Legislature(1993 - 1994)
03/25/1994 03:37 PM Senate RES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
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.