Legislature(1993 - 1994)

04/12/1994 01:55 PM JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
  CHAIRMAN ROBIN TAYLOR  called the Judiciary Committee meeting to             
 order at 1:55 p.m., and brought  SB 306  (ANTITRUST EXEMPTION FOR             
 FISHERMEN) before the committee as the only order of business.                
 SENATOR HALFORD moved that CSSB 306(JUD) (version 8-LS1305\K) be              
 adopted.  SENATOR LITTLE objected.                                            
 Number 003                                                                    
 SENATOR JIM DUNCAN, prime sponsor of SB 306, urged that the                   
 committee hear from the interested parties before making a final              
 decision on adopting a committee substitute.  He said what was a              
 piece of legislation that had unanimous support and could move                
 forward in a first step has become a piece of legislation that has            
 got opposition, high fiscal cost and is doomed to failure.                    
 Number 025                                                                    
 GEORGE UTERMOHLE, Legal Counsel, Legislative Affairs Agency,                  
 explained that the first two sections of the committee substitute             
 contain the entire contents of the original SB 306.  Changes to the           
 committee substitute are contained in Section 3 of the bill.                  
 Mr. Utermohle stated that as a result of the last meeting, he was             
 given instructions to create a mechanism by which the state could             
 qualify certain agreements reached between fishermen and fish                 
 processors for the antitrust exemption under federal law.  The                
 intent was to qualify them for the exemption known as the "state              
 action" exemption.  In order to qualify for that exemption, a state           
 has to articulate a clear and affirmative statement that the state            
 intends to replace competition with regulation.  The second aspect            
 of that is that the state has to actively supervise the activities            
 of the private sector.  To satisfy the requirement for active                 
 supervision, the state must provide an adequate authority for some            
 body or agency to conduct that supervision, and then that agency              
 would have to go forward and actually perform the supervision.                
 Mr. Utermohle directed attention to Section 3 of the committee                
 substitute and explained that the first section is the policy                 
 statement, which is intended to be the clear and affirmative                  
 statement that the state intends to replace free competition with             
 state regulation.  This bill gives the authority for the state to             
 regulate in only two narrow areas: contracts reached between                  
 fishermen and groups of processors.  The second exemption is                  
 allowing fishermen and processors, either an individual processor             
 or groups or processors, to get together and agree on the minimum             
 price that the processors will accept for their manufactured                  
 product.  He said the goal of the bill is to allow fishermen and              
 processors to agree on two things:  the price between themselves              
 and the price which the processor would ask for his product from              
 his market.                                                                   
 Sec. 45.50.615 contained in Section 3, sets out the powers and                
 duties of the commissioner in regard to fish price agreements.  It            
 allows him to review the agreement, actively supervise the conduct            
 of the parties under the agreement, require fair prices,                      
 investigate the agreement if necessary, and conduct studies,                  
 perform analyses, and receive data and information on the price,              
 market, and demand for Alaska fish and seafood products.                      
 Sec. 45.50.620 describes the fish price agreements that are subject           
 to approval by the commissioner.  The only fish price agreements              
 that are subject to approval are (1) those collective agreements              
 between fishermen and a group of fish processors regarding the                
 price paid to fishermen for their fish; and (2) those collective              
 agreements between fishermen and an individual or a group of fish             
 processors regarding the minimum price that fish processors would             
 accept for their fish products.                                               
 Sec. 45.50.625 sets out the procedures and requirements for                   
 approval of fish price agreements.  The core of the section is                
 contained in subsection (c) which sets out the additions that the             
 commissioner must find in order approve the agreement.                        
 Secs. 45.50.630 - 45.50.640 authorize the commissioner to hold                
 hearings, establish hearing procedures, and adopt regulations.                
 Sec. 45.50.645 sets out the misdemeanor penalty for violation of AS           
 45.50.610 - 45.50.650. or a regulation or an order adopted under AS           
 45.50.610 - 45.50.650.  The penalty is the same as for violations             
 of the state antitrust laws.                                                  
 Sec. 45.50.650 defines the terms: commissioner, fish fishermen,               
 fish price agreement, and fish processor.                                     
 Number 276                                                                    
 SENATOR TAYLOR asked if a group of fishermen organize a strike and            
 hold themselves out for a specific price with a group of                      
 processors, are they in violation of antitrust laws.  JIM FORBES of           
 the Department of Law in Anchorage responded that those fishermen             
 are exempt under federal law, but it is less clear that they are              
 completely exempt under state law.  Currently, the state law allows           
 the fishermen to get together for the purpose of bargaining their             
 product, but it doesn't necessarily give the absolute right to get            
 together for the purpose of establishing a price.  He added that              
 that language has never been tested in court, and he does not know            
 what a state court judge would say.  He directed attention to                 
 Section 1 in the committee substitute and the original bill, and he           
 said that change in state law would make it very clear that those             
 fishermen are exempt under state law, bringing it in line with the            
 federal exemption.                                                            
 Number 303                                                                    
 SENATOR TAYLOR asked if the processor is exempt from state law or             
 federal law.  JIM FORBES answered that as things stand today, as              
 long as there is only one processor on the other side of the table,           
 there is no problem.  The problem arises when two or more                     
 processors get together in any way, shape, or form.  Then there is            
 a problem under both state and federal law.   Senator Duncan's                
 original bill gets rid of the problem under state law, but the                
 processors would still have a problem under federal law.  He said             
 the bigger issue is how do the processors get a good price from the           
 people that they sell to.                                                     
 SENATOR TAYLOR observed that the fishing community has always                 
 assumed that the processors had a great deal of power and influence           
 over the price at which they sold.  However, the processors are               
 routinely dealing with people who are exempt from any of our laws             
 because they are Japanese buyers or European buyers, and there is             
 no law that prevents them from setting or fixing a price that they            
 as a cartel or group, or even individually, will offer to American            
 processors.  JIM FORBES agreed that, in practice, that is exactly             
 right.  SENATOR TAYLOR voiced his concern that we should take both            
 steps and provide some relief for processors too.  MR. FORBES said            
 it is a very long and difficult process coming up with an antitrust           
 exemption under state law, but if the U.S. Congress were to address           
 this issue, they could provide an antitrust exemption for the                 
 processors with language no more complicated than what is in                  
 Section 1 of the bill.                                                        
 Number 362                                                                    
 SENATOR LITTLE asked her understanding was correct that even the              
 latest version of the bill doesn't help out with the federal                  
 issues.  MR. FORBES responded that in his opinion, the current                
 version of the bill doesn't go as far as it needs to go.  The                 
 biggest problem in going to the state action group for providing              
 federal antitrust immunities, is that you have got to accomplish              
 the goal of at least establishing a minimum price that Alaska                 
 salmon or other seafood products would come in on the international           
 market.  Unless there is a mechanism in place, it enforces a                  
 minimum price across the board so that not even one processor can             
 sell their products for less than that price, and it will defeat              
 the purpose.                                                                  
 Number 394                                                                    
 SENATOR DUNCAN asked Mr. Forbes if he felt it was worthwhile to go            
 back to the original bill that grants the state antitrust exemption           
 and then allows the opportunity to work with our Congressional                
 delegation to see if federal language can be adopted, or the                  
 opportunity to work with the various interest groups and the                  
 Administration to put together a well thought-out agency.  MR.                
 FORBES answered that he was a little bit uncomfortable commenting             
 on policy issues, but, from a antitrust enforcement point of view,            
 it doesn't hurt anybody to pass the original bill even though it              
 doesn't confer full federal antitrust immunity.  He added that from           
 a legal prospective, he can't see any reason not to take that first           
 Number 442                                                                    
 SENATOR TAYLOR asked Mr. Forbes if was saying that the mechanism              
 being provided in the committee substitute wouldn't work.  MR.                
 FORBES commended Mr. Utermohle's efforts in putting together the              
 draft committee substitute, but he said he thinks it is just so far           
 to go with this particular approach and he doesn't see how the                
 Legislature could  accomplish it in the time remaining.                       
 Number 488                                                                    
 RICK LAUBER, representing Pacific Seafood Processors Association,             
 said he believes the original bill is a good first step and it                
 should be pursued.  There is some problem with the current                    
 restrictions placed on the processors and fishermen in negotiating.           
 However, he does not support the committee substitute.                        
 Mr. Lauber said there are a number of things in the committee                 
 substitute that if they have do this in order to get the exemption,           
 then the exemption is not worth it.  He believes the system would             
 be better if there were some relaxation of the antitrust laws to              
 merely allow two or more processors to negotiate with fishermen in            
 the same room at the same time.                                               
 Mr. Lauber said there is a lot of talk about the control of the               
 market by foreign buyers  and of the investment and ownership by              
 Japanese companies in the seafood business operating in Alaska.               
 However, the largest company operating in Alaska is a company named           
 Trident and it is 100 percent solely owned by Americans, and it is            
 also the largest buyer and processor of salmon in Bristol Bay.                
 Icecycle Seafoods is the second largest buyer and processor in                
 Alaska and it is not only 100 percent owned by Americans, but it is           
 largely owned by Alaskans.  Nelbro Packing Company, which is large            
 buyer in Bristol Bay, is a Canadian packing company.  Ward Cove               
 Packing Company, another large processor and buyer in Bristol Bay,            
 is 100 percent owned by Americans.  Ocean Beauty is another large             
 salmon processor in Alaska and it, likewise, has no Japanese                  
 ownership in it.  There are a couple of relatively large companies            
 that are Japanese ownership, but the vast majority of salmon is               
 purchased and processed by companies that are not owned or                    
 controlled by Japanese.                                                       
 Mr. Lauber stated that we don't have the market with the Japanese             
 that we would like to have with them; they are very good                      
 businessmen and they are tough to deal with.  However, the way it             
 works in business, the buyer wants to buy low and we want to sell             
 high, and we don't always get our way, he further stated.                     
 Mr. Lauber said times have changed, and Alaska no longer controls             
 the salmon market; it happens to be dominated now by places like              
 Norway and Chili.  He said this is not the time to be coming around           
 with some type of utopian concept, and he reiterated that the                 
 original bill is a good first step.                                           
 TAPE 94-36, SIDE B                                                            
 Number 012                                                                    
 KATE TROLL, Executive Director of Southeast Alaska Seiners and a              
 member of the executive committee for United Fishermen of Alaska,             
 voiced her concerns with the committee substitute.  She said the              
 intent originally was to relax the atmosphere and to allow them to            
 enter into long-term contract negotiations with their processors,             
 but in looking over the committee substitute, she feels like they             
 would be doing just the opposite.  She said in looking at the                 
 original SB 306, she recognizes that to accomplish the objective it           
 would still necessitate going to the federal government to get that           
 type of exemption, but that seems to be the preferred approach as             
 opposed to the concept in the committee substitute.                           
 Number 100                                                                    
 SENATOR TAYLOR said the original bill only addresses half of the              
 problem because it relates to exempting only the fishermen, and he            
 questioned if it shouldn't be requesting Congress to exempt the               
 processors as well.  MS. TROLL answered what they are trying to               
 avoid is price fixing; they want to encourage price negotiations,             
 and she thinks there would be concerns about trying to get into               
 price fixing and monopoly if there was an exemption to allow                  
 processors to agree among themselves and set the price.                       
 Number 150                                                                    
 SENATOR DUNCAN said the second step is that if we can get the                 
 federal exemption as a result of this bill, then the processors can           
 get together and talk with the fisherman.  He stated passing SB 306           
 sends the message.                                                            
 Number 167                                                                    
 GEORGE UTERMOHLE clarified that there were two things that the                
 committee substitute was trying to do.  One was to allow groups of            
 fishermen to talk to groups of processors about the prices that               
 they'll exchange between themselves.  The second was to increase              
 the bargaining power of the producers and the manufacturers in the            
 fishing industry in the state by allowing them to get together and            
 put a combined front together to the people they market their                 
 product to in the national and international markets.  RICK LAUBER            
 said he believes processors can do that now on international                  
 markets, but not on domestic markets.  JIM FORBES interjected that            
 he was not aware of any specific exemption under U.S. federal law             
 for that.                                                                     
 Number 195                                                                    
 SENATOR HALFORD withdrew his motion to adopt the draft committee              
 substitute and then moved to pass SB 306 out of committee with                
 individual recommendations.  Hearing no objection, it was so                  
 There being no further business to come before the committee, the             
 meeting was adjourned at 3:00 p.m.                                            

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