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In Germany, the SV controls all aspects of the German Sh epherd. First, the dog must a koer report. That states whether or not the dog meets the breed standard in conformation. Then the dog must have a minimum of a SCH 1 title. Only then is the dog approved to breed. But, that isn't the end of the hoops. The SV also decides what bloodlines are the best match for your dog. If you breed outside their guidelines, then the pups can't be registered and none of that offspring can be bred in the future.
The limited registration and spay/neuter contract is the modern way of culling. Not every dog should be bred, very few should be honestly. In every litter there are going to be pups with obvious faults that shouldn't be bred. Then you will have one that might show extreme potential at an early age. Most will fall in the middle.
How does the breeder know that you have the background and knowledge to carry on their ideal? They aren't just giving you a dog, but the potential to help or hurt their reputation.
Say you breed the dog and the pups turn out less than ideal. Who has more to lose?
Support a reponsible breeder with your money. If you don't agree with them on this, then find another breeder who shares your philosophy.
If you want a herding dog, then go to a breeder who has proven their dogs can work.
To those who said that conformation never mattered with working dogs that isn't true. Form follows function. There may be some cosmetic differences, but the dogs will be more similar over time than different.