Legislature(1993 - 1994)

03/25/1994 03:37 PM RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
                   SENATE RESOURCES COMMITTEE                                  
                         March 25, 1994                                        
                           3:37 P.M.                                           
                                                                               
 MEMBERS PRESENT                                                               
                                                                               
 Senator Mike Miller, Chairman                                                 
 Senator Loren Leman, Vice Chairman                                            
 Senator Drue Pearce                                                           
 Senator Al Adams                                                              
 Senator Dave Donley                                                           
                                                                               
  MEMBERS ABSENT                                                               
                                                                               
 Senator Fred Zharoff                                                          
 Senator Steve Frank                                                           
                                                                               
  COMMITTEE CALENDAR                                                           
                                                                               
 SENATE BILL NO. 306                                                           
 "An Act relating to an antitrust exemption for persons engaged in             
 the fishing industry."                                                        
                                                                               
 HOUSE JOINT RESOLUTION NO. 50                                                 
 Relating to the North Pacific Fishery Management Council                      
 comprehensive rationalization plan.                                           
                                                                               
 HOUSE JOINT RESOLUTION NO. 34                                                 
 Requesting the Department of Commerce to give a high priority to              
 fisheries development project grants for the Alaska salmon                    
 industry.                                                                     
                                                                               
  PREVIOUS ACTION                                                              
                                                                               
   SB 306 - No previous action to record.                                      
                                                                               
 HJR 50 - No previous action to record.                                        
                                                                               
  HJR 34 - No previous action to record.                                       
                                                                               
 WITNESS REGISTER                                                              
                                                                               
 Bruce Schactler                                                               
 Area K Seiners                                                                
 Box 2254                                                                      
 Kodiak, Ak. 99615                                                             
  POSITION STATEMENT:   Supported SB 306.                                      
                                                                               
 Jim Forbes, Assistant Attorney General                                        
 Department of Law                                                             
 1031 W. 4th., Suite 200                                                       
 Anchorage, Ak. 99501-1994                                                     
  POSITION STATEMENT:   Commented on SB 306.                                   
                                                                               
 David Reaume                                                                  
 10746 Horizon Dr.                                                             
 Juneau, Ak. 99801                                                             
  POSITION STATEMENT:   Supported SB 306.                                      
                                                                               
 Dorn Hawxhurst                                                                
 P.O. Box 939                                                                  
 Cordova, ak. 99574                                                            
  POSITION STATEMENT:   Supported SB 306.                                      
                                                                               
 Willis Kirkpatrick, Director                                                  
 Division of Banking and Securities                                            
 Department of Commerce and Economic Development                               
 P.O. Box 110807                                                               
 Juneau, Ak. 99811-0807                                                        
  POSITION STATEMENT:   Supported SB 306.                                      
                                                                               
 Kate Troll, Executive Director                                                
 South East Seiners Association                                                
 9226 Long Run Drive                                                           
 Juneau, Ak. 99801                                                             
  POSITION STATEMENT:   Supported SB 306.                                      
                                                                               
 Rick Lauber                                                                   
 Pacific Seafood Processors Association                                        
 321 Highland Dr.                                                              
 Juneau, Ak. 99801                                                             
  POSITION STATEMENT:   Supported SB 306.                                      
                                                                               
 Jerry McCune, President                                                       
 United Fishermen of Alaska                                                    
 Juneau, Ak.                                                                   
  POSITION STATEMENT:   Supported SB 306 and HJR 34.                           
                                                                               
 George Utermohle                                                              
 Legislative Affairs                                                           
 130 Seward St.                                                                
 Juneau, Ak. 99801-2197                                                        
  POSITION STATEMENT:   Commented on SB 306.                                   
                                                                               
 Karen Brand, Legislative Aide                                                 
 c/o Representataive Moses                                                     
 State Capitol                                                                 
 Juneau, Ak. 99801-1182                                                        
  POSITION STATEMENT:   Commented on HJR 34 and HJR 50.                        
                                                                               
  ACTION NARRATIVE                                                             
                                                                               
  TAPE 94-30, SIDE A                                                           
                                                                               
 Number 001                                                                    
 CHAIRMAN MILLER called the Resources Committee meeting to order at            
 3:37 p.m. and announced  SB 306  (ANTITRUST EXEMPTION FOR FISHERMEN)     )    
 to be up for consideration.                                                   
                                                                               
 SENATOR DUNCAN, sponsor, gave a brief overview of SB 306 which                
 would allow fishermen to negotiate raw fish prices with processor             
 in order to improve the market price of Alaska seafood.  He said we           
 can't control the price that fishermen get on the grounds, but the            
 state can offer more support to our fishing industry which is                 
 Alaska's largest private employer.                                            
                                                                               
 British Columbia fishermen have consistently been getting higher              
 salmon prices than Alaskan fishermen, he said, in part because of             
 multi year collective bargaining agreements with processors.  This            
 will help stabilize commercial fishing prices bolstering local                
 state economies.                                                              
                                                                               
 SENATOR DUNCAN said that the Alaska Fish and Agriculture Bank and             
 United Fishermen support this bill.                                           
                                                                               
 BRUCE SHACTLER, Area K Seiners Association, supported SB 306.  He             
 said it was needed badly.  However, on page 2, lines 10 and 11, he            
 would like to delete, "including fish processors acting through               
 associations of processors,..."                                               
                                                                               
 JIM FORBES, Assistant Attorney General, said the way he sees the              
 issue is that the fishermen can't get a better price than the                 
 processors get and the processors are not in a position to                    
 negotiate from strength.                                                      
                                                                               
 DAVID REAUME, Juneau fisheries economist, said there is enough                
 evidence to suggest that it would appear two large Japanese                   
 companies, Mitsui and Marobani, have organized the market for                 
 Bristol Bay red salmon. One of the categories of cartels the                  
 Japanese are free to organize with government approval is the                 
 import cartel.  This is in line with the Japanese interest in                 
 obtaining raw materials at the lowest possible price which is the             
 fundamental problem underlying the low prices we have been getting            
 in the last three years.  Alaska processors are simply in no place            
 to say no to a Japanese offer.  They have no other place to go in             
 the short run.  The difference in bargaining strength between the             
 processors and the fishermen is really the lesser of the two                  
 problems facing them today.  The amount that is left over to                  
 negotiate is sufficiently small that it's a tertiary order of                 
 magnitude to the problem.                                                     
                                                                               
 Information from the Attorney General's investigation says that six           
 of the largest buyers control approximately 60% of the market.                
 There are about 1500 permit holders in Bristol Bay. This is one of            
 the features of markets which makes it possible for one side to               
 have increased bargaining strength.                                           
                                                                               
 There are several things that signal potential market power                   
 disproportionately on one side rather than the other.  One is rapid           
 verification of price quotations.  Advance notice of price changes            
 would serve the same purpose.  Existence of relative value scales             
 in product standardization makes it very difficult for a fisherman            
 to sell one grade of fish at a price that might be out of line if             
 that grading scale has been established ahead of time.                        
                                                                               
 An outstanding feature of the Bristol Bay fishery, MR. REAUME said,           
 is the "loyalty bonus" for delivering 100% of their fish to one               
 processor.  This bonus does not have to be fair to elicit loyalty.            
 Absence of "shopping around" tends to put downward pressure on                
 salmon prices within the market.                                              
                                                                               
 Another feature of Bristol Bay agreements is custom processing                
 agreements where one processor will process the fish of another.              
 This is quite common.  The side effect here is a possible payment             
 of side payments.  In relation to this, it is known that the CEOs             
 to the six large processors take common vacations to various                  
 foreign countries and while they have asserted under oath that they           
 never discussed price during those vacations, the opportunity is              
 there.                                                                        
                                                                               
 Finally, MR. REAUME said, although Alaska's share of the Japanese             
 salmon market has been declining in recent years, the last data he            
 saw have Alaska continuing to hold in excess of 50% of the red                
 salmon market and comparable species market in Japan.                         
                                                                               
 In conclusion, he strongly supported legislation such as SB 306 for           
 policy reasons.                                                               
                                                                               
 DORN HAWXHURST, Cordova CDFA, supported SB 306, because it                    
 clarified ambiguities in existing laws.  It also removes                      
 inconsistencies between state and federal laws. It makes a more               
 level playing field for fishermen when negotiating with processors.           
                                                                               
 WILLIS KIRKPATRICK, Department of Commerce, supported SB 306.  The            
 Department feels that some stability of price might be established            
 over time with the fishermen and processors working together.  The            
 finished product could be taken onto the market with some assurance           
 that the distribution of that product would have some stability in            
 price to assure future contracts.                                             
                                                                               
 KATE TROLL, South East Alaska Seiners Association, said Mr. Reaume            
 concentrated on Bristol Bay salmon, but the other half of the                 
 component is pink salmon.  She said they do not deal with the                 
 Japanese, but they do move a considerable volume on the domestic              
 market.  Some of the same problems are encountered although they              
 don't have the problem with the Japanese.  She supported SB 306.              
                                                                               
 MS. TROLL explained that the fishing industry had changed from a              
 company town type of set up to a situation where the fishermen                
 didn't really have a business partner relationship with the                   
 processors where there was price and profit sharing agreements that           
 could be openly discussed.  Major processors have felt they                   
 couldn't participate in discussions because of the antitrust                  
 regulations.                                                                  
                                                                               
 She noted Senator Duncan's remark about the price in Canada and               
 said that it has nothing to do with quality and has everything to             
 do with having a union and having collective bargaining.                      
                                                                               
 RICK LAUBER, Pacific Seafood Processors Association (PSPA),                   
 supported SB 306.  He said the objective is admirable.  Based on              
 advise from their anti trust lawyer, there will be no change in               
 activities of the members of the PSPA.  While this bill exempts               
 fishermen from state law, it has no affect on federal law.  This              
 bill is an excellent one, but he did not want to cause any false              
 hopes.                                                                        
                                                                               
 Number 522                                                                    
                                                                               
 MR. FORBES commented that he did concur with Mr. Utermohle's March            
 15 memorandum.                                                                
                                                                               
 SENATOR DUNCAN responded to Mr. Schactler's comment about changing            
 section 2. He said there seems to be some confusion over what that            
 phrase means.  MR. FORBES said deleting the language would take the           
 processors out of the picture.  It would allow fishermen to                   
 negotiate with one processor at a time rather than collectively.              
                                                                               
 JERRY MCCUNE, President, United Fishermen of Alaska, supported SB
 306.  It is a good start, because we need the exemption.  He said             
 it was his opinion that the language in section 2 should be left              
 in.                                                                           
                                                                               
 GEORGE UTERMOHLE, Legislative Affairs, said the section 2 language            
 is intended to provide some efficiency in the procedures whereby              
 the fishermen negotiate with processors eliminating the need for              
 them to negotiate individually with the processors.                           
 SENATOR MILLER said he would hold the bill until there was a quorum           
 and announced  HJR 34  (FED FISH RESEARCH & DEVELOPMENT GRANTS) to be    be   
 up for consideration.                                                         
                                                                               
  TAPE 94-30, SIDE B                                                           
                                                                               
 Number 580                                                                    
                                                                               
 KAREN BRAND, Legislative Aide for Representative Moses, said HJR 34           
 requests the U.S. Department of Commerce give a high priority to              
 fisheries development project grants for the Alaska salmon                    
 industry.  While the ground fish industry has ongoing development,            
 the salmon industry is undergoing stresses which have affected its            
 ability to compete in the changing world market, she said.                    
                                                                               
 JERRY MCCUNE, UFA, supported HJR 34.                                          
 SENATOR MILLER said it was his intent to bring this bill up again             
 on Monday and he announced  HJR 50  (NPFMC COMPREHENSIVE                      
 RATIONALIZATION PLAN) to be up for consideration.                             
                                                                               
 KAREN BRAND, Legislative Aide for Representative Moses, said HJR 50           
 simply reaffirms the importance of the shore based processing                 
 industry to Alaska and asks that the North Pacific Fisheries                  
 Management Council incorporate fairness, equal rights of access,              
 and equity to this sector of the commercial fishing industry when             
 it considers its current comprehensive rationalization plan.                  
 SENATOR MILLER said it was his intention to bring all three of                
 these bills up on Monday and adjourned the meeting at 4:29 p.m.               
                                                                               

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