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gave to the Department of Agriculture the power to regulate not only discrimination in sales but also to actually regulate the prices, and terms, and conditions under which sales could be conducted.
Mr. Chairman, while this legislation probably was realistic with regard to the economic situation at that time, in the intervening years there has been a great change in the structure of the marketing apparatus. Now there are many hundreds of small auction barns located throughout the country, often in vigorous competition with each other.
In this competitive effort, the seller has the opportunity of choosing between two, three, or sometimes even more auction barns, depending on his location and the distance to a particular market.
Under these circumstances, it seems to me very inappropriate that the Federal Government would regulate these small country auction barns as a public utility using cost of service concepts to establish rates, terms, and conditions for service.
Recently, in my own State of Arkansas in hearings held involving three different auction barns located within a 50-mile radius—actually a circle probably 50 miles in diameter would have encompassed the three barns—the Department came up with conclusions which mandated rates which were different from barn to barn.
So, as a result of the work, one barn would have a much lower rate than either of the other two. The effect of this would be to drive the two barns which have the higher rates out of business because they will not be able to meet the competition.
It seems to me that this is an example of the use of a regulatory function in order to do something to destroy competition rather than to enhance it and also to make it more difficult for farmers to choose between which barn or which service they would like to use.
It is most remarkable also, Mr. Chairman, that federal regulation of rates for services to the ultimate consumer of those services are unique in this legislation.
There are only two instances which I have been able to learn about where the Federal Government regulates rates and terms and conditions for a product sold to the ultimate consumer. Those are in the TVA distribution system and in the Bonneville distribution system
Regulation of natural gas rates, of electric rates, of telephone rates, of water rates, of any other utility rates that I know about, is a matter which is appropriate for State legislation and regulatory affairs.
The Federal Government only sets broad guidelines. The Federal Power Commission may regulate the price at which gas is sold from a transmission company to a distribution company. It may regulate terms and conditions in which traffic is exchanged between telephone companies.
Similarly, with regard to trucks, this is a matter which is left to State jurisdiction.
It seems to me, Mr. Chairman, that it is difficult to rationalize any logical reason for supporting Federal legislation to regulate the rates and charges of small, independent, country auction barns. I do not understand where the broad, national purpose is that says that these rates must be regulated, that the forces of the marketplace cannot do the adequate job of determining what these rates and charges should be.
One further thing, Mr. Chairman, if I may, is that the bill which I have introduced is not perfect. It is a bill that is submitted in order to determine what extent of deregulation may be required. It seems clear to me, from the hearings which have been previously held, that there is a need to allow competition in this segment of our agricultural community, and that that competition will be beneficial, not just to the auction barns themselves, but also to the producers who use the services.
Mr. Chairman, again I would like to express my appreciation to you for scheduling these hearings.
I would be pleased to attempt to respond to any questions that you or Mr. Sebelius might have.
Mr. HIGHTOWER [acting chairman). We thank you so much, Mr. Thornton.
Do you have questions, Mr. Sebelius?
Mr. HIGHTOWER. Thank you, Mr. Thornton. We will try to move on now.
Our next witness will be Mr. Charles Jennings, Deputy Administrator of the Packers and Stockyards Administration of the U.S. Department of Agriculture.
Mr. Jennings, because of a conflict in the setting of the hearing this morning, we are also having a markup just down the hall in 1301.
They are having a quorum call, so we would like to interrupt so that Mr. Thornton and I can answer the quorum call.
Mr. JENNINGS. Yes; Mr. Chairman. We were warned and were anticipating it.
Mr. HIGHTOWER. Thank you.
Statement of Chas B. Jennings, Deputy Administrator
Committee on Agriculture
March 14, 1978
Mr. Chairman and Members of the Committee:
We appreciate the opportunity to appear before you today to give
the views of the Department of Agriculture on the proposed amendments
to the Packers and Stockyards Act as set out in H. R. 9482.
The Department opposes enactment of this bill.
Enactment of the bill, based on 1976 volume, would limit the
Secretary's rate regulatory authority to only 103 of the 1,980 stockyards
The 103 stockyards include 71 auction markets with over
100,000 animal marketing units, 9 auction markets with over 20,000 units
located over 75 miles from the nearest market and 23 terminal markets.
All 1,980 livestock markets furnish similar services to livestock
producers, basically that of providing selling services and furnishing
stockyard facilities through a principal-agent relationship.
It is not
equitable to retain ratemaking authority over 103 markets solely because
of market size or distance between markets. Equity would seem to require
the exemption of all markets or the exemption of none from review of rate
The Packers and Stockyards Act was passed in 1921, during a time of
widespread public concern over the apparent domination by some of the
larger meat packers over buying and selling of livestock, meat and meat
products. Stockyards at that time were considered to be in the nature of a public utility due to the small number of markets and because most of
the livestock was marketed through those facilities.
The principle behind the legislation enacted to regulate this vast
and complex industry is that an open and competitive market works best
for all concerned.
The P&S Act and the regulations issued under it work
toward this objective by setting out rules of fair play under which
competitive markets can function.
The livestock industry has changed significantly over the years,
especially in the area of marketing.
When the P&S Act was passed about
80 percent of the slaughter livestock was sold through public markets.
Today there is an almost complete turnaround, with about 80 percent of
slaughter livestock sold directly from producers and feedlots to packers.
Terminal livestock markets and auction markets compete with each
other as well as with other marketing channels. Stockyard owners and
market agencies must continually seek ways to improve services and
facilities offered to livestock owners.
Livestock markets are no longer deemed to be public utilities.
P&S Act was amended in 1968 to clarify the market's statutory right and
duty to establish, observe and enforce regulations and practices which are
not unreasonable or unjustly discriminatory, with respect to the furnishing
of stockyard services.
Packers and Stockyards, AMS, encourages and assists
stockyard owners and market agencies to innovate and to establish and
enforce regulations which foster efficient and competitive livestock
The P&S Act does not abridge the right of the stockyard omer to
conduct his business and establish and enforce regulations and practices
not in conflict with the purposes of the law.
Nationwide hearings conducted by the Department were completed
February 14 of this year to determine first hand from livestock owners,
stockyard operators, and market agencies what the future Packers and
Stockyards rate program should be.
Substantial interest was indicated both
in oral testimony at the hearings and in written comments filed with the
The consensus of the regulated stockyard owners and market
agencies is that some form of deregulation is warranted.
producer association recommendations ranged from continued regulation
without change to permitting markets to establish the level of rates with
review by P&S to assure uniform and nondiscriminatory application of such
The Department generally supports the concept of deregulation when
it can be achieved and at the same time continue protection of the public
Some deregulation appears warranted in establishing rates at
We believe the views expressed by livestock producing
as well as the marketing segment of the industry support some deregulation.
We believe the necessary changes can be accomplished by amending the
current rate regulatory policy under the P&S Act in the following manner.
It is our belief that the Department should maintain its responsi
bilities to the livestock producing segment of the industry to assure
uniform and nondiscriminatory rates and charges at livestock markets.
Under our current policy every new tariff and all changes in existing
tariffs are reviewed to determine the reasonableness under established
An alternative for deregulation purposes might be to provide
that a stockyard or market agency could establish and apply, as determined
by the stockyard or market agency, its own level of rates after giving