We do seriously question whether, even if new legislation is needed, it can sufficiently and adequately protect the farmer unless it is made equally applicable to the business conduct of cooperatives and noncooperatives alike in their equitableness of prohibiting unfair practices if engaged in by noncooperatives unless the same prohibition is applied to their cooperative competitors.

Cooperative managers are just people. They acquire no divine virtue by reason of operating in the co-op framework. They can and do discriminate grossly against noncooperatives in the cotton industry. In our industry, as in others, we believe that cooperatives do not always serve the best interests of their members.

This was brought out in the testimony of the National Grange before the National Commission on Food Marketing last year:

Unfortunately, in the structural organization of some of the larger cooperatives, the control has become so far removed from the farmer-owners, little advantage appears to remain to the members from their participation in the cooperative. We have had numerous examples of cooperatives selling at prices higher than their competition and paying their producers lower than their competition would pay.

In another part of that testimony, in commenting upon the competitive relations between cooperatives and noncooperatives, the National Grange stated:

Some cooperatives have become so large that they are almost monopolies in themselves and are in a position, selective pricing in various areas, to destroy any competition from private business sources. This is particularly tragic when, for many years, the captal which the farmer has earned has been reinvested into the cooperative and his resources to organize competitive cooperatives that might better serve his interests are severely limited to get a return on the previous investments in case he decides to withdraw from the cooperative itself.

Applied to the cotton industry, we fear that many sound and defensible competitive practices might be considered Federal crimes under S. 109 as now drafted. It must be remembered that it is normal and desirable for cooperatives and noncooperatives to compete vigorously for the farmer's patronage. In our view, the present bill would encourage all the co-op managers to loot their competitors' customers without restraint as to merit, tactics, or truth.

The very act of a noncompetitive in defending itself and explaining its position in combating a co-op raid on its customers could be interpreted as constituting "knowingly" to "interfere with, restrain, coerce, or boycott any agricultural producer in the exercise of his rights to join and belong to an association of producers of agricultural products."

Section 3(d) might prevent me as a cotton merchant from trying to buy cotton from a grower who is a member of a co-op, while section 3(b) may provide the legal means to fine me, put me in jail, or subject me to treble damages, for not bidding on his cotton. Some cotton marketing co-ops drop from membership any grower who markets his lint and seed elsewhere; hence, my act of bidding on cotton, the grower of which happened to belong to such a co-op, could be interpreted as inducing him to cease to be a member. Similarly, if I refuse to bid for his cotton, I might be charged with discriminating against him because of his membership. The fact of the matter is, I never know, except by coincidence, whether the farmers whose cotton I buy are co-op members or not.

Ginners throughout the country compete with co-op ginners "down the road." The only way an independent ginner's business can grow is through expanded cotton production or through luring customers away from his competitors by offering better prices or services. The record shows total production is contracting sharply and can reasonably be expected to continue in such a trend for the next few crop years. If noncooperative gins are denied the opportunity to compete for the business of co-op gin customers by legitimate means, the ultimate result will be that all cotton farmers will constitute a captive market for coperative gins, and the farmer will lose the benefits he now derives from the forces of healthy competition. A similar situation prevails in the cotton warehousing and cottonseed processing industries.

Thus, the application of S. 109 to cotton could, by hobbling the ability of noncooperatives to compete fairly and effectively, provide the means by which a cooperative complex might establish a monopoly position in the industry. Today, when at least 70 percent of the cotton farmers have demonstrated their prefences not to function hrough a co-op, why should Congress enact legislation which would inevitably and quickly force them to turn to cooperatives due to the elimination of their private business competitors from the scene? What benefits is such a scheme likely to provide its grower members who would then be captive without choice?

In a recent public statement to the National Council of Fruit & Vegetable Bargaining Cooperatives, Mr. Donald F. Turner, Assistant Attorney General in charge of the Antitrust Division, has gone to the heart of the problem, in a balanced and forthright manner:

The ability to form cooperatives allow the farmers to overcome the power of the larger buyer in two ways. First, to the extent the cooperative gains some control over the supply of a product, it can bargain with the buyer in order to achieve a somewhat higher price than the buyer would have to pay individual farmers selling separately. Second, the farmers may form their own cooperative marketing agencies, thus bypassing the powerful marketer who would otherwise be able to achieve an unduly high profit at the expense of the farmer. It is important to note that this justification for the agricultural cooperative exemption is to allow the farmers to overcome exploitation and earn a reasonably competitive profit. Its purpose is not to allow a monopoly profit.

This also explains why it is important that membership in cooperatives be voluntary, that cooperatives not be permitted to coerce outsiders by shutting off their access to markets. This requirement not only protects the farmers' basic interest in freedom of association, but it also increases the likelihood that cooperatives will be able to earn competitive profits but unable to achieve monopoly profits.

Section 5 of the bill appears to have no organic relation to the other sections of the measure, or to the central purpose of the bill. It refers entirely to the right of one cooperative to affiliate with another. We see no constructive purpose to be served in linking two unrelated proposals in this measure merely because both happen to deal with cooperatives. The intent and effect of section 5 are not clear to us. If its purpose is directly or indirectly to exempt from the antitrust laws those cooperative mergers, acquisitions, or other combinations which are now subject to those laws, we would wish to register our complete and vigorous objection.

To summarize, cooperative enterprises already enjoy great competitive advantages over noncooperatives as a result of preferential

Government policies. While the unfair practices which the bill seeks to correct do not exist in the cotton industry, such abuses, as a matter of principle, are not to be condoned.

If the farmer requires protection from such abuses, the prohibitions should apply equally to the business practices of cooperatives and of noncooperatives alike. Our further opposition to the bill is addressed to the danger that through loose construction it will create a monopoly advantage for cooperatives, to the detriment of the cotton industry generally, and particularly of the cotton farmer who stands to lose most from the elimination of his freedom of choice.

As Assistant Attorney General Turner stated in the address referred to above:

There is no reason I know of to depart from our longstanding policy of encouraging cooperative growth. It is clear, however, that agricultural cooperatives are no longer a negligible factor in our Nation's economic life. And as cooperatives grow in size and importance, as they assume more and more of the characteristics of large corporate businesses, it becomes even more important that the essentials of our competitive policy be applied to private businesses and to cooperative businesses without discrimination.

Senator AIKEN. I would just like to add that I think any cooperative which is serving as a processor, handler, distributor, dealer, or agent thereof would be equally responsible under the bill. I notice that Mr. Turner, like some of the other witnesses has some apprehension that this legislation might invite misinterpretation. I would like to know how to write an act of Congress that would not invite misinterpretation.

Mr. TAYLOR. Well, I agree, you do have a problem. You have got so many different facets that are involved and so many loopholes.

Senator AIKEN. The loopholes are very frequently found in the preambles or the statement of policy which precedes the text of the act, and right now I left Foreign Relations Committee to come over here and I am voting to eliminate the statement of policy in the foreign aid bill because it usually provides whatever loophole a good smart lawyer is looking for.

Mr. TAYLOR. We have found that in

Senator AIKEN. I am not telling you cotton people anything about that. That is all.

Senator JORDAN. Did you have a statement?

Mr. HELMBRECHT. No, sir.

Senator JORDAN. Thank you, Mr. Taylor. Hope that you make the plane alright.

Mr. TAYLOR. Thank you for letting me come ahead of some of the others. I appreciate it very much.

Senator JORDAN. Mr. Paul Courtney, executive vice president, National Association of Wholesalers.

Mr. Courtney, we are glad to have you with us, sir, and we will be glad to hear from you.

STATEMENT OF PAUL L. COURTNEY, EXECUTIVE VICE PRESIDENT, NATIONAL ASSOCIATION OF WHOLESALERS

Mr. COURTNEY. In an effort to try to conserve your time and beat that bell I think I can cut this by 5 minutes, perhaps, Mr. Chairman. I would appreciate it if the full statement would be made a part of the record.

Senator JORDAN. We will make your full statement a part of the record, sir.

Mr. COURTNEY. My name is Paul L. Courtney, I am executive vice president of the National Association of Wholesalers, a federation of 51 national commodity lines wholesale associations representing membership of over 18,500 merchant wholesale establishments in the 50 States. Ours is a $190 billion industry in annual volume of sales, according to the Bureau of Census estimates for the first quarter of 1966. We buy, take title to, break bulk, sell, deliver, and extend credit, where lawful, everything from toys to farm equipment-from groceries to repair parts for locks. We are currently carrying over $14 billion in inventory near the point of consumer or business-user need. We currently have receivables outstanding of over $15.5 billion.

We are very much concerned about the proposals of S. 109 as amendments to the Capper-Volstead Act. Being composed, mostly of small business firms, employing an average of 10 employees each, according to the Census of Wholesale Trade, merchant wholesalers comprise one of the most highly competitive rugged individualistic segments of the Nation's marketing economy. There are just 200,000 merchant wholesaler firms enumerated by the Bureau of Census, employing just over 2 million people.

As an organization, the National Association of Wholesalers has been concerned for many years about the special privileges accorded cooperatives under the various tax, antitrust, and trade laws of the Nation. In many instances, cooperatives are our business competitors or competitors of our customers. When special privileges or exemptions from laws restricting action, collective or individual, are written into law, the effect often goes far beyond the visualized intentions of the lawmakers. Two classes of competitors are thus created competing with each other in the marketplace, those restricted by the law and those wholly or partially exempt from the restrictions imposed by the law.

Our reasons for asking for this opportunity to appear here today and testify on the provisions of S. 109 are based on our belief in, and faith in, the equal opportunity provisions of our trade and antitrust laws. We are here in defense of that basic tenet of our laws. We are here to ask you not to create a special privileged class of competitors under those laws. Already farmer cooperative organizations are beneficiaries of, and greatly aided in their competitive operations by, substantial privileges under our tax laws and regulations; substantial immunity from our antitrust laws favored credit terms avaliable from numerous Government agencies and a paternalism in the Department of Agriculture, where a policy of preference for the cooperative form of business organization has prevailed for many decades.

Cooperatives are business competitors, both farmer and consumer cooperatives, of the wholesale industry and its customers. We wel

come them as we do all other competitors, as long as they play the game under the same set of rules. They have just as much right to enter business, engage in the business of buying and selling products, as we do. We do not believe that the American system of business can continue to grow and prosper, however, if we tamper with the equal opportunity provisions of the law by creating exempt groups, or favored groups or special privilege groups which are in competition with other individuals or groups every day in the marketplace, who do not enjoy the same exemptions, favors or privileges.

If our laws and regulations are designed to encourage competition, fair and equal competition, and are properly written and enforced, no exemptions or favored poositions or privileges need to be provided for any competitor. It seems to us that such a basic tenet is absolutely necessary to the preservation of a fair and open market and a sound. economy. If we are to have regulations of competition, such regulations must be uniformly applied, taxwise, antitrustwise, creditwise and in all other ways, to all competitors.

We oppose enactment of S. 109 because we believe that it would create a special provision of law in the Capper-Volstead Act, and a special set of regulations thereunder, that would apply only to farm or mraketing cooperatives. We believe that competitors for the products of the American farm should be treated euually under the law, be they cooperatives, chains, independents, big, small or whomever.

Several questions must be raised with regard to legislative proposal of this kind: Is there need for it? Is it proper in terms of equal protection under the law for all parties concerned? Will it benefit a special interest at the expense of other interests? Is it a part of a pattern of policies and measures intended to give farmer cooperative organizations ascendency over noncooperative business organizations that compete with them in processing, handling, and distributing farm products, or perhaps later, selling farm supplies?

Unfair discrimination, as proscribed by the bill, with respect to price, quantity, quality, or other terms of purchase, is not wrong solely when it is directed against membership in or dealings with a cooperative. It is just as wrong whenever or wherever it is practiced, and the law already recognizes this. So, too, with the bill's prohibition of coercion and intimidation of a producer causing him to breach or to cancel a contract with a cooperative, and the making of false reports. Such actions are already prohibited by law, not merely when they are directed against cooperatives but in all situations where they may

occur.

This singular attempt to protect only cooperative associations from the offenses that the bill specified makes the bill of highly doubtful propriety. In effect, it declares interference, restraint, coercion, boycotting, certain discriminations, intimidation, the offering of monetary inducements, and the making of false reports to be criminal act, only if they affect cooperatives. The bill is thus analogous to one that would make it illegal to steal only from the grocery stores or assault only elderly clergymen.

Moreover, the fact that the bill does not, even by word or phrase, prohibit and provide equal punishment for unfair practices of cooperatives that could be harmful to their noncooperative competitors makes its provisions a contravention of the fundamental principles