the United States except for in the third and in the southern district of New York and prevail prior to Illinois Brick. What we are asking you to do is write in and define specifically what was actually in the law before. That is, that any person injured who can prove it is entitled to recovery.

Senator HATCH. Handler's proposed amendment would do precisely that and would solve your problem.

Mr. HAWKINS. I am not really offended by his amendment. Senator HATCH. His amendment would help sovle your problem which even Judge Tyler admitted is a problem pursuant to which there may not be any solution under the present state of the law. Mr. HAWKINS. Let's talk about Professor Handler and torpedoing these 2,000 cases. You know what happened to the indirect purchaser cases prior to Hanover Shoe; they were brought and they weren't torpedoed. For 50 years the Clayton Act was in existence prior to Hanover Shoe.

Senator HATCH. I think what he is talking about is that the direct cases would be torpedoed.

Mr. HAWKINS. that is what I am talking about, namely direct purchaser cases. For 50 years there were direct purchaser cases prior to Hanover Shoe and wih no severe problem. Let's address ourselves to the two problems.

Senator HATCH. His point was that the cases to recover the money that Illinois Brick now allows him to do.

Mr. HAWKINS. I think you hit the nail right on the head in one of your earlier questions: Why was it passed and what was it to do? No. 1, it was passed to get away from duplicate recovery. This bill handles duplicate recovery. For example, a defendant, under this bill, if he thinks that there is duplicate recovery all he has to do is to prove the pass-on or any part of it. That is his burden and he can do it.

That protects the direct purchaser because the direct purchaser can still bring his case for any damage that he has suffered. But the defendant can also prove-and there will not be any double recovery-because he can prove that, "Hey, you, Mr. Direct Purchaser, you passed it on to somebody else." Now in the event that you are still bothered by duplicate recovery in your bill, I have drafted some language that is on page 9 of my formal statement that you might look at. Then you can ask me any questions in writing that you would like to in the future.

But I want to say that as far as a complete history of Clayton 4 of the Sherman Act, if you read the Clayton Act in section 4, the legislative history was for compensation. One-third of our cattle people have been put out of business. They are out of business. Now believe me, Senator, we need compensation. I can tell you now that small cattle feeders have been hurt $15,000, $20,000, or $40,000. Our large cattle feeders have been hurt by the millions. I can say that when it comes to a price fixer, he price fixes so he can receive a larger profit being his business. Let me tell you something, the treble damage action of Clayton 4 was specifically put into the act for the purpose to penalize those people by digging into their profit. A large corporation can sacrifice the sacrificial lamb, three or four of their people, by putting them in jail but they cannot explain a large price-fixing suit to thier stockholders when

it sticks on millions and millions of dollars in their profits. Believe me, compensation and treble damages and the individual right to come into this court, to come into any court to prove it is very substantial and we have been deprived of that right, Senator. All we are asking is to put the Clayton Act back as it was before so that we have standing to come in and sue if we can prove our damages. Believe me, the constitutionality of this issue-I disagree with my friend here from the Attorneys General-we feel it is constitutional and we feel that the case of Bradley v. Richmond School Board of 1974, and United States v. Schooner Peggy, which is an 1801 case, substantiate that situation.

I have said all I need to say. Please read my statement. If you have any questions, I would be more than happy to answer them. Senator HATCH. We will do that. I think that you do get A-plus for brevity under the circumstances, and I think for advocacy, not that that means anything to this committee. [Laughter.]

Let me just say this to you that the Judiciary Committee is one of the more interesting committees, the Senate Judiciary Committee is. I think the House would also fit in this category as two of the most interesting committees in Congress today. This is an interesting issue, especially to me. Even Judge Tyler had to admit that there probably is no solution under present law as what is right in Illinois Brick. We have an Interstate Brick out in Utah so I always call it Interstate Brick.

There appears to be some inequity here with regard to the cattle raisers. The question is how many other people are suffering inequities, too, if some solution is not brought about. I have appreciated hearing all the testimony today. I think there has been excellent testimony on both sides of this issue. It is a big issue and you will be interested to note that on the 28th we meet again then on the 5th of May we will vote on it. It will be a very interesting issue. I personally will read your statement.

I have been reading a great deal on this subject. I think it is a monumental problem both ways. It is not quite as simple as has been made out here today by either side. I can see some tremendous problems both ways. Our job as legislators is to try to get the best possible solution to the problem. I do agree with you that the cattle people are being very seriously hurt. I am not passing judgment on their case. The courts will have to do that and juries involved will have to do that if there are juries. But I will say this. If they have no opportunity to come in and assert their right under what appear to be prima facie cases, then there may be some very serious repercussions that occur across our economy. On the other hand, there are some other sides to the question that you have not addressed. Handler's amendment would solve your problem. I have a couple of suggestions in the future that may solve that also. He would limit it to price-fixing situations and that would solve your problem, it seems to me.

Mr. HAWKINS. Time is very much of the essence as far as the cattle people are concerned.

Senator HATCH. We will have this resolved one way or the other on May 5. You will know where you stand at least in the Senate. Then it will become a matter of House-Senate action.

Thank you for your testimony.

[The prepared statements of Currin Shields and Lee Hawkins follow:]

PREPARED STATEMENT OF CURRIN SHIELDS

My name is Currin Shields, and 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 Arizona Consumers Council is the protection and promotion of consumer interests. We have upwards of 1,700 dues paying members in the State and about 60 members outside the State. I am also the founding chairman of the Conference of Consumer Organizations (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, executive director for 1.

The Arizona Consumers Council has been involved in two major antitrust cases in recent years, the Arizona bread case and the Arizona milk case. Both cases resulted from requests by the Council to the Antitrust Division of the U.S. Department of Justice 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 price uniformity for bread and milk.

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 charges of price fixing. The bread case was settled last year. The council represented the retail consumer class, jointly with the Arizona Attorney General. The settlement totaled about $6 million with 240,000 households receiving checks in amounts from $7 to $23 as damages.

The milk case was recently settled with some defendants; the total amount of damages is still uncertain. The council represents, jointly with the Arizona Attorney General, the retail consumer class in the milk case.

I am here to support passage of S. 1874 introduced by Senator Edward Kennedy. I thank the subcommittee for the opportunity to testify on this bill.

The problem S. 1874 addresses is participation by private parties, particularly by nonprofit consumer organizations, in the enforcement of antitrust laws. At the present time, as a result of the Illinois Brick case, consumer organizations have no incentive to participate in antitrust law enforcement. The ruling in that case was that only "direct purchasers" have a right to damages in an antitrust action. Consumers, or indirect purchasers, do not have a right to damages resulting from price fixing.

S. 1874 would restore incentive for consumer organizations to participate in antitrust law enforcement. Passage of S. 1874 is essential for consumer organizaton involvement in antitrust actions. 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 a year in artificially high prices resulting from conspiracy in restraint of trade. Despite the enormous costs of antitrust violations, historically the antitrust laws of this country have not been vigorously enforced.

Enforcement of antitrust laws could come about in a number of ways. In no way has enforcement worked in practice.

The FTC has some jurisdiction in enforcing antitrust laws. The FTC has proved to be notoriously reluctant to become involved in antitrust litigation.

The Antitrust Division of Justice of course likewise has antitrust jurisdiction. The Division has brought some antitrust actions; the Arizona bread and milk cases are in point. But the actions brought by the Division are a pittance, compared to what is required for vigorous enforcement.

State Attorney Generals have antitrust jurisdiction as well, but few have brought antitrust actions against violators of the law. Attorney General Bruce Babbitt of Arizona was a clear exception.

Law enforcement officials have not been anxious to undertake enforcement of antitrust laws for good reason. They have scarce resources. They commit those resources to a few major cases, and to the other work of their office. In so doing they ignore the many instances of antitrust law violations which plague the American marketplace.

There is provision in the antitrust laws for enforcement by private parties but this has not worked in practice. Injured competitors do not sue competitors engaged in conspiracy in restraint of trade. Injured competitors, who tend to be small independents, either become tacit if not overt parts of the conspiracy, or they lack

the economic resources to sue major conspriators engaged in price-fixing conspiracy. Further, they have no incentive to sue. A price-fixing conspiracy ordinarily does not affect them adversely; the conspiracy is to fix prices at high, not low, levels. The Illinois Brick case ruling that only "direct purchsers" from companies engaged in conspiracy in restraint of trade have a right to participate in antitrust awards eliminates consumers from involvement in antitrust actions, even though the ultimate retail consumer-the indirect purchaser-suffers the damages from price-fixing conspiracies.

The direct purchasers-retailers, for example-do not absorb the cost of pricefixing. They pass the cost on to consumers in the form of higher prices. Consumers must absorb the cost as part of the cost of living.

Direct purchasers have no incentive to take antitrust action against supplier companies engaged in price-fixing. More likely than not they are silent partners to the arrangement.

Thus the only party left with a strong interest in antitrust law enforcement is the consumer class, which now has no incentive to participate in such enforcement. In a pamphlet entitled "Antitrust Enforcement and Consumers" published by the Antitrust Division of the U.S. Department of Justice it is stated on page 3 that: "Both the Antitrust Division and the FTC operate primarily in response to complaints from consumers and competitors." Competitors seldom complain. Consumers frequently do; they are the victims of price fixing.

S. 1874 would restore consumers as a class in antitrust actions with a right to participate in awards. This would give consumer organizations an incentive to become actively involved in antitrust enforcement.

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

PREPARED STATEMENT OF LEX HAWKINS

My name is Lex Hawkins, and I am an attorney practicing in Des Moines, Iowa. My entire legal career has been devoted to the practice of trial law, involving cases of diverse subject matter. For many years I have represented clients in major antitrust price-fixing cases.

THE BEEF INDUSTRY ANTITRUST CASES

At present I represent a group of 500 cattlemen from 14 States known as Meat Price Investigators Association, who have brought suit against 18 of the largest retail food chain stores in the United States and four major beef slaughterers for fixing the price of beef to cattlemen in violation of the Sherman Act, sections 1 and 2. I also represent a group of cattlemen seeking to bring a national class action for approximately 35,000 cattle feeders throughout the United States against the same supermarket chains and packers. Over 15,000 of those cattlemen reside in states represented by Senators on this Committee. These cases have been consolidated by the judicial panel on multidistrict litigation before the U.S. District Court for the Northern District of Texas in Dallas, Texas. In re Beef Industry Antitrust litigation, M.D.L. No. 248. In those consolidated cases I act as lead trial counsel for pretrial purposes for all of the consolidated cases.

It is our belief that on June 9, 1977, at which time cases against the supermarkets were pending, they constituted the largest antitrust actions in terms of damages in the United States. It has been estimated that a 1-cent per pound differential in the price of live cattle per year as a result of price fixing would amount to over $4 million damages annually. To demonstrate the magnitude of the cases, The Great Atlantic & Pacific Tea Company was found by a jury in 1974 to have price-fixed the price of cattle, the jury awarding 20-cents per pound damages.

In the MPIA case and the Becker class action cases, both brought by my law firm, we allege the following facts against the retail food chains:

"Cattle are raised and fed on farms, ranches and feedlots Cattle are fattened by feeding them a concentrated feed ration for fast growth and fattening until they are ready for slaughter as fat cattle." (MPIA and Becker paragraph 26.) "A fat steer or heifer is required to be sold within a three-week period of time when the animal reaches choice grade. The cattleman must accept whatever price is given at that time, because retention of the animal results in over-fattening and

significant loss of value. Supply of cattle and beef in the short-term is known throughout the industry and is inelastic." (MPIA and Becker paragraph 27.)

*

"The vast majority of fat cattle are purchased by beef slaughterers and packers directly from cattlemen, although some fat cattle are purchased by beef slaughterers through terminal or auction markets. The direct basis for the price given plaintiffs by beef slaughterers for fat cattle is a price stated in a publication known as the 'National Provisioner Daily Market and News Service' or 'Yellow Sheet' for all transactions east of the Rocky Mountains and some transactions west of the Rocky Mountains, and for other transactions west of the Rocky Mountains, the 'Safeway price.' Cattle buyers for beef slaughterers figure the percentage of dressed meat on the live animal and give the cattle feeder a price for the live animal based upon the value of the dressed carcass according to a formula based on the Yellow Sheet or its west coast counterpart, the 'Safeway price.' (MPIA and Becker paragraph 28.)

*

"Beef slaughterers and packers slaugher live cattle and sell edible beef and beef by-products in interstate commerce *. A substantial majority of edible beef is sold to retail food chain stores such as the defendants herein. Large food chains buy most beef directly from packers and slaughterers. The wholesale market for choice beef in the United States is established on a weekly basis by the actions of the defendants and other co-conspirators, through their size and monopsony market power and as a result of understandings and agreements among themselves and other retail food chains." (MPIA and Becker paragraphs 29-30.)

"A&P and Safeway, and other co-conspirators at other times and places, negotiate for and buy beef in the wholesale market early in the week, which establishes the wholesale price of beef for the remainder of the defendants and co-conspirator chain stores. The price is established by the major leading chains through the use of their monopsony market power, which is enlarged and enhanced by their understandings and agreements with other defendants and co-conspirators. This action is designed to depress the wholesale price of carcass and boxed beef, which directly controls the price of live cattle." (MPIA and Becker paragraph 31.)

"The weekly pricing decisions of A&P, Safeway and other defendants and coconspirators are instantly communicated by the wholesale beef trade (including chain store buyers, brokers, breakers, packers and others). The cattleman is not privy to any of this extensive communication among the wholesale beef trade. The weekly market pricing decisions of A&P and Safeway and other defendants and coconspirators are then reflected in the Yellow Sheet and the west coast 'Safeway price.' Other co-defendant chain stores and co-conspirators utilize this Yellow Sheet price or 'Safeway price' as the contractual basis for the price they will pay beef packers and slaughterers for wholesale beef." (MPIA and Becker paragraph 32.) Approximately 80 percent of the choice slaughtered beef in the United States is purchased by formulae, the basis of which is the Yellow Sheet price and the west coast 'Safeway price.' This use by chain store defendants and co-conspirators of the Yellow Sheet and the 'Safeway price' as a tool to communicate price and as a basis for wholesale beef prices, combined with the use of the Yellow Sheet and the 'Safeway price' by all major beef slaughterers and packers as a direct basis of prices paid for live cattle, constitutes a direct pass-through of the price establised by the defendant chain stores to the cattlemen." (MPIA and Becker paragraph 33.)

"The defendant food chains and other co-conspirators have agreed not to compete with one another on a price basis in purchasing beef for wholesale. Instead they have agreed that A&P and Safeway, and other defendants and co-conspirators at other times and places, will establish the wholesale price and the remaining defendants and co-conspirators will utilize the Yellow Sheet or 'Safeway price.' This is for the designed purpose of eliminating price competition for wholesale beef, of increasing the wholesale-retail price spreads for beef and of driving down the price of live cattle." (MPIA and Becker paragraph 34[e].)

"Most slaughterers and packers have standing agreements with various receivers, including the defendant chain stores and other co-conspirators, for certain quantities of beef each week. With knowledge of their weekly requirements and of the prices quoted in the Yellow Sheet or the 'Safeway price,' the packers and slaughterers directly pass down the price established by the defendant retail food chains. The packers and slaughterers in aggregate do not suffer any dimunition of sales, purchases, margins or profits as a result of this artificially low price." (MPIA and Becker paragraph 34.)

We pleaded a simple and direct pass-on of price from the retail food chains through the beef packers to the cattleman. The packer takes the price given by the chain store (as reflected by a price setting service known as the National Provisioner "Yellow Sheet") gives the cattleman no more than exactly that price for his