3. Detailed disclosures of drugs, active ingredients and their purpose.

4. Nutritional breakdowns as to protein, fat, fiber, contents, minerals, vitamins and the amounts of sugar.

Such detailed labeling requirements for animal food would a fortiori require strong labeling laws relating to food for human consumption. Yet, when Commissioner Bicknell of the Department of Public Health was confronted with this inconsistency, he acknowledged the importance of the problem. Nevertheless, he felt helpless to remedy the problem citing the broadness of his Department's legislative mandate, and the lack of specific direction. See Testimony of Dr. William J. Bicknell at the Commonwealth's Hearings on Food, Health, and Nutrition, July 15, 1974. Representatives of the Department of Agriculture, on the other hand, feel that they have gone as far as their legislative mandate allows. The Department of Agriculture feels its responsibility goes more toward primary agriculture product grading, and labeling than toward packaged food labeling.

This bill clarifies the responsibility of the Department of Public Health and bridges the technical gap between the responsibilities of the Departments of Agriculture and Public Health. The proposed statute is a technical change clarifying the Department of Public Health's mandate to adopt standards of identity for articles of food. It will serve to dispel any questions of primary responsibility or initiative, and insure that the purposes and intent of the General Laws be consistently carried out. (See Exhibit 9.) 9

3. PRE-TICKETING OF FOOD PRODUCTS

A principal purpose of the Food Commission's inquiry has been to ascertain areas where competition in the distribution of food products is not operating at workable levels. The lack of free and open competition is indicated in certain structural aspects of the marketplace as well as by the conduct of the persons engaged in distribution of food products. With a bias toward the promotion and encouragement of price competition, the Food Commission rejects conduct which may have a reasonable tendency to restrict price competition and at the the same time is promotive deception.

Such is the view which we take of the pre-ticketing of food products by persons other than retailers. In both a theoretical and pragmatic sense retail prices should be determined by the person who is in the best position to assess both the marketplace and the retailer's own cost. That person, in our judgment is the retailer himself. He, better than anyone else, knows his own costs of doing business and just what he must earn on a product, consistent with the vicissitudes of competition, to secure a reasonable return on his investment.

Too often nationally advertised products "come through" to the retailer with stamped or labeled prices affixed to the container which are set out upon the market shelves without even a nod to the actual cost of the product. The retailer is saved from the "problem" of competition on those items because he knows other retailers are doing likewise. He may learn this in a number of ways, including from the manufacturuer's representative or the wholesaler. Persons

See p. 277.

engaged in these latter segments of the food distribution process do not desire extensive price competition in their products for obvious reasons. If they can in some way insulate their products from price competition, they offer the selling point of "guaranteed" or nearly guaranteed profit margins. If active intra-brand price competition is eliminated, there is a consequent relief in the pressure upon wholesalers and manufacturers to reduce their prices as an aid to the resale of products bearing their trade name.

The Massachusetts Fair Trade Law made vertical price fixing agreements legal and provide manufacturers and retailers insulation from price competition. While the viability of that statute with all of its obvious drawbacks is now questionable, the adverse effects of its provisions are still present in the guise of suggested retail prices. Their continued usage in so important an area as food prices should not be tolerated.

Chapter 93F attempts to eliminate the establishment, by way of suggestion or otherwise, of retail prices by persons other than retailers. An important exception from the blanket illegality of pre-ticketing is in the definition of that term. To accommodate the situation where a manufacturer's representative or a wholesaler may perform the instore service of pricing and shelving products for a retailer, the Commission has concluded that the potential cost to the retailers of that service outweights its competitive impact. We still believe that there is a competitive impact, but the cost of the services rendered are quite likely to be passed on to the consumer if the retailer has to perform those functions himself.

The statute also deals with the problem of the integrated retailer, e.g. Stop and Shop or Star Market who bakes or produces their own food products and quite probably should be able to price them. While the Commission wishes to encourage the use of private brands, with their usually lower prices, we do not feel that retailers should be permitted to designate non-retailers to pre-ticket those goods. It was suggested that the retailer is merely appointing the canner or baker as its agent for this purpose and if the retailer is in fact setting his own price, who is harmed? Passing the question of enforcement, i.e. who is the real "price setting" party, it is essential to the nation of free competition that these prices be determined by the retailer and that his price reflect the market conditions prevailing in his area of effective competition. Persons in the business of canning or baking private label food products for several retailers or wholesalers should not in any sense be engaged in the process of retail pricing.

Private label merchandise has traditionally been used as a "fighting ship" against the more expensive items. To place these private label items on the shelves already priced, reduces the retailer's incentive to re-price them to meet competition and if he does so, the price "reduction" is deceptive and quite possibly a violation of the Consumer Protection Act, where there never was a firm retail price from which the purported discount was made.

The advantages to the retailer in having food products pre-ticketed are in the opinion of the Commission outweighed by the drawbacks which the consuming public unquestionably sustains by the loss of competition which the practice engenders. Chapter 93F is needed if

we are to uphold our responsibility to promote active price competition. (See Exhibit 10.)

10

4. RECIPROCITY OF MILK INSPECTION

Reciprocity of Inspection is a major issue for dairy farmers and consumers. What is involved are two basic considerations: a monopoly in the milk supply in the Boston area and the consequent levying of additional charges on milk.

Reciprocity means that milk can flow freely between States. Now milk produced in other States must be inspected by Massachusetts employees, and farms may be arbitrarily excluded. Additionally, the Commonwealth pays for several inspectors who live out of State when the inspection functions of the other States could, instead, be relied upon. There seems to be little reason for the taxpayers to support such a practice, since it only serves to create and strengthen a marketing monopoly. Prior to considering recommendations, a little insight into the marketing practices and milk pricing would be illuminating.

Milk prices which the producer (dairy farmer) shall receive are established by the Federal and/or State governments. The U.S.D.A.'s Agricultural Marketing Service establishes a minimum base price which is the foundation for ascertaining the amount dairy farmers are due for their fluid (Class I) milk. The base price, called the "MinnesotaWisconsin Price," is then increased by an additional increment for every marketing order (region) in the country. Distance from Minnesota is the criterion and the relationship between the distance and amount of differential is direct: the longer the distance, the larger the differential. The Boston Region Marketing Area assesses one of the highest differentials in the country-about $2.85 per hundredweight (cwt.).

In addition to the Class I milk price, the U.S.D.A. establishes a Class II price, which together with the Class I price is used to arrive at the blend price due farmers. The blend price is a combination of Class I and Class II (milk products) utilization rates. The Class I rate is higher than the Class II rate which means that the more fluid milk consumed, the higher will be the return to farmers. In addition to the governmental price calculations, prices are also determined by milk cooperatives. Milk cooperatives are common marketing arrangements established by dairy farmers which allow them to pool their milk supply. Once pooled, additional charges can be added to the Federal minimum prices. These so-called over-order premiums (surcharges) have ranged from approximately 77 cents to $1.43 per cwt. The consumer carries the entire weight of the surcharge.

Currently the milk supply in Massachusetts is at the disposal of Yankee Milk Co-op and the Massachusetts Department of Agriculture. Together they control the flow and availability of milk. Yankee Milk markets from 65 percent to 85 percent of the milk consumed in Massachusetts. Concomittantly, the Department of Agriculture certifies which and how many farms may sell milk in Massachusetts. The supply dominance exercised by Yankee Milk conjoined with the prohibitions to market entry established by the

10 See p. 278.

Department of Agriculture thwarts price competition and keeps artificially restricted the availability of milk. The result is the co-op can assess super-pool premium surcharges on milk which are, in turn, passed on to consumers as a cost increase.

The Commission is perplexed that the government would work hand-in-glove with a member of the private sector to the detriment of consumers. Additionally, we are outraged that sanitary and health inspections are used to realize an economic impact. We think it grossly unjust to burden Massachusetts consumers with co-op surcharges, especially since most of the money goes out of State. If dairy farms are to be supported, the money could at least be kept in the Commonwealth and used more judiciously.

Conservative estimates place the cost of the surcharges at $8 million per year, but it could run as high as about $25 million per year if the co-op assessed at the highest rate yet levied for every month of the year. Whether $8 million or $25 million, the money should not be forthcoming. (See Exhibit 11.) 11

5. UNIT PRICING IN ADVERTISING

Massachusetts has the oldest Unit Pricing Statute in the country. The Consumers' Council, which regulates Unit Pricing in Massachusetts, has attempted to increase consumer utilization of Unit Pricing, as well as to make it a more valuable buying tool. Their attempt to do so took the form of a regulation which would have required that in newspaper advertisements unit prices appear next to the item prices of products.

The food retailers sued the Council, and on procedural and statutory grounds the Court upheld the Supermarkets' suit. The Commission believes that the Unit Pricing Law has worked remarkably well at virtually no cost to the State and with offsetting costs to the industry. Specifically, the industry uses Unit Pricing labels for purposes of shelf display, inventory control, ordering and price marking. These benefits have offset any cost associated with presentation of (unit price) consumer information.

COMPARATIVE PRICING: A PRELIMINARY STUDY DETAILING THE UTILITY OF UNIT PRICING IN NEWSPAPER ADVERTISEMENTS.

Research conducted by the Council revealed that a very large number of items which appear in newspaper ads could be compared between stores on a per unit of measure basis. A thorough analysis by the Council of the food ads which appeared in the Boston Globe on December 13, 1973, showed that the following items could have been comparatively unit priced between stores:

11 See p. 279.

The Council found a total of 38 items for which between-store Comparisons could be made if the unit price were listed. On a yearly basis, that means that in this one Boston paper there may be as many as 5,304 possible between-store item comparisons.

Not only that, but there were also a significant number of items which could be compared within stores as the following list indicates:

A total of 18 items could have been comparatively priced within one or more stores, yet without Unit Pricing, such a comparison process on a per unit of measure basis is difficult, if not impossible. If we assume that people read the advertisements, and surely they do or the food companies would not spend their money in this way, then there is every reason to want to increase information which will influence or affect what a consumer buys. Additionally, with the need to conserve energy and not make unnecessary trips to the food store, Unit Pricing in advertising would surely clarify the actual cost and value of food products. It is important to recognize that advertised