In the final hours before adjournment last fall, Congress adopted a late-blooming measure aimed at preventing "collusive practices in bidding" for the federal timber sold by the U.S. Forest Service.
The timber industry of the West is striving mightily these days to kill it. The House Agriculture Committee has already voted, by a close 22 to 20, to seek its repeal. Similar pressures are reportedly building up in the Senate where the most powerful proponent of the law, Senate Agriculture Committee Chairman Herman E. Talmadg (D-Ga.), is said to be growing a bit weary of all the howls from the Pacific North-west, the center of discontent.
"He's about to come to the conclusion that if all those Westerners want to collude, the hell with 'em - let 'em collude," said one source close to Talmadge. "The people who might stand up for God, motherhood and sealed bidding haven't even started to pay attention to this one yet."
Tacked onto the National Forest Management Act of 1976 almost as an afterthought, the bill's most pointed provisions simply require sealed bidding on all timber sales from the national forest system, except where the Secretary of Agricultute determines otherwise by regulation.
Sealed bidding has been the rule, rather than the exception, in the South and East for decades. But under the permissive authority of an 80-year-old law, oral auctions became customary, out West shortly after World War II, ostensibly to give local lumber mills a chance to offer a higher price and protect their traditional timber supply from outsiders.
Oral bidding also provides a ready opportunity to buy government timber at the cheapest possible price, which is all that need be offered if no one else shows up, And, according to the Justice Department's antitrust lawyers, the system makes it easier to indulge in collusive aggrements to divvy up the sales and to intimidate would-be competitors by jacking up the oral offers whenever necessary. The Forest Service itself agrees "that sealed bidding for timber is a greater deterrent to possible collusive practices than is oral auction."
As U.S. Forest Service chief John R. McGuire puts it. "In oral auctions, counterbids, gestures, eye contacts, voice inflections, and facial expressions can be used much as in the game of bridge. These methods can be used in addition to strategy arranged before the sale." On the other hand, "use of sealed bidding restricts collusive methods to strategy arranged before the sale."
The stakes are high in any case. The Forest Service, an arm of the Agriculture Department, sold $584 million in timber last year - about a third of all softwood lumber and plywood used in the nation - most of it in Oregon and Washington ($378 million) and in California ($111 million). According to one Forest Service expert, Alfred A. Weiner, the vast majority of that timber, probably more than a half-billion dollars, was sold by oral bidding.
The tempest began as a mild breeze last year when Rep. John Krebs (D-Calif.), aroused by reports in his hometown paper (the Fresno Bee) about evidence of collusive practices in the forest industry, decided to try to do something to discourage them.
At a House Agriculture Committee markup session last Sept., he successfully proposed an amendment directing the Secretary of Agriculture "to take such action as he may deem appropriate to obviate collusive practices in bidding for trees, portion of trees or forest products from national forest lands . . ."
At the least, the secretary was directed to set up a monitoring system that could "promptly identify patterns of noncompetitive bidding," to order that any collusive practices or patterns be reported to the Justice Department with any and all supporting data, and to institute sealed bidding for advertised sales of 1 million board feet of timber or less.
No one in the forest products industry seems to have gotten excited about that since the affected timber sales were so relatively insignificant. (Sales of under 2 million board feet are counted as "small by the Forest Service.)
"It was frankly more modest than it should have been," Krebs says now of the measure as it passed the House.
When the legislation moved to a Senate-House conference, however, the situation changed drastically.
"I frankly thought that the provision might not survive the conference," says one legislative aide who attended the sessions. "But Talmadge picked it up and said, 'Why should we have sealed bidding in the South. I think we ought to have it all over.' All of a sudden, wham, bang, it was broadened to cover 'all sales except where the secretary determines otherwise by regulation.' Until then, it was just window-dressing.
Some hand-wringing ensued on the House and Senate floors, but Congress was in a mood to hurry up. On the House floor, Rep. StevenSymms (R-Idaho) tried to uphold oral auctions as an established tribal folkway. He suggested that the conference really meant to require sealed bidding only when "reasonable evidence indicates that collusion is occurring." But in a colloquy with Krebs, House Agriculture Chairman Thomas Foley (D-Wash.) said that the conferees "did not intend to give the secretary carte blanche authority to depart from the sealed bidding procedure."
The Forest Service took the new law seriously, at least at first. It suspended all sales for a few weeks following enactment, then decreed sealed bidding for all sales except in isolated cases where it would adversely affect a community dependent on national forest timber. Only the town in the West qualified for oral auction.
The protests welled up. The Forest Service was swamped with some 3,000 letters, most of them in complaint. Rep. Al Ulman (D-Ore.), the chairman of the House Ways and Means Committee, arranged a meeting with Acting Secretary of Agriculture John A. Knebel last Dec. 8 to hear from representatives of several lumber firms in his district. The Forest Service regulations were relaxed shortly thereafter, to exempt more communities, although chief McGuire has said that "we were drafting the new guidelines even before that meeting."
Krebs noted crisply at a House forests subcommittee hearing in February that most of the firms represented at the meeting with Knebel were under subponea by a federal grand jury looking into timber sales in that area of Oregon. In Krebs' own California district, which includes the Sierra National Forest, three other firms were under subponea by a federal grand jury investigating alleged bid-rigging there. In all, according to Justice Department anti-trust lawyers. "six areas are currenly being investigated for possible timber-bidding collusion. It is noteworthy that each of these investigations has concerned an area where oral bidding was the predominant method of selling timber."
In addition, just last month, the 9th U.S. Circuit Court of Appeals upheld the 1975 convictions of the Champion Inteernational Corp. and six other defendants for collusive bidding in violation of the Sherman Antitrust Act, for timber from Oregon's Willamete National Forest. Despite the Justice Department, acknowledged difficulties in obtaining proof of collusion in the tightly knit timber industry, the Court held that the circumstantial evidence of a tacit agreement in the Champion International case was persuasive enough.
According to the government, the defendants methodically took turns acquiring - without substantial competition - most of the various cutting contracts offered by the Forest Service during the period covered by the indictment. The trial judge found that "in sale after sale over a four-year period, the one who expressed an interest in a sale was the one who took the sale without opposition."
By early February, however, the drive to repeal the sealed bidding rule was in full swing. The National Forest Products Association busied itself in the effort, along with at least 20 other trade groups.
Some contacted Sen. Frank Church (D-Idaho), who only two years ago had proudly hailed the debut of Lewiston, Idaho, as a port city with barge access to the ocean. Now he is said to be worried about the prospects of outsiders using the prt to take the timber from Idaho. A protectionist surge is making itself felt on Capitol Hill thses days in many ways.
The carpenters union, which is said to work closely with the Forest Products Association in such matters, has also joined the lobbying. Even the National Association of Counties has passed a resolution in support of oral bidding, presumably on the notion that it produces more money than sealed bidding (State and local governments get 25 per cent of the revenue from national forest timber sales.)
Actually, according to a nine-year analysis of sales by the Forest Service's Weiner, sealed bidding appears to produce more money on the average.
TThe chief House advocate of repeal, Rep. Jim Weaver (D-Ore.), chairman of the House forests subcommittee, opened hearings in February with the protest that many Northwest lumbermen were fearful of extinction if sealed bidding were the rule. "Oral auctions in the Northwest, far from encouraging collusion, have been highly competitive," he insisted.
Defenders of the sealed bidding law maintain that other remedies, such as smaller timber sales and sharper business judgment, are what the smaller mills need. They already have the built-in advantage over outsiders of lower transportation costs in hauling the timber.
Despite all that, Secretary of Agriculture Bob Bergland early this month announced permanent new regulations that make the largely untested sealed bidding law virtually unrecognizable. Now, Bergland said, "in dependent communities, 75 per cent of the timber will be sold by oral auction and 25 per cent by sealed bids, unless sales to outside the dependent, community exceed the normal rate." If outside sales are excessive, then 100 per cent oral auction can be authorized. So far, under a generous definition of what makes a town 'dependent' on national forest timber, 183 communities have been qualified.
"We've been backing down and backing down," said one Forest Service official. "At first everything was sealed bidding, but now it's back to 75 per cent oral auction wherever there's dependent community. That's practically everywhere in the West."
Even so, the timber industry still wants the law repealed. National Forest Products Association vice president John Hall maintains the definition of "dependent community" (10 per cent of the work force engaged in wood products manufacturing and 30 per cent of the timber supply for the past five years from national forests) is still too narrow.
No one, of course, is in support of collusion. The House hearings are full of declarations to that effect. "If there are improper bidding practices, we do not support them," Hall adds. "In no way."
On the Senate side, where Church and five other Western senators have sponsored repeal legislation, the lobbying has also been intense. But the proponents are apparently starting to smart under suggestions that they might not be foursquare against collusion. As a consequence, they're been refining the measure to restate the anti-collusive purposes of last year's law. But the new bills - one is before Senate Agriculture and another before the Senate Energy Committee - still go on to wipe out the requirement for sealed bidding; the only new anti-collusive device that last year's law demanded.
"This requirement has been nothing but terribly troublesome," Church said. "We want something more stable written into the law."
In Senate Agriculture, Talmadge is expected to try to uphold sealed bidding, but he has no intention of blocking a vote on the proposition. He had it put on the agenda for a committee meeting yesterday at the behest of Sen. John Melcher (D-Mont.), but the session fizzled for lack of aquorum. Another try is expected next week.
"Talmadge thinks these guys are making a tempest in a teapot," says one Senate insider, "but one of the lead hitters on this is Mr. Ullman, the chairman of Ways and Means. As the ranking Democrat on the Senate Finance Committee, Talmadge has to deal with him a lot." Some think the Georgia Democrat may still make a fight of it, but the National Forest Products Association's spokesman, for one, seems confident that he won't make a fuss.
Reasons Hall: "Mr. Talmadge isn't the type of person to stand in the way of a solution to regional problems."