation.

Mr. REED. May I respond before allowing Dr. Shields to speak? Senator HATCH. Yes.

Mr. REED. The unanimity that exists among the State attorneys general is indeed remarkable. The State attorneys general run the gamut from liberal to conservative, both Republicans and Democrats, northerners and sourtherners, people who have been elected with business support, people who have been elected with consumer support, I think the full range of the political spectrum in the United States. The 50 attorneys general unanimously supported the State of Illinois when the Illinois Brick decision was first argued before the Supreme Court and have gone on record again and again as unanimously supporting legislation to overturn the Illinois Brick decision. I think that speaks to the need and the wide political base this legislation has.

Second, and I would take issue with you, Senator Hatch, I do believe that Senate bill 1874 does deal with the duplicative recovery issue. I think in its operative sections it allows the pass-on defense in appropriate situations. It, therefore, overrules Hanvoer Shoe while at the same time allowing the pass-on offense. So, the duplicative recovery is dealt with by the statute. Even if there be any ambiguity or question of statutory language, I believe the purposes and findings in section 2 of S. 1874 give the guidelines for the courts and how to avoid these problems. The approach on the House side is different only in style.

Senator HATCH. We appreciate having your testimony.
We will now hear Mr. Shields' testimony.

STATEMENT OF CURRIN SHIELDS, PRESIDENT, ARIZONA CONSUMER COUNCIL

Mr. SHIELDS. Thank you, Mr. Chairman.

My name is Currin Shields. I have a brief statement which I will read.

I am president of the Arizona Consumers Council, a nonprofit corporation chartered by the State of Arizona in 1966. I have been president of the council since 1969. The sole purpose of the council is the protection and promotion of consumer interests. We have upward of 1,700 dues paying members throughout the State and about 60 members outside the State. I am also the founding chairman of the Conference of Consumer Organizations, called COCO, a

national association of nonprofit State and local consumer groups devoted to consumer protection, representation, information and service. I was chairman of COCO for 3 years and director for 1. The Arizona Consumers Council has been involved in two major antitrust cases in recent years, the Arizona Bread case which Mr. Reed referred to, and the Arizona Milk case. Both cases resulted from requests by the council to the Antitrust Division of the Justice Department to investigate bread and milk pricing practices in the State of Arizona. The council's requests were based on a series of bread and milk price surveys conducted over a period of years which showed clearly price uniformity in product lines.

Federal grand jury indictments were returned against the major bread producers and their executive officers in February 1974, against the major milk producers and their executives in August 1974. All pleaded no contest to the charge of price fixing. The Bread case which Mr. Reed referred to was settled last year; he indicated distribution of the settlement. The Council represented the retail consumer class jointly with the Arizona attorney general. The settlement totaled altogether approximately $6 million as I recall with 240,000 households receiving checks in amounts somewhere between, in the range that we tested, $7 to $23.

The milk case was recently settled with some defendants; the total amount of damages is still uncertain. The settlement at this point is $4.1 million in the milk case and we have one company to go yet. Again, the council represented the retail consumer class and that case jointly with the Arizona attorney general's office. I am here to support the passage of Senate bill 1874.

The problem that the bill seeks to address as I view it is the participation of private parties generally in antitrust action and particularly nonprofit consumer organizations, the groups that I am primarily concerned about as far as enforcement of antitrust laws are concerned. At the present time as a result of the Illinois Brick case consumer organizations have no incentive whatsoever to participate in the enforcement of antitrust laws, in other words, to seek out the violators and make violations public. The ruling in that case was that only the direct purchasers have a right to damages in antitrust actions. Consumers who are normally indirect purchasers do not have right to damage resulting from price-fixing as a result of Illinois Brick. The present bill under consideration would restore incentive to consumer organizations to participate in antitrust law enforcement. It is essential for consumer organization involvement in antitrust law enforcement if the antitrust acts are going to be enforced. Without involvement of such organizations, there is little prospect that antitrust laws will be vigorously enforced.

Antitrust violations cost American consumers many billions of dollars every year. I have heard a great deal of difference estimates of the total amount. No one disagrees that there are billions of dollars being paid out in artificially high prices as a result of conspiracy in restraint of trade. Despite the enormous costs to the American people of the failure to enforce antitrust laws, historically the antitrust laws have not been enforced with any vigor. Enforcement could come about and should come about in a number of different ways. But enforcement in fact has not worked.

The FTC has some antitrust jurisdiction in enforcing antitrust laws but the FTC has proved to be notoriously reluctant to exercise that jurisdiction. There is very little FTC action in the area of antitrust litigation.

The Antitrust Division of the Justice Department likewise has the antitrust jurisdiction. The Division has brought some antitrust actions such as the Bread and Milk cases which I mentioned. At the same time the actions that have been brought by the Justice Department in antitrust enforcement are a mere pitance compared to the number of actions which they could and should bring. In other words, the incidence of taking action is absolutely minimal compared to the amount of antitrust violations that are going on in the country. State attorneys general have antitrust jurisdiction as well, but generally they have not been active in the antitrust area. Attorney General Bruce Babbitt of Arizona was an exception to the general rule.

Let me suggest that the law enforcement officials have not been anxious to undertake enforcement of the antitrust laws for very good reasons. They have scarce resources. They commit the resources to a few major cases rather than trying to police_the marketplace and trying to clean up antitrust price fixing. They have to set priorities in their office. Generally white-collar crime is not a high priority in law enforcement at any level. As a result you have the many instances of violations of the antitrust laws going on without law enforcement officials of the Federal or the State level either being involved in antitrust enforcement.

There is provision, as you know, in antitrust laws for enforcement by private parties but this has not worked in practice. There has been some reference as to why. Injured competitors do not generally sue competitors who are engaged in a conspiracy_in restraint of trade, in other words, the direct purchasers do not. The injured competitors who tend to be small and independent operators either become tacit if not overt parts of the conspiracy, or they don't have the economic resources required to take on major competitors who are engaged in a conspiracy. This simply is no practical solution. Also, a price-fixing conspiracy ordinarily will benefit the injured competitor not hurt them because the conspiracy is to fix prices at high levels which benefit the so-called injured competitor.

The Illinois Brick case ruling that only direct purchasers from companies engaged in conspiracy in restraint of trade have a right to participate in the antitrust awards eliminates consumers from involvement in antitrust actions, even though the ultimate retail consumer is the victim in any kind of a price-fixing operation. The direct purchasers such as the retailers pass on the cost of the artificial high price. They pass the price-fixing cost on to the ultimate consumer. Consumers have to absorb that cost; they can't pass it on; it becomes a part of their cost of living. They are the ultimate victim of the price-fixing conspiracy. Also, notice that direct purchasers have no incentive really to take an antitrust action against the supplier companies who are engaged in price fixing. More likely than not-and referring specifically now to the two cases that I have been involved in-they are part of the conspiracy. They simply go ahead, go along with the manufacturers,

pass the price on to the consumer and the consumer is the one who has to pick up the tab for the conspiracy. As a result, the only party, as I see it, that you have left with a strong interest in antitrust enforcement is the consumer class. Consumer organizations have become more and more interested in antitrust enforcement because of that. They now have no incentive to participate because of Illinois Brick.

I would like to point out in the pamphlet entitled "Antitrust Enforcement and Consumers" published by the Antitrust Division of the Justice Department. The statement is made that both the Antitrust Division of Justice and the FTC operate primarily in response to complaints from consumers and competitors. Competitors seldom complain; consumers frequently complain. To what extent we have had antitrust law enforcement by the Justice Department has come as a result of pressure from consumers complaining about the price-fixing practices in the marketplace. This bill would restore consumers as a class in antitrust action with a right to participate in awards. This would give consumer organizations an incentive to become actively involved in antitrust law enforcement.

Government agencies generally have failed to enforce the antitrust laws historically. Private parties, especially consumer organizations are the last best hope we have for vigoruous enforcement of antitrust laws. The active involvement of consumer organizations in antitrust enforcement could mean a very significant improvement in such law enforcement. It could save consumers many billions of dollars per year. I respectfully urge you to support passage of S. 1874.

Senator HATCH. Thank you, Mr. Shields. We appreciate your effort to give us this testimony. Let's now go to Mr. Hawkins. Mr. Hawkins, I am in a bind for time here. I have to be at another committee hearing. I know your testimony is important. All I am saying is if I could encourage you to summarize it, we will put your complete statement in the record.

I think that you with your experience in antitrust at the bar and especially in these cases will be able to do so without feeling like we have impinged upon your time.

STATEMENT OF LEX HAWKINS, TRIAL LAWYER, DES MOINES,

IOWA

Mr. HAWKINS. I hear point are given for brevity and taken off for verbosity.

I represent 500 cattle feeders spread throughout the United States in 14 States and also a class action called Becker which is 35,000 cattle feeders. Over 15,000 of those cattle feeders are constituents of the Senators on this committee. We are here because we have probably had the largest antitrust cases pending in the United States at the time that it was dismissed.

Senator HATCH. Maybe we had better disqualify ourselves then. Mr. HAWKINS. I don't know, Senator, but I am hoping that some or your constituents can come in here and say that we have been thrown out of court and we have a very mild curiosity about overruling Illinois Brick.

Senator HATCH. We have had a number of them here.

Mr. HAWKINS. It has been estimated that if the supermarkets are fixing the price of beef at 1 cent per pound, that our case is worth $250 million annually.

Now the Bray case which has already been tried against A. & P., that jury in San Francisco found that A. & P. was fixing the price at 20 cents. When you are talking about $500 million you are talking about the tip as far as price fixing that we are talking about in the cattle cases.

You could well say that you cattlemen are in a unique category and Illinois Brick just knocked you out because some Federal judge in Texas decided to do so. This is not true. There are 40,000 to 60,000 wheat farmers who have also been knocked out of court because of Illinois Brick because they were indirect sellers. We are indirect sellers in a rigged market. We claimed that the supermarkets control the demand by what they feature, et cetera. They lowered the price to the packer. The packer in turn directly passes on the lowering of the price, the price fix, to us on a direct formula. For example, A. & P. sets the price on the east coast; Safeway sets the price on the west coast along with other conspirators. They drive the price down on carcass beef to 60 cents, let's say. Then the packer buys his live cattle on a direct formula based upon if the carcass is going to yield 60 percent for edible beef. He takes 60 percent of the 60 cents, which is 36 cents, and directly gives us 36 cents. So he passes it completely on.

Now we see the supermarkets-and notwithstanding Mr. Handler-we also see the packers in a separate case as co-conspirators because they are co-conspirators and we can prove it. But we sell to the packer. So, we are not a purchaser in a rigged market; we are a seller in a rigged market. We have a direct pass-on and we also are suing co-conspirators. Yet, Federal district court knocked us out based on Illinois Brick.

Senator Wallop, at his last hearing, asked for our pleadings to be sure that what Hawkins is saying here is really true. I have the pleadings and I would also like to make those part of the record. Senator HATCH. Without objection, the pleadings and your written statement will be made a part of the record.

Mr. HAWKINS. This bill, S. 1874, does not change the law. Since 1914, in section 7 of the Sherman Act before that, says that any persons injured by violation of the antitrust laws can collect. Now then, the Supreme Court in Illinois Brick amended and as far as we are concerned and the wheat farmers and a lot of other people, they repealed the Clayton Act. They added to the Clayton Act "any persons injured who is in privity or who is a direct purchaser may recover." All the rest of us are out. All we are asking you to do in 1874 is to bring the law back to what it was before Illinois Brick. In all of the jurisdiction in the United States, in the second circuit most recently, in the fifth circuit and in the eighth circuit and all circuits except for the third circuit and the southern district in New York, we could have brought indirect purchaser action. That is why Handler's sample in the southern district in New York is really not an accurate one because myself as a plaintiff's lawyer would never bring an indirect purchaser case in the State of New York. I could bring it in the fifth circuit, I could bring it in the eighth circuit like our cases, I could bring it any place in