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
 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.                           

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