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LETTER OF TRANSMITTAL

SPECIAL LEGISLATIVE COMMISSION ON Food PRICING AND MARKETING

PROCEDURE OF Food CHAINS IN THE COMMONWEALTH OF MASSACHUSETTS

a

To the Honorable Senate and House of Representatives:

We, the undersigned, hereby submit a final report of the results of the investigation and study authorized under the provisions of Chapter 90 of the Resolves of 1974 and most recently revived and continued by Chapter 10 of the Resolves of 1975 and membership increased by Chapter 53 of the Resolves of 1975 on food pricing and marketing procedure of food chains in the Commonwealth of Massachusetts and other related matters. Respectfully submitted.

ANTHONY M. GALLUGI,

House Chairman,
PETER A. VELIS.
THOMAS F. BROWNELL.
DORIS BUNTE.
ARTHUR M. KHOURY.
GERALD COHEN.
BERNARD D. FLYNN.
STEPHEN J. McGRAIL,

Senate Chairy an.
RONALD C. MACKENZIE.
ALAN D. SISITSKY.
David H. LOCKE.
MICHAEL LOPRESTI, Jr.
BARRY RAVECH.
MARY REMAR.

LOLA DICKERMAN.

PART A

LEGISLATIVE COMMISSION ON FOOD: GENESIS AND

OBJECTIVES

In July 1974, the Legislature enacted House Bill 6581 which established a Special Legislative Commission of Food Marketing consisting of ten members. Five were members of the House; three were to be members of the Senate and there were to be two public members appointed by the Governor.

I The idea of such a commission got its impetus from the soaring food prices experienced by consumers in the winter and spring of 1974. Representatives Anthony Gallugi and Peter Velis approached the Consumers' Council in June of that year with the very simple but disturbing question: what can the State do about food prices and the availability of foodstuffs? In meetings with Council Staff members it became obvious that there was little which the State could currently do to either affect, control, or in any way determine the price of foodstuffs.

Distress and consternation were shared both by the Council Staff and Representatives Gallugi and Velis about what seemed to be a no-win situation for the consumer. In addition, it was noted that the Federal Trade Commission was looking into the same problems at a national level; but, for reasons never made altogether clear, chose not to include Boston as one of the cities included in the study. With this situation serving as the backdrop, the meetings resulted in a proposal which Representatives Gallugi and Velis put into operation: they were to attempt to establish a special legislative commission to examine the marketing of food and to assess whether anything could be done to improve, if not alleviate, the problems faced by consumers.

The Representatives filed such a proposal and it became House Bill 6581. In addition to themselves, the following members of the Legislature were appointed to the Commission: Representatives Thomas F. Brownell, Arthur M. Khoury, and Doris Bunte; and Senators Stephen J. McGrail, Ronald C. MacKenzie, and Alan D. Sisitsky.

Governor Sargent, exercising his option, appointed Barry Ravech, Esquire, and Mary Remar as public members to the Commission.

The purpose of the Commission was to investigate and study the pricing and marketing procedures of grocery chains in the Commonwealth. It was also to consider in the course of that investigation possible remedies to relieve the burden of the high cost of food for consumers. The Chairman, Representative Gallugi, chose to read this mandate in very broad terms. The Commission felt that it should look closely at as many marketing practices as possible, realizing that at every juncture in the marketing process costs and unnecessary services could well be slipped into the operations of the food marketing system-costs which the consumer would bear.

II

The Commission was of the opinion that there were two basic ways to go about collecting information about abuses, problems and difficulties regarding the marketing of food. First, it would be necessary to gather impressions from consumers located across the State as to the problems and difficulties they experienced when shopping for food. The best way to do this would be through a series of public hearings. It was also hoped that the food industry would come forth at these hearings and provide an insight into what they do, why they do it, and what is involved in the marketing of food.

These hearings were scheduled in all corners of the State, including the communities of Boston, Lawrence, Springfield, Worcester (for a complete list of the hearing cities and dates, please see Exhibit 11). The hearings were scheduled over a two-month period with the express intent of timing them so consumers could be able to attend. To that end, the majority of them were held in the evening and, where necessary, two days of hearings were held when it was felt that this would best serve the interest of gathering consumer opinion.

The second way in which the Commission went about gathering information was to utilize a questionnaire built upon the Federal Trade Commission's Line of Business Report Form. It was the opinion of the Commission that the Federal Trade Commission's Report would serve as a substantial and authoritative basis for its own activities. Furthermore, it was determined that the Food Commission's own investigation would, in some respects, be similar in objective and scope to the Federal Trade Commission's work.

The Federal Trade Commission report was amended to contain specific sections dealing with, among other things, product movement, advertising allowances, retail operations, manufacturing and producing subsidiaries and store locations. Other information drawn from industry publications was also used when constructing the questionnaire.

The questionnaire was mailed to all food wholesalers and retailers doing business in the Commonwealth of Massachusetts. The response was chilling. Only two of the one hundred and thirty or so recipients even bothered to read the questionnaire and their responses were niggling. People in the food industry argued the questionnaires were too detailed, demanded too much information, would be a burden to complete, would not provide anything useful and, in general, since it was not legally required, they had no intention of complying. (See Exhibit 2 ).

The Commission's response to the food industry's actions was to approach the leadership of the House requesting subpoena power. It was strongly felt that without subpoena power it would not be possible to gather the sort of information required. After discussions with the Speaker, the Majority Leader, and the Majority. Whip, the Commission agreed to try again. The leadership asked that the questionnaire and attendant documents be simplified and that the industry once again be given the opportunity to voluntarily comply. (See Exhibit 33).

1 See p. 225. ? See p. 226.

The questionnaire was then decomposed into two parts: (1) A section to send wholesalers and (2) one which would go to retailers. This particular segment of the Commission's activities was overseen by Attorney Barry Ravech. As a result of the revision, there were then two separate questionnaires to be sent to two distinct parts of the food marketing system. (See Exhibits 4 and 54).

In the Spring of 1975, the questionnaires were sent out and, once again, from both segments of the industry, the response was very disappointing.

As a consequence, the Commission approached the leadership and requested powers to issue subpoenas and send out interrogatories. This request required a four-fifths vote on the floor of the House and, because of normal legislative reluctance to grant subpoena powertruly the power to investigate problems beyond the surface-to any Commission, the request was denied. Once it became obvious that no further information was going to be forthcoming the Commission decided to ask the Attorney General to study the level of competition within the food industry throughout the Commonwealth of Massachusetts. The Attorney General advised the Commission that he would do everything within his powers and resources to study the situation. The Commission then turned its attention to bills which had been referred to it during the legislative session and to particular problems which they gleaned in the course of the public hearings. These issues then became the focus for the Commission's next set of activities—drafting legislation and preparing summary reports.

III

Concomitant with Commission activity sketched out above was the active interest of the Federal Trade Commission in the Massachusetts case. Numerous contacts between Commission members and Federal Trade Commission staff members were initiated from both parties for the purpose of establishing and maintaining open lines of communication regarding common problems. Copies of the correspondence between the Federal Trade Commission and the Legislative Commission on Food may be found in Exhibit 65).

It was also apparent that the Legislative Commission on Food was attracting the attention of national industry, organizations. The Consumer's Council had been invited, at industry expense, to attend a conference sponsored by the Grocery Manufacturers of America in Washington, D.C. The Council had been approached regarding this matter because of prior contacts with officials at GMA. Since it was not possible to secure State support for the Washington GMA Conference, the Council was in no position, nor would it accept industry underwriting of the trip. The consequence of the Council's refusal was to suggest that Representatives Gallugi and Velis attend the Washington meetings. As members of the General Court, they elected to do so and, accordingly, attended the GMA session at their own expense.

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3 See p. 249. • See pp. 251, 259. 5 See p. 272.

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