Cornell University Library HD 1484.A4 1920a Labor, agricultural, dairy, and horticul 3 1924 002 436 461 Congress. Senate. Cominittee on the TJ. S. Judiciary. Lalsor, agricultural, dairy, and horticul- tural organi28.tions. Hearing. THE LIBRARY OF THE NEW YORK STATE SCHOOL OF INDUSTRIAL AND LABOR RELATIONS AT CORNELL UNIVERSITY LABOR, AGRICULTURAL, DAIRY,. AND HORTICULTURAL ORGANIZATIONS HEARING BEFORE A SUBCOMMITTEE OF THE COMMITTEE ON THE JUDICIAEY UNITED STATES SENATE ■•»■■;•' ■■ '■•'■'■-''■ SIXTY-SIXTH CONGEESS SECOND SESSION ON =■ '-■' .i->ti;A.:-.r.' ■■ ^:r — <...,:. . . X.Vih^mai M'-.MT SO AC -'-:o;' ,axiAi .H -;.■:;.!' ! A BILL TOJAMEND SECTION 6 OP THE ACT OF OCTOBER 15, 1914, ENTITLED "AN ACT TO SUPPLEMENT lEXISTING LAWS AGAINST UNLAWFUL RESTRAINTS AND MONOPOLIES, AND FOR OTHER PURPOSES" ■ Printed for the use of the Committee on the Judiciary WASHINiia»©S'"'"" GOVERNMENT PRINTING OFFICE 1920 COMMITTEE ON THE JUDICIARY. KNUTE NELSON, JBiinesota, Chttirman. WILLIAM P. DILLINGHAM, Vermont. frank: B. BRANDEGEE, Connecticut. WILLIAM E. BORAH, Idaho. ALBERT B. CUMMINS, Iowa. LEBARON B. COLT, Rhode Island. THOMAS STERLING, South Dakota. ALBERT B. PALL, New Mexico. GEORGE W. NORRIS, Nebraska. FRANK B. KELLOGG, Minnesota. SiuON MiCHELET, Clerk. CHARLES A. CULBERSON, Texas. LEE S. OVERMAN, North Carolina. JAMES A. REED, Missouri. HENRY F. ASHURST, Arliona. JOHN K. SHIELDS, Tennessee. THOMAS J. WALSH, Montana. HOKE SMITH, Georgia. WILLIAM H. KING, Utah. Mehbebs of the Sttbcommittee. GEORGE W. NORRIS, Nebraska. FRANK B. BRANDEGEE, Connecticut. George L. Teeat, Assistant Cleric 2 THOMAS J. WALSH, Montana. LABOR, AGRICULTURAL, DAIRY, AND HORTICULTURAL ORGANIZATIONS. TUESDAY, JANUARY 27, 1920. United States Senate, Committee on the Judiciary, Washington, D. O. The subcommittee met, pursuant to the call of the chairman, at 10.30 o'clock a. m.. Senator George W. Norris presiding.- Present: Senators Norris (chairman) and Brandegee. Present also: Senator Arthur Capper, of Kansas; Charles S. Deneen, of Chicago, HI.; John D. Miller, of New York City; and N. Frederickson, of Guthrie Center, Iowa. The Chairman. The bill which we are considering is S. 845, to amend section 6 of the act of October 15, 1914, entitled "An act to supplement existing laws against unlawful restraints and monop- olies, and for other purposes." The bill is as foUows: fS. 845, Sixty-sixth Congress, first session.] A BILL To ameud section 6 of the act of October 15, 1914, entitled "An act to supplement existing laws against milawful restraints and monopolies, and for other purposes." Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 6 of the act of October 15, 1914, entitled "An act to supplement existing laws against unlawful restraints and monopolies, and for other purposes," be, and the same is hereby, amended to read as follows: "Sec. 6. That the labor of a human being is not a commodity or article of com- merce. Nothing contained in the antitrust laws shall be construed to forbid the existence and operation of labor, agricultural, dairy, or horticultural organizations, instituted for the purposes of mutual help and not conducted for profit, or to forbid or restrain individual members of such organizations from lawfully carrying out the legitimate objects thereof; nor shall such organization, or the members thereof, be held or construed to be illegal combinations or conspiracies in restraint of trade or commerce, under the antitrust laws. "Associations, corporate or otherwise, of farmers, horticulturists, planters, ranchmen, or dairymen engaged in making collective sales for their members or shareholders of farm, orchard, plantation, ranch, or dairy products procjuced by their members or shareholders, are not contracts, combinations, or conspiracies in restraint of trade or commerce. "Contracts, agreements, arrangements, or combinations made by such associations or the members, officers, or directors thereof in making such collective sales and prescribing the terms and conditions thereof are not contracts, combinations, or con- spiracies in restraint of trade or pommerce, nor are they combinations or conspiracies to monopolize or to attempt to monopolize any part of trade or commerce. "Nothing contained in this act, in the antitrust or other laws, shall forbid or be construed to forbid the existence and operation of associations, corporate or otherwise, not conducted for profit, of farmers, horticulturists, planters, ranchmen, or dairymen engaged in making for the producers thereof collective sales of farm, orchard, planta- tion, ranch, or dairy products, or to forbid or restrain individual members, directors, or officers of such organizations from making such collective sales, and prescribing terms and conditions thereof; nor shall such organizations or the members, directors, or officers thereof, so engaged in making such collective sales and prescribing the 3 4 LABOR, AGRICULTURAL, DAIRY, ETC., ORGANIZATIONS. terms and conditions thereof, be held or construed to be illegal combinations or con- spira,cies in restraint of trade or commerce under the antitrust laws: nor shall any of the acts specified in this section be construed or held to be violations of any law of the United States. Mr. Mille'f, you represent the people who are f iivorable to the pas- sage of this bill, or one faction of them ? Mr. Miller. Yes; and- Gov. Deneen does also; Senator Brandegee. Is there,j(}pposition to the bill ? The Chairman. I understand not. I understood there was to be, but they do not seem to be here. Do you know, gentlemen, whether the people who are opposed to this bill are going to be here? Ml'. Deneen. No; I do not know anything about it. We simply received notice of the hearing and came down. Senator Brandegee. Do you know whether there is any organized opposition? Mr. Deneen. I do not know. Mr. Miller would. know. Mr. Miller. I know of no organized opposition. Senator Capper. I do not believe there is any real opposition to it. Senator Brandegee. If there is and it does not appear, we will not know anything about it. The Chairman. Who wants to be heard first ? Senator Capper. I should like to be heard. STATEMENT OF HON. ARTHUR CAPPER, UNITED STATES SENATOR FROM KANSAS. Senator Capper. Mr. Chairman, the amendment to the Clayton Act proposed in Senate bill No. 845, authorizing collective bargain- ing in farm products, does not change the policy of the Govermnent as already declared by Congress. The purpose of this amendment is to make clear by express language the intent of Congress. This congressional intent was reaffirmed in the special appropria- tion bill of March 5, 1915, the sundry civil appropriation bill of July 19, 1919, and the deficiency appropriation bill of October 21, 1919, as follows : Provided further. That no part of this appropriation shall be expended for the prose- cution of farmers, producers, and associations of farmers who cooperate and work in an effort to and for the purpose of obtaining and maintaining a fair and reasonable price for their products. So- far as I have observed a like.policv has been declared by such of the State legislatures as have consi(fered the effect of antitrust laws upon farmers' sales organizations. A complete illustration of this may be found in the laws of the State of New York. The executive committee of the Dairymen's League were indicted under the State antitrust statute and under the penal code, which contained like provisions prohibiting combina- tions in restraint of trade. The organized farmers of that State requested the legislature to enact an amendment clearly permitting such collective sales. Without hesitation the legislature passed sucfi laws, and they received executive approval. They may be found in the laws of New York for 1918, volume 3, page 1562. Upon their approval by the governor, the ^strict attorney of New York County, where such indictment was found, dismissed it, pub- licly stating that such amendments made such collective sales lawful. LABOEj AGRICULTURAL, DAIRY, ETC., ORGANIZATIONS. 5 At the same session a law was enacted authorizing the creation of associations with express powers to make such collective sales. This is a voluminous law, and m its general provisions follows the form of an act recommended for State enactments by the Office of Markets and Rural Organization of the United States Department of Agri- culture, being Service and Eegulatory Announcement No. 20 and dated February 7, 1917. Similar laws have been enacted in Cali- fornia, Colorado, Florida, and New Mexico. It thus appears that so far as the policy of the Federal and State Governments has been determined by legislative acts that such policy is to permit such collective sales. Unfortunately, however, the congressional intent so apparent in section 6 of the Clayton Act is so obscurely expressed that the question of what farm organizations may lawfully do is left uncertain, and the purpose of the proposed amendment is to make clear and certain that which at present is somewhat obscure and uncertain. Section 6 of the Clayton Act excepts only farm organizations "not having capital stock." In many of the States there is no law author- izing the creation of such associations without capital stock, making it impossible for the farmers of such States to bring their organization within the class mentioned in section 6 of the Clayton Act. I quote again from such section 6 : Or to forbid or restrain individual members of such organizations from lawfully carrying out the legitimate objects thereof. It in no way defines or makes clear what are or may be the "legiti- mate objects" of such associations, and lawyers differ in opinion as to the legal status of farm organizations under this section. Able lawyers argue that the "legitimate objects" of such associations can not be such as are prohibited by the enacting clauses of the Sherman and Clayton Acts. In Illinois the Federal district attorney devoted much time to an investigation of the milk producers' association that operates in the territory tributary to Chicago. The investigation attempted to lay the ground for an indictment charging acts in violation of the Federal antitrust laws, but failed to estabhsh a case. A number of dairymen in Ohio were dragged out of their farm homes after midnight by United States marshals, hurried oft to Cleveland, kept in jail until they could send for bondsmen, and compelled to stand the expense of a trial, though the Government had no case against them. Many of the producers' associations of the country do business in more than one State, and therefore come within the scope and are subject to the provisions of Federal laws. Senator Brandegee. What has been the determination of the highest court which has considered the question as tq the interpre- tation of the present law? Senator Capper. There has been no court that has passed on that question at all. Senator Brandegee. Yoji spoke about those men who were arrested and then discharged. . Was there any trial of them ? Mr. Deneen. There was a trial and acquittal in Ohio. Mr. Miller. Under the State law. Senator Brandegee. But not under this United States statute? Mr. Miller. No. 6 LABOK, AGRICULTUEAIi, DAIRY, ETC., ORGANIZATIONS. Senator Beandegee. Were these other proceedings under the State statute ? Mr. Deneen. All under the State statute. Senator Capper. In Minneapolis and Chicago ? Senator Brandegee. Is this just an apprehension that they may be prosecuted under the United States statute? Mr. Deneen. So that there can not be any question about it. Senator Capper. The uncertainties of the situation are preventing farmers from successfully cooperating. They desire to proceed but hesitate because of such uncertainties. This is not from timidity, but from a wholesome respect for law. Nearly all the national farm organizations and many State and local agricultural bodies have / indorsed this measure and are urging its immediate passage. [ The farm organizations are not asking for "class" legislation. \ They do not want any special favors from Congress, but they have a ' right to insist that the law which now is indefinite and uncertain • should be made definite and certain. The proposed amendment only places organized farmers upon the same plane as organized labor. By section 20 of the Clayton Act laborers are clearly permitted to make collective sales of the products of their labor. Individually, farmers are powerless to cope with the great organi- zations with whom they must deal. They must either bargain col- . lectively or not bargain at all. They must either have the right to bargain collectively or they must accept the prices offered them individually by the middlemen engaged in processing and distributing. These middlemen while comparatively few in number, by reason of their aflShated and interlocking interests, their superb organiza- tions, their ability to command the service of the best brains of the country, and their far-flung financial connections, exercise an influ- ence greater than is warranted by their number, by their investments, or by the character of the service they perform. Organized farmers with the undoubted right to bargain collectively would still be at a_ disadvatange in dealing with these powerful organizations of middlemen. But the right and the clear right to bargain collectively should be given them, else they can not operate successfully, and therefore can not survive. This right is vital to all farm organizations. At present, however, conditions seem most serious with the organized daiiymen. Those selling fluid milk for city consumption must of necessity sell upon credit, contract in advance, and make daily deliveries. Before the dairymen organized dealers dictated prices. The evidence taken by the Federal milk commission for the Chicago district shows that the method of the dealers in fixing prices there was to ascertain if dairy farmers were apparently prosperous and to fix prices at the lowest figure possible that would not cause open revolt. In the New York district the evidence taken by the Wicks legislative committee shows that the method there adopted was to first fix a price to consumers, subtract therefrom the dealers' costs and profits, and give the farmer what was left. In all cases costs of production and the law of supply and demand were absolutely ignored. At present the dealers of the entire country are receiving more for distributing milk than are the farmers who produce it. In Chicago the farmers received for the month of May, 1919, 5.2 lABOB, AQMOULTUEAIi, DAISY, ETC., ORGAITIZATIOKS. 7 cents per quart, while consumers paid 14 cents. In New York farmers received 6.1 cents per quart while consumers paid 15 cents per quart. Losses to farmers from selling to insolvent dealers are frequent. Organized dairymen with liberty of action under the law can protect themselves from such losses in a large measure, thus reduc- mg the cost of and encoxiraging production. As to the constitutionality of this proposition and the legal ques- tions involved, of course, I am not prepared to discuss them, and I should like to have Gov. Deneen or Mr. Miller and others here present that phase of it. The Chairman. Senator Brandegee, do you want to ask Senator Capper any questions ? Senator Brandegee. No I The Chairman. Grov. Deneen, we will be glad to hear from you. STATEMENT OF MR. CHARLES S. DENEEN, OF CHICAGO, ILL. Mr. Deneen. Mr. Chairman, I appear here for the Milk Producers' Cooperative Marketing Co. of Chicago. Mr. Miller is the general counsel of the national organization. I appear for the local organi- zation. First I will make a very brief statemefit of the facts as they apply to the Chicago district. In December, 1915, the cooperative marketing organization was effected. We have now about 12,000 members. It is in the district that supplies Chicago with milk. It is entirely a cooperative com- pany, organized iinder the cooperative law of our State. It has a turnover of about $2,000,000 a month now. The overhead expense is about 1 per cent on the gross cost. That organization is the outgrowth of a long series of acts that I think should appear here. The Chicago district comprises a terri- tory of about 125 mUes north into Wisconsin, about the same dis- tance west into Illinois, and nearly the same distance into Indiana. These States serve our city with milk. The method of conducting the business is as follows: They have about 230 milk shipping stations, one station for each village or town, each station serving from 75 to 400 farms. For a long period of time preceding 1909, the men who owned the processing plants fixed the prices which they would pay for milk, without consultation with the farmers. The matter has been referred to by Senator Capper. In 1909 the farmers of that district formed an organization called the Milk Producers' Protective Asso- ciation, and endeavored to create conditions which would enable them to meet the dealers on a plane of equality in reference to fixing prices. The struggle went on until 1916 without any change in the situa- tion. In March, 1916, the farmers were able to fix a price at about $2 a hundred pounds. They fix prices twice a year. In October, 1916, they fixed the price and again they fixed the price in April, 1917. The price, however, was agreed on in 1917 probably three weeks before the 1st of April, when it became effective. It was not fixed on war conditions. 8 LABOK, .AGRICULTUKAL, JDAIKY, ETC ., OKGA NIZATJOHS. ' On the eth of April, 1917, war was delared. The question arose at once whether the farmers should stand by their contract. They determined to do so and they stood by the contract until October. The price of milk per 100 pounds for -September, 1917, was $2.30, and the farmers in that district as well as elsewhere were losing- a great deal of money, because the price of feed was very high and was going higher. In August, 1917, the Food Administrator, Mr. Hoover, called the representatives of these organiZ|ations west of the Mississippi River together, to get the farmers to act as a imit. I understand he likewise called in the dealers, and he told them to go back to their members and advise them not to buy feed, because the cost of feed would be lowered very considerably through his department, but the producers must produce as much milk as they could, and he assured them that they would get the cost of production and a rea- sonable profit. He also appointed a committee to ascertain the cost of produc- tion. The committee had expected to report before the 1st of October, but failed to do so. Because Mr. Hoover had not ascer- tained the cost of production through his committee he requested these farm organizations to make a contract for one month covering October, 1917, rather than for the six months' period as had been their custom for years. The farmers met in Chicago and ascertained the price which they fixed for this month. They secured a member of the faculty of the University of Illinois, Prof. Pierson, who is an expert on the cost of production of milk, and he served on Mr. Hoover's committee to prepare a formula by which the farmers could make an easy calcu- lation as to the cost of milk, a formula known throughout the west as the Pierson formula, which is practically the same as the Warren formula for New York and other formulas. The farmers then selected one man for each of the milk-shipping stations where they had a local organization, and gathered the farmers in from each local organization, took the formula and applied it, and came back and made an estimate of the price, which was S3, 42, a raise of .f 1,12 a hundred pounds. Immediately the Government grew very active. The State's attorney for Cook County made a raid upon the offices of the Milk, Producers' Association. He issued 9, subpoena duces tecum, and instead of serving it upon the officers, he sent police officers over to the offices of the Milk Producers' Association, and took from that association its contracts, its records, and correspondence, minutes, and took them over to the State attorney's office. Shortly after that they were indicted. Then the Government began an investigation almost immediately through the food admin- istrator for Illinois. I was then employed by the Producers' Association. We went to the Government and stated to the food administrator that th6. farmers of that district would, submit to an arbitration of the cost of production, and a reasonable profit, and a commission was appointed. We. were given notice that we would receive the cost of production and a reasonable profit. I'he commission sat for about three months, nearly daily, hearing, testimony in reference to the cost of production. A final award was LAPOR, AGRICULTURAL, DAIRY, ETC., ORGANIZATIONS. 9 made from which an appeal was taken, and the Government modified the award somewhat. The award continued in force until the 1st of July, 1918. In the meantime another indictment was secured against the milk board of the Milk Producers' Association, the board that had to do with the executing of the will of the organization. The Chairman. That was under the State law ? Mr. Deneen. That was under the State law. Three additional members were indicted; five under the first and three added to the second, one of them a member of the commission that had to do with fixing the price of milk, chosen by the farmers. The Government then established this procedure. A member of the Food Administration came to Chicago about the middle of the month, and brought with him data gathered in the various depart- ments of the Government, as as to the cost of feed for the month pre- ceding the day of his arrvial, and then applied the formula. The dealers, the farmers, and the representatives of the Government sat and agreed upon a price to extend until the 1st of January, 1919. When the armistice was declared we were notified to prepare for trial in December, and after some preliminary motions, which con- sumed about nine months in their hearing and adjudication, we went to trial in September of last year. The trial lasted seven weeks, and we were acquitted. _, The Chairman. That trial was under the State law? Mr. Deneen. That trial was under the State law. In April, 1919, I think — I.have the date here but I will not stop to make it definite— the Federal Government through the district attorney for Chicago issued a subpoena duces tecum to two oflficers in Chicago, the Milk Producers' Association, and the Cooperative Marketing Co. They served this subpoena as a subpoena had been served by the State a j'ear or two before, by coming into the offices and taking the documents, taking the correspondence between the Milk Producers' Association and the Marketing Co., and the minutes, and they are now in the office of the district attorney of the United States. That matter has been investigated by the district attorney since April last. We do not know what course the Governmet intends to pursue in reference thereto, but it has not returned our documents, and we presume that the investigation is being carried on. In the meantime, to show the situation in Illinois, a bill was sub- mitted to the general assembly of our State in June of last year and passed, and I should Uke to submit it here. It is very brief. It is an amendment to our conspiracy law. I do not know whether you would care to have me read the conspiracy law. It is a law providing that a conspiracy is a combination of two or more persons to do an illegal act prejudicial to public justice or interfere with trade. ■rbie amendment which you will be interested in is somewhat after the form prepared here. It provides that — Contracts, agi-eements, airangements, or combinations made by such associations or; the:member8, officers, or directors thereof for making such collective sales, marketirg and presciibiug terms and conditions thereof are not conspiracies, and they shall not be considered to be injurious to the public trade. That was passed by our general assembly and signed by the governor, and became effective. It amended the defmition of the 10 LABOR, AGEICULTUKAL, DAIRY, ETC., OEGANIZATIONS. conspiracy law. On the trial the court held that the meaning reverted back to the passage of the law originally; not that it was retroactive, but that it defines the word, and we submitted the law as one of the defences in the trial we had in the State courts. The Chairman. A sort of legislative definition? Mr. Deneen. a definition of conspiracy. It was submitted for that purpose and passed with the full knowledge of its intention, I think, and it was submitted to the jury by the court that tried th& case, and the jury acquitted the farmers. We were indicted there for conspiracy to fix the price and also to eliminate competition among independent milk dealers. That was the charge. It varies in a number of counts, but that was the substance of it. The trial lasted seven weeks and they were acquitted, and, as stated by Senator Capper, I assume that like charges were made in these various States, m California, Minnesota, and Ohio. I might add this, that in looking up the law — and we gave it an exhaustive investigation — we were unable to find a case, either in our own country or in England, where farmers had been convicted for acting together in selling products collectively, where the upper court sustamed the conviction. Not only our own office but others who were brought in made a search to find whether there was a case, and there had not been any. The conspiracy laws have been leveled against the middleman and against the man in the large towns and cities in reference to dealing in the products of the farm, but we failed to find a single case where farmers had been convicted of conspiracy in acting collectively. That very briefly is the situation so far as the facts are concerned. Now, I want to advert very briefly to the situation so far as the policy of the State is concerned. A situation has grown up there which, if carried out as it should be, is probably an economical arrangement. There is no necessity for havmg two processing plants in any one town. In our State, by a municipal ordinance, tiie milk is treated, pasteurized, bottled^ cooled, and brought into the market. There is no more occasion for having three or four or five plants in a town than there is for having five or six or eight post ofiices in a town. There would be waste in a duplication of plants. In fact they could not exist. Our business has affected it so that there is one plant in the village or shipping station, for the group of farmers surroimding the station withm 5 or 6 miles. It can not be handled economi- cally when the distance is greater. That is the reason why we have 230 shipping stations in that large district. • Now, when you get a situation like that somebody has to make the price. Heretofore the dealer made the price. It was revealed in evidence before the commission and likewise at the trial that up to 1909, and following it, the Borden Co., which was the largest at that time and I believe still is among the dealers, fixed the price in this way: The superintendents of the Borden Co. were requested to ascer- tain the financial condition of the farmers, by inquines at the banks and stores and by observation, and determine their relative proa- ity. These superintendents were called to New York City before the price-fixing day arrived, a general consultation was had of the super- intendents with the officers. The price then was determined by the officers. It did not appear whether the superintendents did any of the determining or not, but having been determined, a letter was sent LABOB, AGRICTJL.TUKAL, DAIRY, ETC., OBGANIZATIONS. 11 to the superintendents about a week or more before the price date, inclosing another letter, sealed, with the notation "To be opened on the price day." On the price day the letter was opened at 8 o'clock, and the farmers were required to sign a contract before 4 o'clock that day to sell their milk for the ensuing six months or the company would not buy the milk; and if. the farmer could not sell his milk to the coinpany, he had no market. He could not arrange to have it Pasteiuized and cooled and shipped to market in Chicago. He could not care for it by manufacturing it into cheese, butter, or evaporated milk. It simply was a dead loss for the ensuing six months. Occa- sionally, and I beUeve frequently, farmers who were dilatory were fined in this way: They were offered after haggling with the company two or three days, from 10 to 20 cents less a 100 pounds for the ensuing six months as a penalty for not being prompt. The point is that the dealers fix the price and fix it absolutely. Then, another matter came up. The farmers were encouraged to produce the very largest amount of milk that Chicago could consume in any one day. For instance, in the summer time, on a very warm day a vast amount of milk is consumed in the form of ice cream. " The next day may be cool and verj" httle ice cream is sold, but the cow gives the same amoimt of milk. The result was that that created a surplus all the time, and the dealers have made the excuse that they would not pay a fair price, which would include the cost of production and a reasonable profit, because there was such a surplus of milk that the market would not absorb it. So the farmers have gotten together in oiu" district, and I assume in other districts, to remedy that con- dition, and have formed a marketing company. The farmers take care of their own siu-plus. For instance, if I am a farmer and produce a thousand pounds of milk a day, one day I sell a thousand pounds and the next day the market does not demand that, and they can take only 800 pounds. The marketing company takes the other 200 pounds and through its machinery transforms it into butter or cheese or evaporated nulk. Then I am paid for the 800 pounds of milk which goes to the consumers of milk and for the cheese, butter, or whatever it may be. The farmer in that way takes care of the surplus. "There was an agreement made as to the cost of production. I omitted to state that in hurrying through my statement. It worked out in a way that the Federal Government agreed on a formula, 20 pounds of purchased grain, or 24 pounds of home-CTown grain or com, 110 pounds of hay and three hours labor. The Government fixed that as a factor to ascertain the cost of production. When it was applied back for a number of years, for 10 years, it was found that the farmer before oi:ganization was effected was receiving about 7 cents an hour for his labor. They agreed first oh 30 cents an hour during the war, and now on 40 cents an hour, for the labor in pro- f reducing 100 pounds of milk. The farmers feel that they should ave the right to bargain collectively. They realize the objections that are made, and you are of course familiar with them. If you desire we will prepare a brief on that matter, but the theory that has developed is this: In the first place the objection is made that the laws will not be equal in their application to farmers; that there will be a preferred class. But there are two ways of answering that. (^e way is by facts and the other way is by law. If the dealers can 12 LABOB, AGBICULTUBAIi, DAIRY, ETC., ORGANlZATiOJirei bargain collectively, if labor can bargain collectively, if the manu- facturers can bargain collectively, it will be strange indeed that farmers should not have the right that men in every other line of business have, and I assume that the right to bargain collectively is not challenged per se. It is in regard to its application to certain classes that the question arises. Now the farmer, if he has the right to bargain collectively, must do it on an adequate scale. Oth'erwise it is not effective. I believe that the courts have announced the rule that men have the right to form organizations that tend to monopo- lize provided the elimmation of competition is an incident to the origi- nal purpose. So competition is eliminated by entering into a partner- ship,. Competition is eliminated by organizing a corporation. Competition is eliminated in many ways, and the farmers will elimi- nate competition among themselves to a degree, and that is the pur- pose of it, so that they can bargain as a whole and bring about the economies which will come to them by reason of such authority. I will not pursue this question,, because Mr. Miller, who assisted in drafting the law, is familiar with it and has presented the matter to the Judiciarjr Committee in the House. I just want to speak for one moment about the economies which I want to state, and I believe, then I shall have completed what I have to say. The farmers in our own State not only desire to sell collectively so that they can get the cost of production and a reasonable profit — they are not asking more and they only got the cost of production during the war — but they desire to buy collectively. We have organized this company so to do. We expect to ehminate the profit of the jobber, the wholesaler and the retailer in this way, and it wiU be done without cost. As I said, we charge only 1 per cent of the gross, and it is cooperative. If that amount is not all used it is redistributed to the farmers. Senator Beandegee. Is there anything now that prevents co- operative buying ? Mr. Deneen. No, nothing that prevents cooperative buying. This would not be applicable to the point, and I only state it as a matter of general information. I do not know whether it will be necessary to state it. Senator Brandegee. To state what? Mr. DsisTEEN. To state what we are doing. It would not apply Senator Beandegee. Not as far as I am concerned. The Chairman. Are the House Judiciary hearings printed ? Mr. Deneen. They are printed and we have copies here. Senator Brandegee. Then we can get them from the document room. - Is there any appearance here by the Department of Justice? Mr. MiLLEE. No, sir . Mr. Deneen. For the purposes of the record probably I had better state what they intend to do. We have been the object of verjr severe attack in the newspapers and on the public platforra. The trial was had, and since then we have escaped the customary attacks. We expect to effect economies in this way: We deal at wholesale. The station buys whatever it needs in car lots. For instance, if I were desirous to buy 5 tons of alfalfa, the local station hujs it. by the LABOR, AGEICtTLTURAl,, DAIRY, ETC., ORGANIZATIONS. 13 carload and the, jobbers, the wholesaler and the retailer wo.uld be eliminated. In that way we are enabled to get our supplies cheaper than we could in the other way. Then we expect io do a business very considerably larger than we are doing, prooably twice as large, of abouPw,000,000 a month in fact. IlftSy add that objection was made at the other end of the Capitol to the fact that they would have so many in the organization. That same objection has been made to the labor organizations, that first they were in the neighborhood and then in the community, and then in the large city, and then extended throughout the country. They found that they could not deal collectively except by organizing classes. It is not necessary to do that in the milk industry, but it is necessary to organize effectively those who serve any particular place, in order to get back the cost of production and a reasonable profit. The Chairman. I believe that everybody, as far as I know, is in entire sympathy with the proposition of collective bargaining; but the da,nger, if there is any danger in it, comes it seems to me from the possibility that after the big organizations are formed and become monopolies, they will do as a monopoly usually does when they get the wliole thing in their own hands — that is, exact prices that are unfair to the consumer. What have you to say about that ? Mr. Deneen. I will answer the question by facts, as I did before. The question was raised whether or not giving men power, with the natural selfishness of mankind, would require them to exercise the power to the utmost ? The first answer is that the dealers having that power, their natural tendency to be selfish has been' exerted to our detriment. They have that power. So we must protect our- selves against it. We meet with these conditions. The answer to the other is, practical. There is no limit on the amount of wages that men may demand by reason of their large organizations. Nor would there' be a limit there unless you make it a public utility and fix the cost of production and a reasonable profit. That could be done, but you can not indict a whole people as Burke said, and all monopolies have been run by a few, and j'ou can not conduct a monopoly with 12,000 members. The Chairman. Suppose that selfishness in your organization, and that you eliminate the middleman and the dealer, and all that, and suppose when you have got every thing your own way, you say, " We will double the price of mUk." What would be the remedy if under the law you were relieved as you seek to be from the opera- tion of the antitrust law ? Mr. Deneen. The remedy would be the natural law of supply and demand itself. The Chairman. How would that operate if you had control of it all ? Mr. Deneen. We have a radius around Chicago of about 125 miles. In .New York City they get milk at a distance of 540 miles, and the dealers could go anywhere they chose and buy the milk. That would be the first thing. Ultimately, if we extended the district as dealers extended their purchases and established their plants, then if such conditions arose the Government, the State, or the Nation could fix the price as it has fijced in regard to other large concerns which are monopolies. It 14 LABOR, AGRICULTTJKal,, DAIRY, ETC., OBGArNIZATIONS. woxild have to fix the price if competition could not do it. There is no claim that the farmers should have the right arbirtarily to fix any price they chose. That is not according to cooperative marketing, as extensively conducted in Kussia. It may not be a very good example just now, but it is conducted in Holland and Denmark, and not only not discouraged but encouraged by the Government. I noticed in reading this morning that a very large percent^e of the farmers of Denmark are members of such organizations. They ship their milk over to London and distribute it there, and manufacture difi"erent articles, and the Government encourages it, andit has made Denmark prosperous financially. The Chairman. What effect has it had on the consumers in London ? Mr. Deneen. I do not know, but if they are happy and prosperous I imagine that there would be so many go into it that they would naturally reduce it down. Mr. Miller is more familiar With that than I am. But the actual fact is that our own experience has been that tjie farmers so far have not received the cost of production and an ia,dequate wage. During the war, although we were offered the cost of production and a reasonable profit, it proved that prices were so high that they were compelled only to receive the cost of production. I have the prices of milk for the months and can submit them in the record if you choose. The Chairman. You may do that if you wish. Senator Brandegee. May I ask you a question? Mr. Deneen. Yes ; I am a lawyer, and not familiar with the facts, but I will tell you as far as I can. Senator Brandegee. I do not know about the different industries that the amendment proposes to exempt from the antitrust law, but I remember well when the committee considered this section 6 of the antitrust law which exempted farmers from its operation.' Now, I notice that your amendment not only gives the farmers the right to organize for profit, a right which the original section 6, which exempted them from the antitrust law, did not give them, but it also gives the same right to fruit growers, to cattlemen, and to planters, which would take in cotton growers. Now, let us assume that they should exercise the right to such a point as they wished. As it is now you say that the mUk producer, the dairyman, is largely in the control of the wholesaler, dealer, or middleman. Mr. Deneen. Of the middleman. Senator Brandegee. Between the producer and the consumer. Mr. Deneen. Yes. Senator Brandegee. In other words, the producer of milk does not have a proper influence in fixing the price, because he is in the hands of the fellow to whom he has to sell, and you say that is in- jurious to him. I can see that that is probably so. Now, in answer to Senator Norris's question, it seems to me that your remedy for that situation was to take the producer out of the hands of the middle- man, but to put the public m the hands of the producer, and if I understand you correctly, you see no limit in the figure to which the prodiRier may raise the price under the immunity of this amendment. Mr. Deneen. It is not limited in the bill. There is no limit in the bill. Senator Brandegee. And in practice you say there is no limit except that there would come a tijtne when the public would rise up LABOR, AGBIOTJLTURAL, DAIRY, ETC, ORGANIZATIONS. 15 against it if they were too selfish about it. Now I know nothing about it, for this is the first I ever heard of the proposition, but I want to ask you this : Supposing all the cotton growers and all the milk producers and all the fruit dealers and all the men who raise meat of every kind, beef and sheep, etc., combine their respective local asso- ciations, and then into a great national association of each one of these great industries upon which the public are dependent for food, and they are exempt from any attempt of the Government to regulate them or prosecute them, or interfere with them. I am wondering whether it would be wise to exempt all those industries from the antitrust law, and still keep the antitrust law applicable to other concerns who do the same thing, and what would be your idea of the propriety of the Government doing it, and the weight of the argument either to do it or not to do it? Mr. Deneen. On that matter I would have to answer by historical illustrations. The labor men have that power now, and they have a national federation. Senator Brandbgee. But it was intended to give them, and also the farmers, the power, if they did not have any capital stock or operate for profit. Mr. Deneen. Yes. Senator Brandegee. This proposed amendment makes it lawful to organize great national corporations, nation-wide, to do these things in food products at a time when there is complaint about the high cost of living, and to do it with utter immimity from any res- training statute of the Government. Mr. Deneen. The answer would be first as to the danger of large organizations. I think the organization of the laboring men would be the response. Some men would say they have increased in power. I think it is generally conceded that it has worked out well. I think we all appreciate the fact that the laboring men in this country have been raised immeasurably by reason of their power to bargain col- lectively. Now, as to the capital stock, we represent here only a portion of the dairy farmers. We were perfectly content to strike out about four words from section 6. We do not want to organize a corporation with capital stock for the purpose of profit. They want to remain cooperative entirely, and if you just eliminate "not having capital stock," but state "not conducted for profit" it would meet our situation. As to the words " or forbid or restrain individual mem.bers of such organizations from lawfully carrying out the legitimate objects hereof," nobody has volunteered to test that yet. Nobody has volun- teered up to date to submit himseK to a criminal prosecution and be convicted and test that in the Supreme Court, which is the only way in which it can be finally determined. Therefore the matter is vague, indefinite, and uncertain in the absence of a test case ia the Supreme Court. , . • mi 1-1 Now, as the dairymen, there is this distinction: There are a whole lot of different departments of f armiug. The dairyman can not very well injure the public, because his goods are perishable. For instance, if you say, "Well, if he can not sell his nulk he could transform it into butter." 'But the demand for butter is hmited. He could not put it all into butter. You say he might put it into cheese. If he did 16 LABOK, AGfilCULTUEAL, DAIRY, ETC., ORGANIZATIONS. that the market would suffer, and the same would be true of evapo- rated roilk. We must sell every, day. We produce every day and we must sell every day, so there is no danger of that. If the public ceases to buy for a few days we can take care of it, but only for a few days. As to the other consideration, I am not familiar with the scope of the cooperative laws applied in some of the other countries, but my understanding is that in Canada the farmers do bargain collectively and sell their wheat collectively. They have elevators and they have organizations and they hold their wheat and sell it to the best advantage. They do not fix the price, because the world fixes the price of wheat. The Chairman. That would be true of wheat. It has always seemed perfectly plain to me that the ordinary farmers who produce wheat or corn or hogs can not combine so as to control the whole country. There is no danger, in my judgment, as far as anything has happened so far at least, to indicate that they are going to get a combination by which they could control the whole country. Of course it is conceded that if they did have that kind of a combi- nation, if that were possible, they could hold up the public in any- way they wanted to; but they are so separated and there are so many of them that it never has been attempted yet, and I can not see any reasonable hope of success if anybody should undertake it. It is too big. It would be an impossibility to get them all into it. •They could not eliminate competition in that way. I have never been troubled about the danger of anything of that kind as coming from the ordinary farmer. But you know I am somewhat in doubt when we come to the milk producers, under your own illustration about Chicago. They can, evidently, because necessarily in the very condition of things they are in groups that are small. It would not be possible to ship milk, for instance, from western Nebraska to compete with the organization around Chicago. It is too far away, and you could run your combination there with perfect success, if you got all these people into it. You would not meet with competi- tion from the outside. That situation does not apply to wheat, and it does not apply to corn or hogs. Mr. Deneen. Wisconsin is a great milk-producing State, and what Chicago consumes is a very small proportion of what is produced in Wisconsin. They could flood Chicago with milk if they chose. Most of the Wisconsin milk goes into Ijutter and cheese and evapo- rated milk, but they could buy immense quantities there. The Chairman. If you had the buyers eliminated, as you propose to do Mr. Deneen. We do not intend to eliminate them. The Chairman. I sympathize with the idea of letting the middle- man's profit be divided up between the producer and the ultimate consumer, and eliminating the middleman so far as possible, but if you had them eliminated in Chicago, and if this group of farmers around Chicago who are supplying that city with milk were in com- plete control, how would the farmers up in Wisconsin get into that city to break up that combination ? Mr. Deneen. We sell to dealers in Chicago. We do not distribute the milk, and we have no authority to eUminate competition among dealers. liABOE, AGEICULTUEAL, DAIRY, ETC., ORGANIZATIONS. 17 The Chaie>la.n. This gives you authority to eUminate. Mr. Deneen. We sell to the dealers only. That is all we do as a matter of business ; but the answer to that is that we have not the authority the dealers have. It was exercised even by the Govern- ment, and I thought rather unjustly during the war. When we con- sulted with the Federal officials, they said at once that the price of milk should represent the cost of production to the farmer with a reasonable pront, and the cost to the distributor with a reasonable profit, and because milk sold at from 10 to 13 cents the commission said arbitrarily, "We will fix the price to the ultimate consumer at 12 cents." Then an investigation was made of the dealers, and their figm-es were accepted, with the promise to make a careful investiga- tion later. Then their figures were subtracted from the 12 cents, and we had to take what was left. That was all there was. The Chairman. That was unjust to the producer. Ml". Deneen. We considered it very unjust. The Chairman. They began at the wrong end. Ml". Deneen. Yes. During the war they endeavored to give us the cost of production with no profit at all. You can not keep up an industry m that wa}^ The Chairman. No. Mi\ Deneen. They must have some rights. If we could eliminate the actual experience of having the dealer arbitrarily fix the price, so we could have competition, there would be a good deal of force in anticipating what might occui\ But there that fact is. What are you going to do? It is unjust to say we shall have no remedy because of the drmculty in arriving at it. The Chairman. I think I can see clearh* that you have not had fan- treatment, and you are seeking to do a good thing. The only difficulty is, whether in doing that, are we not going to get away from one monopol}' and into another. Mr. Deneen. Those arguments were made by the opponents of labor legislation. The Chairman. There has always been more or less competition in the labor Ime, because not everybody belongs to the union. If the oi-ganization of labor fixed the price of labor too high, there would be other fellows going in and going to work at a less price. But take yom- Chicago dairymen. In the first place it is absolutely necessary that thev belong to this local organization in order to have their milk treated properly and put on the market. Mr. Deneen. No. We deal for the othei-s. Under our cooperative law we must. They handle the products of all who come. Senator Brandegee. But the labor organization is not a corpo- ration with capital stock conducted for profit. The Chairman. Let me get that dealer proposition correctly. Perhaps I have not got it straight in my mind. As I undei-stand it, at each one of these 230 stations you have the proper machinery by which you treat the milk at the station before it is shipped. Mr. Deneen. Owned by the dealer, not by the farmere. We sell principally in the comitry and not in the city. The Chaikmax. The dealer buys it I Mr. Deneen. In the country, at the station. 171150—20 2 18 LABOR, AGEICtlliTUBAL, DAIRY, ETC., ORGANIZATIONS. The Chairman. Don't youseek to eliminate that dealer and do it yourself ? Mr. Deneen. No ; we want to sell to him. We have no competi- tion there. If the dealer will not buy it, they could determine whether they would erect a plant of their own. The Chairman. Suppose he does not buy it. It seems to me it is aU right to ehminate him. I am not objecting to that. Suppose you do it yourselves. Now when you do that, assuming that you have reached that point, and then in your bigger organization where all these locals are represented you fix the price to the consumer. Let us assume that you fix a price whichjs unfair and unjust. Where is the consumer going to get his remedy ? Mr. Deneen. If such a result could be brought about, the State would have to interpose its power and make it a public utility, which it is, as much as transportation or light, and fix the price at reason- able cost of production plus a reasonable profit. The Chairman. I am almost afraid it is coming to that. I hate to see it, but I have thought a good deal about it. In this city of Wash- ington — I have had the subject up several times in our hearings in the Agricultural Committee — would it be possible to eliminate the dealer by providing by law, for instance in the city of Washington, that the proper authorities here should take complete control of the handling and distributing of milk l. Mr. Deneen. And license the dealer or distributor. The Chairman. Suppose you eliminate the dealer and that it becomes a municipal activity. For instance, where I live, out 5 miles from the Capitol, in a little suburb, on the street on which I Uve there are about seven or eight houses. Every morning at least four diffei;ent milk men come there. One of them delivers milk at my house, a different man delivers milk at the next house, and a different man delivers milk at the third house. Now it has always struck me that that was an enormous economic loss, that one man could do it all and save aU that overhead expense. Would it be a proper thing in this case for the District to do that business ? Mr. Deneen. It could do that by licensing the distributors. It has been done. I think it was done in London. I had a clipping from the London Times in which an article appeared which stated that they had organized two corporations there Avith a capital of $25,000,000 to ehminate waste. The Chairman. That was a Government corporation, so that the question ot profit was entirely eliminated. Mr. Deneen. Yes. The Chairman. And the selfishness gotten out of it, and with the idea only of supplying the consumer. Would that be a solution here ? Mr. Deneen. I do not represent the views of my clients upon this matter. Some of them are opposed to the Government making it a public utility. I say that is an answer to it. The Chairman. I do not know whether I am in favor of it or not, but it seems to me that is almost the only answer to it. Mr. Deneen. I think so. I do not represent the views of aU my chents on that. In Chicago where they have large apartment build- ings it appeared that 11 companies served one building of 24 rooms and that there were 8 or 10 in the smaller buildings. It Irequentiy occurs that where a building has three apartments in it there are liABOB, AGKICULTtTRAl,, DAIBY, ETC., OBGANIZATIOSTS. 19 three different milkmen serving those three different apartments, and not only the dehvery is duphcated, but it duphcates the overhead all through. Now, we think we could deliver milk and save the con- sumer about 2 cents or 3 cents a quart if there was one organiza- tion, and license them, and eliminate all these useless wastes. The Chairman. There is no doubt you could do that, but the minute you do that, if it is done for profit, then comes the other danger of a big monopoly. Mr. Deneen. It does not yet appear what we shall do. We do not know what is coming out of it. All sorts of remedies h«ve been proposed. In so far as we are concerned we can not anticipate what will occur definitely, but if we do not do something it gives to the dealers in nulk the power absolutely to fix our prices and determine the price we shall receive for labor and the value of our land. The Chairman. That is the condition now, and that is unjust. There is no question about that. Mr. Deneen. That is the condition, and it has obtained for a long time. The Chairman. I agree with that. Mr. Deneen. And it necessarily will obtain, because we can not create a business of dealing in milk which will put 10 plants in a town where 1 could serve it. There can not be any competition in buying. Therefore, there must be some protection in selling, or else we suffer. Well, it may be said that we will be selfish. The answer is that human nature is tne same in the farmer that it is in everybody else. What we are doing is to call attention to the condition from which we are suffering. The Chairman. I admit the condition that exists. There is a monopoly of these dealers, and they are unjust. If there is any danger in your remedy, it is that you are going to substitute a different monopoly for it. We ought to obviate that if we can. Mr. Deneen. I have given considerable attention to this matter, but I will say not the exhaustive investigation that T would make if I were called upon to act- Senator Brandegee. As a legislator, for instance ? Mr. Deneen. I believe it can be solved. I have not worked it all out, but I believe it is capable of solution. Now, while the milk investors do not want to put obstacles in the pathway of any of these coordinate branches of the farming industry, and while as far as we are concerned we are willing to permit organizations to be without profit, we are in this position on the subject of the corpo- ration. In order to be within the cooperative law oi Illinois, we must be a corporation. Nobody can own more than five shares. They can not nave more than $500 worth of stock. Then we come right in the teeth of the Clayton Act, to meet conditions that come right in opposition to the Illinois law, and we feel that we ought to be in a position where we could do business without the danger of going to the penitentiary. We do not ask for the impossible. We do think we ought to have the power to raise the funds to erect a plant and to buy the machinery and operate it to take care of our own surplus when there is a falling off in the consumption of fluid milk, and we should have the macmnery to make butter, cheese, evaporated milk, condensed milk, and whatnot, so that we could utilize the product which we create, which otherwise would go to waste- 20 lABOE, AGRICULTURAL, DAIRY, ETC.^ ORGAKIZATIONS. The Chairman. I want to make a suggestion which occurs to me. When you say you have the Illinois statute on the one hand and the Federal statute on the other, would this meet the situation? Suppose we enacted a law that said that such organizations as you represent should not be liable under the Sherman antitrust law, but should be liable under State law. A State with a city like Chicago in it probably would need a different statute than some other State that did not have such a law. If the State had a law that controlled it, and if you complied with the State law, and- that violated the Shernaftn law, siippose that we should provide that that should exempt you under the Sherman law. Would that be any remedy? Mr. Dbneen. I do not know whether it would be effective or not. I have not considered it at all. The Chairman. I never did before. Senator Brandegee. Our only way to apply it is through inter- state commerce. Mr. Deneen. Ours is an interstate commerce affair. The Chairman. Gov. Deneen's clients are located right where inter- state commerce comes in. Mr. Deneen. We are as near Indiana as we are to Illinois, and it runs up against Wisconsin, too. Senator Brandegee. Do you appear for anybody else ? Mr. Deneen, I -appear for nobody else. Mr. Miller represents the national body, and he is better informed than I am. Senator Brandegee. Why was it thought necessary to include the cattlemen and the stockmen and the beet sugar men and all these others? Mr. Deneen. I was not a party to the consultation. Mr. Miller will know about that. I am very much obliged to you, gentlemen. STATEMENT OF MR. JOHN D. MIIIEE, REPRESENTING THE NATIONAL BOARD OF FARM ORGANIZATIONS. The Chairman. Now, Mj-. Miller, we wiU be glad to hear from you. Mr. Miller. Mr. Chairman and gentlemen of the committee, I appear here representing the National Board of Farm Organizations. Senator Brandegee. Please give your address and occupation. Mr. Miller. I am a farmer and a lawyer. The address for the purposes of this hearing perhaps had better be 303 Fifth Avenue, New York City, which is the office of the Dairymen's League, an organiza- tion of 80,000 dairy farmers that supplies Greater New York with milk, of which organization I am vice president. The Chairman. What is your residence ? Mr. Miller. My residence is Susquehanna, Pa. The Washington address of our national board is 1731 I Street NW. Several of the large farm organizations of the country are affiliated with the national board that I represent here. The Nations;! Grange is not affiliated with that organization, but is represented here by Dr. Atkeson, the Washington representative, in favor of the biU. The American Farm Bureau's Organization, the national federation of which was only recently formed, but which is one of the great aggressive farm organizations of the country The Chairman. What organization is that ? LABOB; AGBICUXiTUKAI/, PAIRY, ETC., ORGANIZATION^, 21 Mr. MiLT^ER. The American Farm Bm-eau's Federation. Mr. How- ard, the president of that federation, expected to attend this hearing when the daj' was set. As soon as I was advised of this date I wrote Mr. Howard, and received this letter from him, of which I will read a part: January 19, 1920. Mr. J. D. MiLLEB, National Board of Farm Organizations, nsi I Street NW., Washington, D. C. Dear Mr. Miller: I note your letter of the 8th, which came to my home* while I was away, and that a hearing is set on the subject of the Capper-Hersman bill before the subcommittee of the Judiciary of the Senate for January 27. It will be impossible for me to be in Washington before the afternoon of the 28th or the morning of the 29th. I am scheduled for Columbus, Ohio, on the 27th, and plan to go from there direct to' Washington. I am advised to authorize you to fully represent our association at that hearing. ' I have also a letter from Mr. C. F. Barrett, president of the Farmers' Union, requesting 'me to represent their organization, he not being hece. Mr. Chairman, something was said aboiit the hearing oil this bill before the House committee. Is it understood that the transcript of the proceedings at that hearing will be offered in evidence in this record ? The Chaikman. No : I think not. That is printed and we can get copies of it. Mr. Miller. Then I take it it will not be necessary to repeat much that was said at that hearing. The Chairman. I would not say that. You can use your judg- ment about that, and I presume it would be a little better for the Members who read the hearing to get it all in the Senate hearing. I think it would not be advisable to have the House hearing reprinted. Your reference to that will probably be sufficient. Mr. Miller. Speaking generally upon the provisions of this bill, the farmers of the Nation believe that the essential provisions of the bill should be enacted into law. The phraseology in which that is done is entirely immaterial. This being a committee of lawyers, we take it that if the farmers can explain to you what they want, and in your judgment you decide that they ought to have it, you wiU find the language in which to enact the law. Perhaps tne greatest movement of the nineteenth century was the growth and development of cooperation. It was during that period that the business of the country passed from the individual into the partnership, and from the partnership to the corporation. Now the corporation is purely cooperation in mdustry. May I illustrate that very briefly in the form in which I have Olustrated it elsewhere ? Swift & Co. advertise that they have 30,000 shareholders. Those 30,000 shareholders own plants which are widely separated, but as the titles to those plants are vested in the corporation, and as the corporation can not combine with itself, those 30,000 shareholders are now lawfully collectively bargaining through the agency of that corporation. Assume that those 30,000 shareholders were divided into 30 groups of 1,000 members each, and the representatives from each group should meet to fix prices, they would be operating in violation of the antitrust act; but inasmuch as the title to aU of them is vested 22 LABOE, AGBICUIiTUEAL, DAIRY, ETC., OEGANIZATIONS. in the corporation, they are doing the same thing, and doing it lawfully. Now, assume that 30,000 ranchmen supply the cattle and hogs that go into Swift & Co.'s plants. It is not possible for the title to those 30,000 ranches to be in one corporation. It is possible in law but impossible in fact, and it would be most detrimental if they could. Therefore, the only way that the-30,000 ranchmen can collectively bargain is by combining and appointing a joint selling agency to meet with the purchasing agent of the 30,000 shareholders of Swift & Co. on an equal plane. The day before the Sherman antitrust law was enacted the share- holders of Swift & Co. could lawfully bargain collectively and were domg so. On the same day the 30,000 ranchmen could collectively bargain for the sale of their products and do it lawfully. The day after the Sherman antitrust law became effective, Swift & Co. could go on as before lawfully, while the farm and ranch organizations be- came outlaws. Now Congress recognized this, and in the Clayton law I believe meant to correct it. The farmers feel that section 6 of the Clayton law, which was designed by Congress to remove this discrimination against the farmers in the operation of the Sherman act, is some- Traat obscure, and that it is difficult to determine what ultimate con- struction the courts will place upon it. It is for that reason that they are coming to Congress asking for a clarification of the law. That is all. From the hearings before the House committee and the questions that have been asked here I take it that the general thought seems to be in Congress among those Senators and Representatives who have investigated the question that the clear right of collective bar- gaining should be given to farmers, but that there is some fear that power win be abused by the formation of oppressive monopolies. So just for a few moments, and as briefly and concisely as possible, I would hke to discuss that phase of this question. Before doing so may I suggest that every subsequent Congress wih have just as much power as this one, and if in the future it develops that farm organi- zations are abusing the power of organization, Congress can regu- late so as to correct those abuses. But may I suggest here that to guess in advance what the abuses may be and attempt to regulate them in advance may seriously handicap us in our efforts, which are now but in their infancy. But is there danger of oppressive monopoly? The chairman has called attention to the production of milk. Under present industrial and economic conditions it would seem to be practically impossible to have any oppressive monopoly even of milk. Modern transporta- tion devices and facihties are such that milk can now be transported a long way. Why, last January, when there was a milk fight on in New York between the farmers and the dealers, trainloads of milk were brought from Chicago into New York. Cream from New York is shipped frequently to Florida. There are modern methods, only recently perfected, by which milk is converted into a powder and later, by the addition of water, reassembled into milk. The Chairman. It may not have any direct bearing on tfcds, but I bave been trying to find out something about that very thing. I have been reading about it. It would be at least a good educational LABOR, AGKIOULTUBAL, DAIRY, ETC., ORGANIZATIONS. 23 feature if you would tell us something about that. Has that become practical now, and is it economical, and if it is why does it not do away, and why will it not do away, with the milk wagon that goes around the city? Mr. Miller. In a measure that is in its infancy. For some time — I think for several years — there has been a method of converting skimmed milk into powder, and later, with the addition of water and butter fat, to reassemble the mUk. Very recently one firm, and I think only one, have devised a ihethod which they state permits them to powder the whole mUk, leaving the butter fat in it. Hereto- fore there was no method that could prevent that butter fat from turning rancid and spoiling the product. They claim they have solved that problem. The Chairman. If they have solved it, they have settled all this difficulty, haven't they? Mr. Miller. If they have solved it, it means that it will be utterly impossible to have any higher prices for city milk than the law of supply and demand fixes upon that same mUk for the purpose of its manufacture into butter, cheese, and condensed milk. The Chairman. I should think so. Mr. Miller. Yes. The Chairman. And would it not mean that the cost to the con- sumer would be very greatly reduced ? All these milk wagons that run around the streets in the cities would be out of business, would they not ? Mr. Miller. I can not say as to that. The Chairman. You could go and buy enough milk and carry it home in your overcoat pocket, to run you for six months. Mr. Miller. It all depends, of course, upon the price charged for the powder. The Chairman. Yes; I am assmning now that they have a prac- tical method of doing that. I have thought about it a great deal, and since you mention it I want to find out. Mr. Miller. While we are on this subject, while it is something' of a digression, may I say that there is great danger of abuse, for this reason: The laws of most of the States, particularly of the State of New York, are quite strict in regard to requiring that milk shall not be adulterated. No water must be put in and no butter fat taken out; but with this process the mother may be feeding the infant some- thing that is called milk, that looks like milk, that tastes like milk, but that lacks the essential food element of milk; so that it perhaps should be subjected to some form of regulation. The Chairman. Yes; it would have to be regulated, but that would not do away with the fact that it would eliminate practically all the cost of distribution, which is greater than the amount which the pro- ducer gets for his mUk now, isn't. it? It would eliminate practically all the cost of distribution, which is a greater item than the amount of money that the producer gets priginally for the milk. In other words, it costs us now, under our present system, more to distribute the milk than the producer gets for it ? Mr. Miller. I am not prepared to state how much saving there would be in that form of distributing the milk. There might be a saving over the present method. I do not know. 24 LABOft; AGRICULTURAL, DAlEY, ETC., ORGANIZATIONS. The Chairman. There would not be any such thing as distributing it, any more than there is in the distributing of chocolate. Mr. Miller. How expensive the process is I do not know. The Chairman. I thought maybe you could tell us about that. Mr. Miller. No; I can not tell you how expensive that process is. , The Chairman. I wish some man would invent that. Mr. Miller. But eliminating the factor we have mentioned, it is still impossible, in my. judgment, for organized farmers to fix an oppriessively high price to city people for fluid milk. Permit me to take pur own territory for example. The territory of all New York Stiate'and the adjoining counties of five other. States constitute the milk territory tributary to Greater New York. In that territory at present 51 per cent of the milk is manufactured. That goes into butter, cheese, condensed milk, milk powder, and so forth. About 49 per cent of the milk from that territory goes into the city in the fluid state. It costs more to produce milk for the city than for the purposes of manufacture, for technical reasons which I will not take the time of the committee to discuss; but if at any time the price that the farmer receives for milk going into the city is enough more than he receives for the milk for the purposes of manufacture, to cover such increased cost, large quantities of the milk now going into the manufacturing plants will be diverted to the city, producing a sur- plus which will automatically bring down the price to the former common level, and no power on earth can prevent it. What is true of that territory is true of the country as a whole. Over half the milk produced in the entire country is manufactured. It can be diverted to the cities, with our present transportation systems all over the territory where the great cities of the land are located. So that, so far as the milk industry is concerned, no matter how much of a desire the farmers may have to establish an oppressive monopoly or oppressive prices, they would be unable to do so. And then again, farmers have usual business sense. They are anxious to enlarge the markets for their products, just as anxious as any other class of producers or manufacturers. They want all the milk possible consumed in the fluid state. One of the great aims of a farm organization, after getting a fair price for the farmers themselves, is to see that the milk reaches the ultimate consumer at as low a price as possible. It has been suggested that this bill represents farmers of all classes. Why not ? Their needs are also great. Now let us take up the ques- tion of the wheat. Could the wheat farmers form an oppressive monopoly? Probably if any class of producers in the United States can form an oppressive monopoly, it would be the wheat growers, for the reason that their product can be preserved indefinitely. They can withhold it from the market indefinitely. But suppose they tried. I will ask Dr. Atkeson if he knows the number of wheat producers in the United States ? Dr. Atkeson. I should say about four million, that is 4,000,000 farms that are devoted more or less to the production of wheat. Mj. Miller. That leaves somewhere from two million to three million farmers who. are not producing wheat. A large part of the wlieat now produced is produced on prohably less than one million farms in the great wheat belt. Assume that they established a monopoly there. But other classes of farmers are buyers of that LABOR, AGRICULTURAL, DAIRY, ETC., ORGANIZATIONS. 25 product. Thirty-five or forty million farmers are buyers of all classes of products, and the largest buyers of all classes of products. The dairy farmer must buy the wheat by-products that come from the wheat field. Now if at any time the price of wheat is raised to a point where it is oppressively high, it , means that every other farmer in the United States whose farm is adapted to the growing of wheat — and the most of them could be adapted to it if the price were high enough — would go right into the business. What is true as to wheat would be true as to cotton. The dairy farmers are large buyers of the by-products of cotton for cattle feeds. Some of the cotton lands are available for com, can be adapted to corn raisi ng, and there are vast districts of cotton land as yet unde- veloped. Whenever the price reaches a stage that will warrant the Eroduction of any commiodity, you will see such production as will reak down any monopoly that might be established. The economic and industrial conditions under which the farmers operate absolutely prohibit the formation of any oppressive monopoly. The only way that is left may be the metnod that was suggested by one of the copomittee, that all of the farmers could combine and raise the price of all of their products oppressively — an organization that would break down of its own weight. The Chairman. It is now 12 o'clock, and as it is evident that we can not finish the hearing to-day, we will adjourn until to-morrow morning at 10.30 o'clock. (Whereupon, at 12 o'clock noon, the committee adjourned until Wednesday, January 28, 1920, at 10.30 a. m.) LABOR, AGRICULTURAL, DAIRY, AND HORTICULTURAL ORGANIZATIONS. WEDNESDAY, JANTTABY 28, 1020. United States Senate, Committee on the Judiciaky, Washington, D. C. The subcommittee met, pursuant to adjournment, at 10.30 o'clock a. m., Hon. George W. Norris, presiding. Present: Senators Norris (chairman) and Brandegee. STATEMENT OF MR. JOHN D. MILIEE— Continued. The Chairman. Mr. Miller, you had not finished when we ad- journed yesterday. Mr. MiLLEK. Mr. Chairman, at the adjournment yesterday we were discussing some reasons why we thought it was hardly possible for farmers to form an oppressive monopoly. I would like to dwell upon that a little further, and wUl try not to weary your patience. I know you are busy men. Then I will talk very briefly upon one or two other phases of the matter. I take it that possibly the difficulty in the minds of Congressinen may be the fear of the danger of the formation of an oppressive monopoly if bills of this character are enacted into law. As we have said, the economic conditions under which farmers operate will of themselves prevent that. First, there is the annual renewal of supplies that no one can stop unless the farmer goes out of business. A labor union can stop work a week, a month, or two months, and when they resume their la,bor all that they have lost is their wages during the period of cessation; but the farmer must seed in due time or he can not harvest. His is a year's business. Therefore for him or his organization to fix prices oppressively high would mean such a decrease in consumption that there would be a surplus left over, and the succeeding year's crop could be dumped in on top of that surplus, and nothing would pre- vent it. Further than that, it would be necessary for the farmer producing any one kind of farm product to control every other food that could be used as a substitute for the ones in which they were attempting to fix prices oppressively high. Senator Brandegee. Will you let me ask you a question there ? Mr. Miller. Certainly. Senator Brandegee. Of course, nobody claims that the farmers would be extortionate or attempt to establish a monopoly, but the question is, Should a situation be created which leaves it open to ■ anybody to do it legally % -"As I understand your argument it is that nobody would attempt this thing because it would be inexpedient or impossible % 26 lABOR, AGEIOULTURAL, DAIRY, ETC., OEGANIZATIONS. 27 Mr. Miller. Yes. Senator Brandegee. But ought the law to authorize a particular class of people, so that they would have the legal right to do it, if they could, while prohibiting others from doing that same thing ? Mr. Miller. I think, Senator, that possibly the best answer to that is the one made by Gov. Deneen in nis argument yesterday, and that is that there is no alternative and no middle ground. Either farmers must have this clear right, or they must for all time accept the, prices dictated to them by organized middlemen. As we view it there is no middle ground. Senator Brandegee. The argument you make that the products of the farms could not be stored up and held, first, because they are to such an extent perishable, and second, that the amount carried over would interfere with the crop of next season, would not apply to cotton, would it "i Mr. Miller. I am not famihar with the cottpn sitjifation. Senator Brandegee. I mean that cotton diflfers in this respect, that it is not plerishable. Mr. Miller. It could be stored almost indefinitely, I take it. Senator Brandegee. Yes. Mr. Miller. Or assume that the price of cotton reaches a certain point where it is highly profitable to produce. There are hundreds of thousands of acres of undeveloped cotton land yet, and no power of organization could prevent other farmers opening up these farms and producing cotton. Senator Brandegee. I know, but that remedy takes a long, time to make it effective. That means that people must go out and buy land and adapt it to cotton raising, and get their labor, and all that sort of thing; and then the thing that they were fighting, the Cotton Trust, lowers prices and puts them out of business. Mr. Miller. Assuming that the cotton growers who are now raising cotton go on producing cotton, they must sell it. It is possible that in some one year as to cotton the price might be excessively high, but it would mean the breaking down completely of the organi- zation that raised the price of cotton, because it would invite the opening up of all these other lands, which would mean such an excessive production in cotton that in a very few years the situation would rectify itself. Senator Brandegee. I am not disputing you there. In fact I am not disputing you anywhere. This is a new subject to me, and I am asking for information. Mr. Miller. I concede that, of course. Senator Brandegee. But as I say, when we exempted labor unions, farmers' organizations, agriculturalists and horticulturalists I was on the committee that did it, and made that exemption, and it was done for the reason that the laboring men and the farmers said, "The broad, general terms in wnich you have couched this anti- monopoly statute will enable a department of justice which may be hostile to our organization to break up our organizations because they fall within the letter of the statute, and we want to be assured that this statute, desired to protect, the public against monopoly, sjiall not be used to break up our fraternal organizations." And so it was that the exemption was limited to those organizations by farmers' granges, and labor unions, and horticultural associations, which they 2» LABOR, AGKICULTURAJLi, DAIKY, ETC., ORGANIZATIONS. said were necessary fox their fraternal purposes and to keep abrieast o|;their trade and all that sort of thing, but which were organized without any capital stock. ^ow your proposition, as it seems to me, from the language of ydUr amendment as it is drawn, would exempt from the operations oPt^e Sherman law every body of men engaged in producing any food products from the soil, no matter of what kind. Fruits, sugar, cattle, milk, and dairy products, every sort of food product which is produced from the soil in this country would be exempt, while the statute would be maintained in all its rigor against those who produce fuel and ndneral products and everything else that can be produced from the soil, also against the men who work on the floors of factories and in other departments of activity, who would be subject to the penal- ties of this statute, while all the people connected with the soil would be exempt. I would like to know the logic of relying, as you state, either upon the inipossibility of their ever proving dangerous to the community by asking too high prices, or upon the impossibility of their creating a monopoly because of the circumstances attending the tilling of the soil. I would like a little information why that should be done, and whether it can be done safely. Mr. Miller. First, as to your suggestion that the present law pre- vents those engaged in other great industries from collective bar- gaining, I attempted to show you yesterday, Senator, that under and through the agency of the corporation, which has many thousand shareholders, big business is now collectively bargaining. Further, in comparing the present protection given to farm organi- zations and to labor, permit me to call your attention to the fact that section 6 of the Clayton Act is not the only section that protects organized labor. Section 6 does protect organized labor in exactly the same language that it protects organized farming. But Congress then was very clear in its mind that that was not sufficient protection for organized labor, because by section 20 of the same act they legal- ized everything that organized labor is now doing. Senator Brandegee. But organized labor is an association to pro- tect the wages and better the conditions of the individual man, and it is not a moneymaking enterprise. Mr. Miller. And this. Senator, is exactly for the benefit of the individual farmer. What he is fighting for is a living wage. Why, he sells his crop. Senator, and from the proceeds of those sales he pays his multitudinous expenses, including wages. The balance is his wage. Now, in selling the product of his labor he should have the same protection that labor has in selling the labor itself. Senator Brandegee. If your theory is correct, if it is carried to its logical conclusion, would it not result in the entire repeal of the Sherman law ? Mr. Miller. I do not think so. I think there is a very material distinction. I advance this with some diffidence, conceding that you gentlemen on the Judiciary Committee, with your long experience, are in a position to form a judgment which is more valuable than mine; but let me suggest this, that there is a material distinction be- tween this amendment to the antitrust law and a general exemption of farmers from the antitrust law. The antitrust law prohibits all arrangements or-conspiracies in restraint of trade. If the exception said, "Farmers and other organizations are excepted from the oper- LABOR, AGRICULTURAL, DAIRY, ETC., ORGANIZATip:i*fS. :29 ations of this act," it would mean that they could go out and combine, conspire, and a,iTange to restrict trade and commerce in any way they f lease; but this amendment is very materially different from that, t is simply a congressional declaration which will permit farmers to make collective sales of their products, and which says that that per- mjission to farmers to make collective sales is not restrictive of trade or commerce; in other words, that to permit them to do that par- ticular thing in that particular way is not restrictive of trade or com- merce. It is not a general exemption from the antitrust act. r. Senator Bbandegee. The phrase "collective bargaining" is a general one. Tender that you intend, if I understand you, to have it so arranged that all the cattle raisers, for instance, the big cattle ranches can enter into a combination to hold back all their product from the market and agree with each other that they will not com- pete, and fix a price to be enforced by pains and penalties among themselves, for violation of it, by which they agree to mass their product, to hold it for a market, to sell it only at a certain price, or at such times as certain officers chosen by them authorize them to sell it. Now that is an attempt to monopolize, partial at least. It is allowing them to agree that they will not sell below a certain price. It is just what the Stevens bill proposed to do when it wanted to authorize price fixing of articles by the producer, by the manu- facturer, and sold through the jobber and wholesaler, on down to the retailer, with contracts so that if any retailer anywhere sold the article below the price fixed by the manufacturer he might be sued by the producer. How does this differ from that ? Mr. Miller. Without refreshing my recollection as to that bill I would be somewhat reluctant to discuss in what respect this differs from that. I do not, however, see the dangers that you apparently . see in a law of this character, giving to farmers the right to form their organizations as you have suggested. In many of these organizations it is customary to have certain stipulated damages if the farmers do not consign their products to the organization or to the joint selling agency for sale; but in every one of these that I have any knowledge of the farmer can rescind that power of sale at will. It is not compulsory for him. It is a purely contrattural relation. Now in our particular business, the dairy industry, the contract between the organization on the one hand and the farmer on the other states that twice a year, on or before the 1st day of September and on or before the 1st day of March the farmer can, by giving notice, rescind the contract entirely. Bear in mind that if an organization is going to sell milk, it must know that it has milk to sell. Therefore the contract between our members and our organization is indefinite in time, but with the Provision that each farmer twice a year, on or before the dates which have mentioned, can by giving notice rescind the contract of sale, and from that time on the organization has no power at all to sell his milk. Senator Brandegee. Of course I do not claim that men will be forced into your organization, i know it wiU be a voluntary thing. If they are forced in it will be simply because the individual farmer finds he can not coiripete with the organized farmer, just as an indi- vidual man may think it is better for him to join a labor union than to try to handle the situation for himself. But nevertheless if the 30 LABOE, AGBICtTLTTJEAL, DAtBY, ETC., OBGANIZATIONS. sugar beet and sugar cane fellows are allowed to combine, and the cattlemen are allowed to combine in their industry, and the cotton men in their industry, and the citrus fruit gentlemen in theirs, and the dairy men in theirs, and each one of those industries is so organized that the product is offered for sale only in accordance, with the judg- ment of a board of directors, so far as each one of those industries is concerned, it seems to me to tend to suppress competition, and to that extent it is a restraint of trade. The analogy that you hare suggested, if it is an analogy, between the people ymd put their money into a factory and hence are -allowed to combine for the purpose of pooling their efforts, and are not pro- hibited from that^ does not exist as to farmers as you have stated it, because 20 farmers can now go to work and buy a ranch, a large tract of land, and do exactly as the men do who put their money into any company or corporation; but the law prevents the separate factories from combining. Mr. MiLLEK. You mean the separate companies, not the separate factories, do you not? Senator Brandegee. Yes, separate companies — ^prevents them • from combining in restraint of trade. Mr. MiLLEE. Absolutely, yes. Senator Brandegee. I do not think your analogy applies to that. The steel trade can not be monopolized — at least, it can not legally be inonopolized. Mr. Miller. As I recall the language of the decisions as to the many consolidations that have been going on, no matter what may be the method adopted the courts will look at the results; and if the result is a combination and not a sale, the court wiU. strike it down. But under the antitrust law to-day, so far as I recall it, the courts have construed it that where one company buys out another, and it is a complete sale for cash or its equivalent, and not merely a joinder of control 1^ combination, it is upheld as legal. Am I correct in that ? Senator Brandegee. I can not state, because, as you know, these distinctions are very fine, and the intent to monopolize depends so largely upon all the circumstances of the case, under the act of Con- gress, that it is impossible to tell in advance. Mr. Miller. That is true. Senator Brandegee. There is another feature of your case which you discussed to some extent yesterday, which also occurs to me as being an objection to the proposed amendment, and that is this: If your amendment passes, it is not necessary that your whole industry should be organized as a whole in order to be effective. The fact that you are dealing in a perishable product, a product that has to be con- tinuously supplied every few hours, puts the enormous populations of our great cities, where millions of people live, under the thumb of the immediate, or comparatively immediate, surrounding country. They want fresh milk every few hours, so that the farmers around each city or in the immediate neighborhood, or within 6 or 8 or 10 hours of it, would have that city at their mercy. I am not saying they would. I am simply saving that so far as the amendment is concerned they could have it at their mercy it they wanted to. Mr. Miller. I do not think so. Senator. Senator Brandegee. I cut out of the New York Evening Sun last night an article stating that Gov. Smith of New York asked the le^is- LABOR, AGBICULTXJEAL, DAIRY, ETC., ORGANIZATIONS. 31 latiu-e to declare that the dairy industry, in New York State at least, De aeclared a pubhc utihty. I do not know whether you have seen the article. It is so brief that I will read it. Smith Urges Milk Contkoi^GovJirnok Asks Legislature to take Action— Vi- tal TO I'TJBLic Welfare— Would Declare Production, Distribution, Price l^UBLic Utility. Albany, January 9.1 . Declaring that the production, distribution, and the pricing of milk should de- clared a public utility, Gov. Smith sent a special message to the legislature last night urging that laws be enacted placing the industry under State control. Gov Smith forwarded also the report of the New York City Fair Price Milk Committee, which recommends State control of the milk industry, along with the report of Martin H. Glynn and Dr. John H. Finley, who investigated the food problem. Senator James J. Walker, Democratic leader, declared immediately after reading the message of the governor that bills carrying out the recommendations would be introduced m the legislature during this week. "The last year has witnessed a steady increase in the coat of milk to the consumer," the governor said in his message. "While all food commodities have increased in cost the special attention of our people is attracted to the question of an adequate supply of milk at prices within the reach of everybody. Inasmuch as milk is the sole food of infants and absolutely necessary to children, invalids, and those con- valescmg, the question of its price becomes infinitely more important than the eco- nomic question involved in the-price of food generally. It is a question of public health and is as vital to the welfare of a great community as is a supply of pure and wholesome fresh water." The governor referred to the reports of the two committees and continued: "Both of these reports speak of the necessity on the part of the State of declaring the production, distribution, and price of milk to be a public utility, subject to State control. "It is the unanimous opinion of those who have made any study of the subject that the solution lies in State regulation to the end that an adequate supply be always available at a price within the reach of all. I urge your honorable bodies to read these reports having in mind that the relief can come only through legislative action, and I strongly depend upon you to consider favorably leegislation to carry thes» recommendations into effect." That is from the New York Evening Sun of January 27, 1920. In connection with that, in the same issue of the same paper, is an article entitled "Middlemen as price pirates." This is opposed to the fellow that you are opposed to, as I understand it. This is from the Agricultural Department, here in Washington, but is rather germane to this subject, and I should like to put it in. It is as follows: Middlemen as "Price Pirates" — Five Months op. Vast Profits, Experts Declare- Producer and Consumer Caught— Former Get Less, Latter Pay More than Ever, Say Officials. Washington, January 27, 19tO. Middlemen have accumulated vast profits during the five months of the Govern- ment's campaign to reduce prices of necessaries, investigations of two Government departments indicated to-day. Since the middle of August, when Attorney General Palmer announced he was "going after the price gougers, " reports show that: Prices paid farmers for principal crops decreased from 3.4 to 8.7 per cent each month, according to the Agriculture Department, and prices paid by consumers increased continuously until they reached the highest point in history in December, according to the Labor Department. BUYING cheaper THAN EVER. These reports seem to indicate that middlemen are buying cheaper than ever before, but receiving the highast prices in history. 32 LABOB, AGRICXJLTUKAL, DAIRY, ETC., -OEGAKIZATIQ]S^S. According to the Agriculture Department the level of prices paid producers of the principW crops at the farm decreased like this: 3.4 per cent in August, 1.07 per cent in September, 3.7 per cent in October, and 4.7 per cent in November. Part of this is due to a seasonal falling off in demand. Agriculture Department officials say, but over a 10-year period the average decreases due to seasonal demand were only 1.2 per cent in August, 2 per cent in September, 3.6 per cent in October, and 3.6 per cent in November. TARMEHS GET LESS. Prices paid farmers for meat producing animals also have decreased in the last fi-^e months in greater proportion than the average seasonal decreases for the 10-year period. In the month ending August, 1919, prices decreased 3 per cent, as compared with a customary increase of 1.8 per cent for the 10-year average; in September, 1919, 13.6 per cent decrease as ciJmpared with a customary increase of 2.6 per cent; in October 9.1 per cent decrease as compared with a seasonal decrease of 1.8 per cent, and in November 2.9 per cent decrease as compared mth 3.8 per cent decrease for the 10-year average. TWENTY-TWO COMMODITIES HIGHER. The history of the increase in prices paid by producers for 22 articles is shown by the Labor Department index numbers as beginning in September. In that month the index figure of prices of principal commodities was 188. In October it remained the same, but in November it jumped to 192 and in December had increased to 197. Thus from September to December the index figure increased 9 points. What this means is seen in the Labor Department's report from November 15 to December 15, which shows that retail prices increased as follows: Cabbage, 36 per cent; onions, 17 per cent; granulated sugar, 16 per cent; strictly fresh eggs, 11 per cent; potatoes, 10 per cent; flour, 4 per cent; butter and storage eggs. 3 per cent; fresh niilk, 2 per cent; and Iamb, evaporated milk, oleomargarine, and rice, 1 per cent each. I think the last part is more germane than the first part, as to the governor's recommendation. Mr. Miller. The fact that the farmers are receiving less and the consumers paying more is one of the strong reasons why this bill should be enacted into law, so that the farmers can control that situation. We are powerless to control it except by the force of our organization. Senator Brandegee. What I meant by probably being less ger- mane, it was not confined especially to the dairy industry. This report is from the Agricultural Department. The latter report to . which I referred is a comparative table of prices of all food products. Mr. Miller. The introduction of that message of Gov. Smith's into this hearing introduces an angle of the question that I had not expected to discuss. I am very familiar with the report of the fair- price committee upon which the recommendation of Gov. Smith is based. I wish I had time to go over that entire situation in this record, but I know this hearing must end sometime, and there are things which I deem material that I would be very glad to get upon the record. The entire milk situation in New York City is a political football, and this is one of the kicks of that football. Why, if the people who made the report of that fair-price committee thought their recom- mendations were going to be enacted into law they would be appalled. It recommends what « That a law be established which absolutely would prohibit the farmer from selling his milk to be. made into butter, and would make it a misdemeanor for him to do anything else with his milk except send it to the city. What would be the effect i of that? Fifty-one per cent of our milk in that territory is now manufactured into butter„ cheese, condensed milk, and evaporated milk, and so forth, and it means that that 51 per cent of our entire LABOR, AGRICUIiTUEAL, DAIRY, ETC., ORGANIZATIONS. 33 product would have to be dumped with the other 49 per cent mto the city, creating, such a surplus- that they could not use it by any possibility. Yet the farmer would be guilty of a misdemeanor if he did anythmg else with the milk than to send it to the city. It is a strife between contending political factions there; not entirely party politics. It is that in part, but also factional politics in one of the parties. The Chairman. You mean, do you, that the people who are back- ing this proposition do not themselves believe in the remedy they are suggesting ? Mr. Miller. Senator, can we believe for a moment that an intelli- gent man thinks that a farmer should be convicted of a misdemeanor if he turns his milk into butter instead of sending it to the city ? I ask, is that fair ? The Chairman. Of course, that statement of the question takes its answer with it, as far as I am concerned. Mr. Miller. Yes : it takes its answer with it. The Chairman. Nobody who is sane, it seems to me, would think of doing such a thing. Mr. Miller. That is fundamental. The Chairman. But I want to ask a question to get at the motive in this thing.. As I understand, you claim that the men who have made these recommendations have done so for political effect, probably ta get the votes of the consumers of milk. Mr. Miller. Absolutely so. There is no question about it. Why that report advises the legislature to appoint a commission of three, and to vest in that commission entire control of the production and distribution - of milk. I am using almost the exact words of the report. In other words, that commission of three is to be appointed by the governor, not even by and with the advice and consent of the senate. They are to be absolute political appointees, and it is proposed to turn over to these three mortals, not endowed with infinite wisdom, the control of 12,000,000,000 worth of the farmers ' property. Can the Bolshevists go much further than that? I submit to you that when you take from men the power to control their own property you have stripped them of every attribute of ■ownership except the privilege of paying taxes. Senator Brandegee. I agree with you Mr. Miller. And that is one of the reports on which Gov. Smith based that recommendation. Senator Brandegee. I agree with you entirely, that in my judg- ment at least, you can not take the private property of people, their farms, their labor, and their capital invested, and arbitrarily and peremptorily declare it to be a pubhc utihty, to be managed by governmental agents, without compensation to the people whose piroperty you take if you injure their business. I know nothing about this fair-price commission or its recommendations. I have not read the report. This is the first I ever heard of it, when I read this article; but inasmuch as you appear to be familiar with it, I ant to ask you who appointed this fair-price commission ? Mr. Miller. The governor appointed them. I do not know but ■ part of that committee may have been appointed by the mayor the city. 171150—20 — -3 34 LABOR, AGEIOtTLTUBAL, DATBT, ETC., OBGANIZATIONS. Senator Brandegeje. Did the governor appoint them as officers authorized by law, or simply as personal agents of Jiis own? Mr. Miller. I think it was more of a personal appointment of his own. There was one commission appointed by virtue of law, called the reconstruction committee, but their report is not yet published. Senator Brandegee. When was this fair-price commission ap- pointed ? Do you remember about how long ago ? Mr. Miller. Several months, because they have had hearings from time to time. Senator Brandegee. Appointed by the present governor of New York, Gov. Smith? Mr. Miller. Yes; appointed by the present governor. And let me say to you that you would think that if a commission of that character were going to make a report touching upon the question of milk, they would at least permit the farmers to present their side of the case in their own way in order that they might have all the information necessary. What did they do? They called in one or two agitators who stated that they represented producers. One of these men is well known to be an agitator. Yet he was heralded in that part of the press that was exploiting this particular political propaganda as bemg one of the great dairymen of the State and representing the dairy interests. As a matter of fact that man's wife does own a farm. They have not a cow on that farm. That man never had 10 cows in ms life. If you go back there you will find his wife carrying in firewood, his barn doors off the hinges, while he is away reforming the world. Senator Brandegee. The world is full of those gentlemen now. Mr. Miller. That is just the kind of ^itators that this fair price committee called before them to settle the milk question. Senator Brandegee. There will not be any such proceeding as that here. Mr. Miller. Oh, no. I was not even suggesting that. Senator Brandegee. I know that. Mr. Miller. But passing that and taking up again the question The Chairman. I do not know that it bears directly upon this hearing, Mr. Miller, but a year or so ago I was very much impressed at a hearing before the Agriculture Committee, in which it developed that in the State of New York the farmers were going out of the dairy business, and that a census of the female calves that were being saved to become milch cows showed a very large decrease. Do you know anything about that? Mr. Miller. Yes, Senator, and I am glad you called my attention to that. As to the number of heifer cajhres being raised, a census of the cattle population was made in 1917, and it showed then a de- crease of 26 per cent in the number of heifer calves in that State from the year previous, making in round numbers something like 60,000 less heifer calves. Ten months later another census was taken, and it was then found that the number of heifer calves was 38 per cent less than the number in the former census 10 months before, being in round numbers 84,000 less heifer calves in that territory. The Chairman. Of course, that means undoubtedly that the farmer has found it more profitable to do something else than to produce milk. IjAbob, ageicultueal, dairy, etc., organizations. 35 Mr. Miller. Yes. The Chairman. And he is gradually going out of the business in the State of New York. Mr. Miller. What I am going to say now apphes to the ts^pical dairjr farm, not to the farms that may be adapted to diversified farming, or to grain or to fruit particularly, but typical dairy farms, which may often be upland farms, from which four-fifths of the milk of the city must come. You can buy almost one or all of those farms for less than the replacement cost of the buildings upon them. The Chairman. Of course, when the effect of that decrease comes upon the country, it will take several years to remedy it, no matter what may be done, because you can not produce a cow over night. Mr. Miller. No; it takes three years. All the power of the Gov- ernment can not produce a cow in less than three years. The Chairman. It seems to me that is an alarming condition, and if that is the general condition it behooves somebody — I do not know who — to change conditions before it is too late. Mr. Miller. The introduction of that thought — and I think it is a valuable one — ^impels me to say that possibly the day of cheap foods in this country has passed. It may not be many years before the question for the public will be not so much the price of food, but the adequacy of the supply of food; and the dairy cow is one of the greatest agencies to increase the supply of human food. In the form of milk a dairy cow will produce in one year three times as much food as will her carcass for beef. In her lifetime she will produce as much food in the form of milk as will the carcasses of 17 steers, and it is a food that is economically produced. Eighty-nine per cent of the food that that dairy cow is consuming is utterly unfit for human consiimption, and yet the cow takes that 89 per cent and converts it into a palatable, nutritious food. Yet the condi- tions in New York State have been such in the past that the dairy industry has continually declined. For 25 years there has been a fradual and continuous decline in the number of dairy cows in the tate, with the exception of one year; and I do not know whether it was merely coincidental or whether it was cause and effect, but one year there was an increase of 4,000 cows in the State, not a great percentage increase among a million and a quarter cows, but that increase came just at a time that indicated that it was possible that the dairymen had been encouraged by the formation of their organ- ization, because it came three years after their organization became active. I do not know whether that was cause and effect or not. The Chairman. One of the questions that has bothered me a great deal is this question of the decrease in the dairy cows, and I think I can see that it is necessary that something be done. That New York condition, to my mind, is almost alarming. Mr. Miller. Yes. The Chairman. If the investigation should show that the condi- tion in the balance of the country is similar to that in New York, and that it is the rule rather than the exception, then it is imperative and necessary that something be done. But the question comes up to me, What can we do here to remedy that ? Is not that entirely a State proposition in New York ? Mr. Miller. Senator, I do not know that there is any one thing that is a panacea for declining agriculture, but while I absolutely 36 LABOR, AGRICULTXJEALy DAIRY, JBTC, ORGANIZATIONS. disclaim being an expert, I have been giving some close study to these problems for 25 years, and I do believe that one of the things that will encom-age agriculture more than any other one thing would be absolute liberty of action upon the part of farm organiza- tions to cooperate to market their products. During all these years they have"" been compelled to turn over their product to the middle- men at prices dictated by the middlemen. I repeat, if there is any other one thing that more than anything else will encourage agri- culture, stimulate production, and encourage farming, it will be to let the farmers know that they have complete liberty of action to market their products cooperatively. Senator Noeris. Mr. Miller, with that statement I am in very full accord, and what I should like to get at now is this: What can we do to bring it about in a straightforward, honorable way? What law can we pass? In other words, just where are the farmers handi- capped, for instance, in this particular hearing by the Sherman anti- trust law, and just what will bring a remedy in so far as we are able to give a remedy ? For instance, it seems to me that in the case of New York, that particular situation there is almost beyond our jurisdiction. Mr. Miller. No, Senator; for this reason: The New York Legis- lature have done all that the farmers have asked them to give them liberty of action to cooperatively market their products under the State law. The executive committee of the Dairymen's League were indicted under the State antitrust act. The farmers of the State organizations immediately went to the legislature, who convened at about the time the indictment was found, and laid the case before them; and the legislature, by a large majority, promptly amended the State antitrust act so that the farm organizations there. have liberty of action under the State law. But this organization, the Dairy^men's League, is doing business in six States. They come under the Federal antitrust law, and their organization is advised by counsel learned in the law that the status of that organization at present is so uncertain and unsatisfactory under the Federal law that there should be an amendment to the Federal law that will clarify the situation. Senator Noeris. Is this proposed amendment similar to the statute passed in New York by its legislature ? ■ v, Mr. MiLLEE. I shall be glad to read into the record, if you would care to have it, the amendment to the New York statute. Senator Noeris. Yes; I think I should like to have it. If that was a remedy there, why would it not be a remedy here ? Mr. MiLLEE. It is not so long a statute as this, because the legis- lature there were amending a different law. Senator Beandegee. Mr. Miller, before you leave that I want sub- stantially to repeat the question that I understood Senator Norris to ask you and have you explain it a little more. Suppose your proposed amendment should be adopted to the Sher- man antitrust law, the Federal statute, which apphes only to com- merce among the States. It would still be possible, would it not for the New York State Legislature to pass such a law as it wanted to lor the control of the farmers and dairymen and the distribution of their product within the State of New York ? Mr. MiLLEE. Oh, yes; sir. LABOR, AGRICULTURAL, DAIRY, ETC., ORGANIZATIONS. 37 Senator Beandegee. I understood Senator Norris to ask that, substantially. Senator Noreis. Yes. Well, this idea struck me, that the New York Legislature had met that situation. Mr. MiLLEE. Yes, sir. Senator Noeris. And it struck me that I should like to know just what the law was that they passed that did meet the situation, so as to see what application it would have to us here. Mr. Miller. I shall be glad to read it into the record. In fact, you will find that law on page 65 of the transcript of the hearing before the House committee; and it reads as follows: Associations, corporate or otherwise, of farmers, gardeners, or dairymen, including live-stock farmers and fruit growers, engaged in making collective sales or marketing for its members or shareholders of farm, orchard, or dairy products produced by its members or shareholders, are not conspiracies. Contracts, agreements, arrangements, or combinations, heretofore or hereafter madfe by such associations or the members, officers, or directors thereof in making such collective sales and marketing, and pre- scribing: the terms and conditions thereof, are not conspiracies, and they shall not be construed to be injurious to trade or commerce. Now, right in that connection, Senator,, the fact that the three great States having within their borders the three largest cities of the country — New York, Pennsylvania, and Illinois — have, upon having their attention called to this question, so promptly amended their State laws as to give this power, may be of some interest to you gentlemen as indicating the trend of public thought and of legislative thought. Senator Noeeis. Has Pennsylvania passed a similar st&tute? Mr. Miller. No, sir; not like this. I will explain that in this way: Pennsylvania has no drastic antitrust law. The law con- trolling it in Pennsylvania is largely the common law, but that has some teeth in it. Senator Norris. Yes. Mr. Miller. And in order that farmers there might have that clear right, at the last session of the legislature they enacted a law which will be found on page 67 of the transcript of the hearing before the House committee here, which is entitled: An act to provide for the incorporation and regulation of cooperative agricultural associations not having a capital stock and not conducted for profit, and defining agriculture so as to include persons engaged in agriculture, dairying, live-stock raising, poultry raising, beekeeping, and horticulture. Senator Brandegee. Is that Pennsylvania, do you say? Mr. MiLLEE. That is Pennsylvania. It is a very long act, but it authorizes the creation of corporations. Now, a stock corporation is not the most desirable form for our farm organizations. In some of the States we have to adopt them because we have no other one. Our association, the Dairymen's League, at present is a stock corpo- ration, but we are now reorganizing it under the membership law of New York, a law that was also passed in 1918, and is similar to the Pennsylvania law; so that these three States have cleared the way for cooperative marketing by farmers. Senator Beandegee. When was the New York statute which you have just read from page 6-5 passed ? Mr. Miller. In 1918. , • , . Senator Brandegee. The same year as the Pennsylvania law i 38 LABOE, AGKICULTUKAL, DAIRY, ETC., OBGANIZATIOSTS. Mr. MiLLEB. Pennsylvania was in 1919, and Illinois in 1919. Senator Norris, Was the Illinois law similar ? Mr. Miller. The Illinois law Gov. Deneen read into the record yesterday. Senator Bbandegee. So that it is under the New York statute of 1918, which you have just read, that the dissatisfaction exists in New York State, is it not ? \ Mr. Miller. There is much less dissatisfaction than before. The milk question has been an irritating question Hn New York for 20 years. \ . . Senator Norris. Was it under that statute that these indictments were had in New York ? Mr. Miller. It was under the antitrust statute that the indict- ments were had. After the legislature amended it, the district attorney dismissed the indictments. Senator Norris. This law was passed after the indictments ? Mr. Miller. Yes, sir. Senator Norris. In fact, it was the indictments that brought about the passage of this law, I presume? Mr. Miller. Yes, sir; it was. I do not want to trespass upon any political conditions here, but let me say this : That amendment to the antitrust law was a,ttacked by what we think were the representa- tives of the organized milk dealers. It was well known all over the State, a matter of continual controversy in the newspapers, that that law was pending, and under their custom there the committees notify all parties who request to be heard whenever they have a hearing. The majority party that passed that law evidently met with the approval of the people, because they have gone back with a bigger majority than ever before. Senator Brandegee. It was to meet, so far as we could, in the appropriation bill recently passed, was it not, the grievance of which you complain, that we declined to make available a certain appro- priation for the Department of Justice to prosecute these farmers' organizations which Senator Curtis and Senator Capper were inter- ested in ? Mr. Miller. Of course, I do not know the intent of Congress in passing it, but that was the effect of it, as you state. Senator Brandegee. I was told that that was the object of it. Mr. Miller. Possibly so. That was certainly the effect of it. While I am on that subject, it may be of some interest to know who are opposing these legislations in the different States. I do not know of any one that is yet opposing it, either openly or under- ground, here. In New York State, when it came to the hearing before the com- mittee, and it was, as I say, well known that it was coming on for bearing, first in favor of it were all the farmers' organizations of the State, not only the dairymen, but all of them. Against them appeared two lawyers, able lawyers, estimable gentlemen, representing the milk dealers' union. The milk dealers there are organized into an association known as the Milk Conference Board; and they, and they alone, opposed that law. Now, IJiave in my hand here such a law which is now pending in Ohio, an amendment to their antitrust law. It has already passed the assembly, but, the last information I had, it had not yet passed the senate. At a meeting in Chicago in Decern- LABOR, AGRICULTURAL, DAIRY, ETC., ORGANIZATIONS. 39 ber, I was informed by a gentleman from Ohio that the International Harvester Co. were actively opposing the amendment in Ohio. I did not know but that it might be of some interest to know the facts, and so yesterday I telegraphed the president of the Farmers' Cooper- ative Milk Co. m Ohio, Mr. H. W. IngersoU. This is my tdegram to him: Wire me, care of National Board of Farm Organizations, if it will be accurate to say to Judiciary Committee of Senate, in hearing to-morrow morning, that the Inter- national Harvester Co. is antagonistic to the development of the cooperative move- ment in Ohio, and that it opposes proposed amendment to Valentine antitrust act of your State. (Signed) J. D. Miller. The reply is as follows : It will be accurate, according to statement of members of legislature to me. (Signed) H. W. Ingebsoll. Senator Noeris. Well, why ? I am interested to know why the International Harvester Co. is mixing into that fight. Mr. Miller. It is a matter of interest to know why they are do- ing it ? Senator Brandkgee. In order to make friends amongst the farmers, I suppose. lifi-. Miller. It is a far cry from Ohio to Siberia; but may I say to you that out in Siberia, where they have very effective dairy farmers' organizations to cooperatively market their products, they had a fight to the finish with the International Harvester Co. over the distribution of farm machinery. While I am on that, now, just think: These are the things that the farmers' organizations find op- posed to them. Now, not all manufacturers are in that position. Those that are not interested particularly in farm implements are favorable to this. I have in my file a resolution adopted by the Manufacturers' Association declaring positively that farmers should have the right which this bill asks, and I shall be glad to read it into the record if it will be of any assistance to you. Senator Norris. I shall be glad to have you do so. Mr. Miller. But what the International Harvester Co. are doing, if they are doing this, is what we are meeting i;i different localities. While I am on that subject, let me say that imless the farmers in this coimtry have the privilege which this bill gives, we are handicapped in competition with foreign producers. I have mentioned the Sibe- riq;n milk producers. Mr. Holman, who is now connected with our national board, a year ago visited Siberia in the employ of the Food Administration to report prospective supplies of fopds. He found that the dairy farmers there are not nearly as efficient producers as are the dairy farmers in this country, but they are far more efficient in marketing their products. They are marke^ting them collectively through cooperation, and have actually established sales agencies in London for the sale of their products. We can not do that. The farmers are hesitating under the uncertainty of the law. They do not dare make necessary investments. They do not dare go ahead. They are waiting, hesitating, and we have come to you for relief, and say, "Give us this power, and permit us to compete not only with the great organizations with whom we must directly deal, but com- pete with world-wide producers in world-wide markets." 40 LABOR, AGBICULTURAL, DAIRY, ETC., OBGANIZATIOITS. I will now read into the record, Mr. Chairman, the manufacturers' resolution. That, also, will be found on page 65, of the hearing. This was a conference at Chicago, called the " Our-Country-First Conference," under the auspices of the Illinois Manufacturers' Assor ciation. The conference as a whole consisted of some ten or fifteen hundred delegates. There was a committee on resolutions of 28. One of those 28 was an officer of a farm organization. Two of the 28 wei-e publisher^ of agricultural papers. The rest represented manufacturing industries, and they are nationally known names. Among the names here is that of Frank W. Noxon, representing the Kailway Business Men's Association: Alba B. Johnson, whom you gentlemen know as president of the Baldwin Locomotive Works, and he is also president of the Railway Business Men's Association of Philadelphia; and a long /list of names of that character. They reported to the conference, and the conference adopted this resolution: The business of the nation has grown from the individual through the paitnei-ship into the corporatioO. A corporation is hut a form of cooperative enterprise; and cooperation m industry, therefore, is much more marked than it is in agriculture. To destroy this element of industry— these factors of growth— would weaken the Nation itself. We believe the time has come when the millions of faijners, not only in their own intere.st but in the interest of consumers, should have the clearly ex- pressed right by both State and Federal laws to buy, sell, and bargain collectively, concerning their own products, and we ask for such clarifications of existing statutes that this cooperation will be permitted without fear of prosecution. Where the only offenses charged have been technical, and the purpose intimidation or political effect, we deprecate criminal prosecutions directed against farmers and farm organi- zations'over the country. The question is sometimes asked, if the farmers are to have this privilege, why should not the manufacturers have it? There is the answer of the manufacturers themselves. They say they do have it, through the agency of the corporation, and that we farmers do not have it, but ought to be permitted to have it. Now, Mr. Chairman, I really think I should apologize for the length of time I have taken. I wanted to go more at length into the matter, to explain to you how difficult and impossible it will be for the farmers to form an oppressive monopoly; but I have taken so much of your time that 1 will not go further into that subject. Senator Brandegee. Has the House Judiciary Committee re- ported on this bill, yet ? Mr. MijLLER. Not that I know of, Senator. Senator Brandegee. When was the hearing ? How long ago ? .. Mr. Miller. October 28; but through a confusion for which I am sure the stenographer is not to blame, but rather some of us people who were connected with it, the record was not printed until several weeks later. May I just call your attention to this again ? Every great farm organization of the country, is on record in favor of this law— every one of them. It is, in the minds of farm, organization leaders and officers, the one most important piece of legislation, as affecting, agriculture, that can be brought before Congress. There are repre- sented before you to-day not less than four or four and a half million of the American farmers. Senator Nobris. I should like to ask you something about the phraseology — not particularly the phraseology, but partially so — of the particular bdl before us. I have not been studying it lately LABOB, AGRICULTUEAL, DAIRY, ETC., ORGANIZATIONS. 41 but when I was appointed on this committee, and even before that, I had given some attention to it, and I remember I ^yas impressed then that'the particular bill had a good deal more in it than to my mind seenaed to be necessary to bring about the remedy that you were seekmg. You are faixuliar with it. I guess you are the author of it, Mr. Miller. Mr. Miller. In part; yes. Senator Norris. Do you not think it could be shortened a good deal? ^ Mr. Miller. I assume that it could. The original draft was changed and lengthened at different times by conference with leaders of other farm organizations, each one of whom seemed to have some particular danger that he wanted to guard against. Senator Norris. Now, suppose this committee decided to report out something, and 4;ook the New York statute, for instance, as a sample: Do you think that New York statute, with perhaps a change or tw-o to make it apply to a Federal statute rather than a State, . would cover the ground ? Mr. Miller. I thought, when that was adopted by New York State, that it was ample protection. Personally, my own judgment yet is so — that an act of that character would be ample — but when I came to confer with representatives of other farm organizations (legal representatives, I am now referring to), they seemed to have some doubt whether of not an amendment of that character, which' simply provided for collective selling, would cover organizations that proc- ess their products. For instance, would it cover an organization of fruit producers that packs its fruit, a dairy organization that churns its milk, and so on ? Senator Norris. Well, even if it did not — I have never read it before ; in fact, I have not read it yet ; all I know about the New York statute is from hearing you read it this morning, but in listening to you it seemed to me it was a very comprehensive statute in a very few words. Mr. Miller. Yes, sir. Senator Norris. I think we will all agree it is desirable to make the statute just as short as we possibly can. Mr. Miller. Yes, Senator Norris. Now, if that is not in it, it seems to me such a change could be made, by adding a word or two here or there in the statute, that would cover the objections that you say have been made by some of these organizations. Mr. Miller. It is quite possible; and, as I said in the beginning, it is utterly immaterial te us what language is adopted. We simply want the protection. At the time that amendment to the New York statute was drawn I thought and still think that it was' ample pro- tection under the law. I believe that when organizations are given power to collectively market their product, involved in that is the power to prepare that product for market; but, as I say, there is a difference of opinion among the legal representatives of some of the farmers' organizations, and for that reason the power to process, etc., was expressly given. Senator Norris. I can riot conceive of a fruit association, for instance, being allowed to market its product without there being impliedly added also the power to prepare it for market. 42 LABOR, AGRIOULTUBAL/DAIKY, ETC., ORGANIZATIONS. Mr. Miller. Yes, sir; and as this amendment was originally pre- pared none of that; appeared in it. It was added for the reasons that I have stated. There is, however, this thought that also entered' mto it, of which the original draft was longer than the amendment to the New York State act, and that was this: We thought that masmuch as specific powers were expressly given labor organizations by section 20 of the act, which, as you gentlemen know, enumerates thmg after thing that the labor organizations may do — they may picket, they may persuade, and so on through the whole list — that if in amending the Federal statute Congress then thought it necessary to specify every particular power to the labor unions possibly it might not be unwise to specify more definitely. Senator Norbis. Lots of times, however, the legislator, in trymg to be specific, and specifying, hurts his cause rather than helps it, because the court is apt to say: "Since you have undertaken to specify, it does not include anything except what is specifically named." Mr. Miller. Absolutely so. Senator Norris. And if you had a general phrase, it would include everything. Mr. Miller. That is so; yes, sir. It is a well-known rule of con- struction that they would say that. Senator Norris. Yes. Mr. Miller. So I say again, Mr. Chairman, that if this committee become convinced that the farmers should have the relief asked, you gentlemen are lawyers, and we have no doubt that you will find the necessary language to give that relief. Now, may! just say to you, in closing, what perhaps I have said before, and that is that there is no middle groimd here; that either the farmers, through their organizations, must have a voice in saying what the price of their products shall be, or we must absolutely accept the price dictated to us by middlemen. Gov. Deneen told you yes- terday, in that very able argument of his, how prices were fixed for milk in the Chicago district before their farm organization became effective. The same is true of the New York district. Usually upon the 13th or 14th of March and of September the local plant superintendent — because these mUk-shipping plants are owned by the dealers, the middlemen — would receive by sealed mail a bundle of what they called contracts, with instructions not to open them until the morning of the 15th of September or of March. On those days, which iron- ically were, called contract days, you would see the farmers coming in from all directions to the shipping stations to sign that contract. On other days you would see the boys, or the hired men, sometimes the wives, sometimes community loads, but on these particular days they must come. They would line up beifore the office of this milk- receiving station. Not one of them would have the slightest idea what the price of milk was going to be for the succeeding six months. One by one they would go into that office and have presented to them a contract like this, Mr. Chairman. [Producing paper.] I have got one of the old ones here, a copy of it. Senator Norris. I wish you would put that contract in the record, Mr. MiUer. Mr. Miller. Yes; I will. LABOR, AGBIOUL.TUKAL, DAIRY, ETC., ORGANIZATIONS. 43 (The contract above referred to is as follows:) " Borden's" milk contract. This agreement, made this day of , 1916, between Borden's Condensed Milk Co., party of the first part, hereinafter known as the company, and each of the undersigned, parties of the second part, hereinafter known as the dairyman, Witnesseth, that the parties hereto, for and in consideration of the sum of $1, each to the other in hand paid, receipt of which is hereby acknowledged, each agree indi- vidually and not for others, to perform the a^greements herein set forth and specified. The dairyman agrees to sell and deliver daily to the company, at its plant at , at the hour it names, the amount of milk produced by his or her dairy, as specified below, the milking of the morning of delivery and evening preceding, such milk to be whole, sweet, unadulterated, uncontaminated, and of standard richness. That the cow stables will be amply lighted with windows and well ventilated; to keep them, clean, removing daily therefrom all manure or foul material; to use no horse manure or foul material for bedding; to keep no hogs, sheep, or fowls housed in said stables; to keep the cows clean. To thoroughly wash and scald all milk utensils used at the dairy immediately after use morning and evening; to put no milk in unclean cans; to keep the outside of cans and covers clean and bright, and when not in use to keep the cans upside down, with covers off, on a rack provided for this purpose in the milk house. To provide a milk house within clean surroundings, lighted and ventilated, of suitable capacity, and not connected with any stable or kitchen; to be painted or whitewashed inside, to be used for the safe keeping of milk and for no other purpose except for storing milk utensils. To have the mUking done with dry hands, in the most cleanly manner; immediately after milking to remove the milk, including strippings, to the milk house, strain it through a 100-mesh wire cloth strainer, and to cool the milk to 58° within 45 minutes from the time it is drawn from the cow, and to keep the cans of milk in the vat of wate i until time for delivery; to prevent the milk from freezing or rising in temperature to exceed 58° between 45 minutes after drawn from the cows and when delivered at the company's plant, to which place it shall be transported on a spring wagon, covered with a clean canvas; to not mix evening's and morning's milk, except the remnants of each milking; to not deliver the milk from a cow that has calved within 10 days or from a cow which will calve within 60 days, or from any cow in an unhealthy condition. , , . i, ,. To whitewash the cow stables, sides, ceilings, and stalls thoroughly throughout within 30 days after signing this contract. To not feed the cows wet brewery or distillery grains or such ensilage or such teed as will impart a disagreeable flavor or odor to the milk. To immediately notify the company in case of any sickness or disease among th( cows of the herd. To immediately notify the company if any member of his or her household, or an> member of any family occupying the premises on which the milk is produced, has any infectious or contagious disease or any person who may be assisting in the work of the dairy who comes in contact with any infectious or contagious disease. When such notification is given and the company should deem it necessarjr to discontinue to receive the milk of said dairy, the company will remunerate the dairy- man for unavoidable loss inciured on the milk during the period of sickness, or until the danger of contagion has been removed. ,_ „ , ,, It is mutually agreed that the representatives of the company shall at reasonable hours have access to and the right to examine the cows, cow stables, milk house, feed, dairy utensils, and place for keeping the same ; and that if any cow is found t9 be suffer- ing with any disease which, in the judgment of the company's representative, would tend to produce unwholesome milk, such cow shall be removed from the herd either temporaiily or permanently, as may be necessary to insure wholesome milk; but therl shall be no needless sacrifice in any herd, and sufficient evidence of the existence of disease shall be produced to warrant the removal of any cow. That should the^dairyman be unable to make deliveries of milk to the company because of the action of legal authorities, he or she will give notice to the company, anSll be under no obli|ation to deliver milk to the company; if because of condi- tions caused by the elements, floods, or fire, accident, action of legal authorities, adverse leailation, interruption of railroad transportation facilities, strikes, or ina- bilitv to sS necessary supplies, the company be prevented from operating its X.t manufrctvSine or prepanng the milk for shipment, or shippmg or marketing fti prodTcte theTip^y s^all gile notice of the fact, and shall thereafter be under 44 lABOE, AGBICTJLTUBAX,, DAIRY, ETC., OKGANIZATIONS. no obligation to receive milk from the dairyman, but at the end of such period or periods, and when normal conditions are restored, the parties to this agreement shall, and are hereby bound to, continue the performance of this agreement." That failure to comply with the requirements of this a^eement by the dairyman shall be sufficient warrant for the company to refuse to receive milk from the dairy- man, and in such event the company shall in no waj^ be held liable for any losses sxistained; that the company has the right to cancel this contract in case it has satis- factory evidence that adulterated, skimmed, or contaminated milk is being delivered of offered for delivery by the dairyman. The company agrees to buy from the dairyman the number of pounds of milk^as signed. individually, if produced and handled as specified herein; wash and clean at its.glant the inside of all cans in which milk is delivered; to pay on the loth day of the month following month of delivery, according to butter-fat tests, the price per 100 pQunds of milk as set forth in attached rider, which is a part of this contract. Such_Jutter fats to be determined by an average test made by the Babocock test four times monthly. In witness 'whereof, the parties have hereunto interchangeably set their hands the day and year first above written. Borden's Condensed Milk Co. Mr. Miller. I regret to say that this particular contract lacks the schedule attached, which was simply the prices and the quantities of milk that the farmer was to produce; but in other respects it is complete — a page and a quarter of single-space, closely typewritten matter, as difficult to construe as an ordinary fire-insurance policy. When the farmer went in there, that plant superintendent had no power to change one syllable of that contract. All that he could say to the farmer was, "Sign on the dotted line." Mr. Chairman, I have stood in that line, and I have seen men indignant at the semi- annual humiliation of it all. That is an indenture of servitude, and they called it a contract; but the farmer had to sign it, because he had nowhere else to turn to. Senator Norris. If he did not sign it, they did not take his milk ? Mr. Miller. Absolutely not, and you must sign it before 4 o'clock. Senator Norris. And if they did not take his milk, what other place had he to sell his milk ? Mr. Miller. None. He must go out of business. Senator Norris. And these contracts were drawn up and submitted by the milk dealers' association, were they I — I do not mean that I have named them right, but it was the body or the organization that bought the milk of the farmer, and then sold it to the consumer in the city? Mr. Miller. Yes, sir. Senator Norris. They were the corporation or the association en- gaged in the distribution of the milk ? Mr: Miller. Yes, sir; that is right. Senator Norris. They sold it directly to the consumer ? Mr. Miller. Yes, sir. Senator Norris. Are there such organizations in all the principal cities of the United States ? Mr. Miller. I think so. Do you mean the dealers' organizations ? Senator Norris. Yes. Mr. Miller. Oh, I think so. Senator Norris. Is there one here in Washington ? Mr. Miller. I do not know as to Washington. I am referring to Chicago, New York, Philadelphia, and Boston particularly. LABOK, AGEICULTXJKAL, DAIRY, ETC., ORGANIZATIONS. 45 I think, Mr. Chairman, I will not take up any more of your time) and I: very much apnreciate the time that you have given me. ^Senator Norris. Mr. Atkeson, are you ready to go on, or what is the-FW-ogram ? I do not want to interfere with it. Mpr Atkeson. I understand you are going to adjourn in a few minutes, Mr. Chairman. Senator Norris. I do not think we will adjourn unless the bells ring. Mr. Atkeson. Are you going to have a hearing to-morrow ? Senator Norris. I think we will have to continue to-morrow at 10.30. Mr. Atkeson. I am so situated that I can net come here to- morrow; and the subject has been so substantially covered that I want to say only a few words. Senator Norris. Before you proceed, will you give your name and residence to the stenographers? STATEMENT OF ME. ' JAMES C. ATKESON, WASHINGTON EEPEESENTATIVE OF THE NATIONAL GRANGE. Mr. Atkeson. I am a representative of the National Grange, the farmers' organization, with a bona fide membership of about 750,000 people. Senator Norris. You are the representative of that organization ? Mr. Atkeson. I am the Washington representative. Our people are dairymen. Senator Norris. Where is your residence ? Mr. Atkeson. In West Virginia. I am master of the West Virginia State Grange. Senator Norris. How long have you been such? Mr. Atkeson. If I live until the end of the present year, it will be 24 years. That is a good while. I do not care to go into personal history Senator Norris. Now, I know that you do not, but I want to have that in the record. There will be a good many people, perhaps, who will read this record, and it will be the basis of argument, asto who represented whom, so do not let any modesty interfere with that. I know who you are, but I want the record to show it. Mr. Atkeson. Well, I own and operate the farm where I was born several years ago, and I have never had any interest but that as a practical farmer, except a few years when I undertook to teach agriculture in our State university. The people that I represent — which is the important question — are not dairymen only, but they represent every aepartment or field of productive agriculture. They are beet growers and cattle producers, wool growers, sheep producers, and hog producers, and they are scattered over 'the country from Maine to California. In the States, we are largely organized. We have the largest member- ship in the State of New York, with 130,000 or 140,000 members m that State alone; and so, if there is any organization that represents all the farmers, as well as farmers' families and farmers' home life, it is our organization. . . . ,, ^ .^ . It is different from all the other organizations m that it is not exclusively a commercial organization. I may go further and say. 46 LABOR, AGRICULTURAL, DAIRY, ETC., ORGANIZATIONS. that it is a secret farmer fraternity, and that three black balls keep anybody out that they do not want in. We aecided after a thorough investigation, and we had the matter before the judiciary committee in our last national session, that we must have some such protection against the concentrated power of the purchasers of farm products, and they are not the consumers of farm products, and they are all organized completely and con- cretely and efl&ciently organized, and when they procure the products of these various farmers, regardless of what they may produce, it seems to be but little protection against their being kept out of the market. And so it seems that these producers and consumers have a common interest. They are the two ends against which the middle is playing the game. The distributors in all their relations, and all the distributors of food products, they are the people that the fanners deal with, and not the consumers. The great consuming public seems to have a horror of giving farmers an opportunity to sell their products collectively, but the farmers sell very little, or very few of their products, to the consumer directly, either 'collectively or otherwise. Most of them go through the hands of the organized machinery of distribution. There is not any question about there being an organi- zation. So that it seems to me that the great consuming public have with us a common interest in this matter that is now under con- sideration. The National Grange, at its last session at Grand Rapids, Mich., last November, passed two resolutions which are embodied in a letter which I have just received from the master of the National Grange. When I knew that this hearing was coming on, I wrote Mr. Lowell, who is now master of the National. Grange, and asked him to come and represent this organization in his official capacity. In response to my letter he writes as follows [reading] : Feedonia, N. Y., January 22, 1920. Prof. T. C. Atkeson, Washington Representative of the National Grange, SOS Seventh Street NW., Washington, D. C. Dear Sir: Other engagements prevent my coming to Washington to be present at the hearing to be held by the Senate Committee on Agriculture on the Capper- Hersman bill — He is misinformed as to that — as to the Senate committee — and I wish to ask you to present to the committee my strong personal belief that this bill should be promptly enacted into law. I want to say for Mr. Lowell that he is a grape grower and a dairy- man, up in New York. I have read the text of your statement to the House Judiciary Committee in favor of the bill and wish to indorse it in every particular. I made a lengthy statement before the House committee. The National Grange action on this subject is positive^and convincing and expresses not only my own views but the views of every member of the national body, and so far as I know the view of our membership without exception, when it said: "We ask for the enactment of laws which ^vill clearly establish the right of farmers to cooperatively market their own produce and purchase their own supplies without legal or other interference." The public generally knows that these rights have not been granted to farmers' cooperative organizations, and that such organizations have been subject to prosecu- tion and serious interference m other ways, both under the guise of law and clearly' without the law. The public should know also that every effort of the farmers to LABOR, AGBICtTLTrrBAL, DAIRY, ETC., ORGANIZATIONS. 47 market tiieir products cooperatively has been brought about either in an effort to reduce the cost of marketing or to take the necessary steps to save from destruction some specific agricultural industry upon which large portions of the public depended for food supplies. The ri^ht to cooperate for these piu^poses is all that we ask to be set forth m statute law, and I believe that the Capper-Hersman bill does this in the best way yet proposed before Congress, and that, therefore, the Capper-Hersman bill should be reported and passed without delay. The following resolution was also adopted by the National Grange at its last session: "Resolved, That we urge granges everywhere to support the passage of the bill known as the Capper-Hersman bill, which gives farmer organizations the undisputed right to sell their products collectively witiiout danger of prosecution." Public policy, which recognizes agriculture as the oaeic and essential industry, dic- tates that any step which fosters, encourages, and develops this industry is wise and sound statesmanship. This was recognized in the clear intent of Congress to legalize collective bargaining of farmers in the so-called Clayton amendment to the Sherman antitrust law. It is only because interpretations have been sought upon this amend- ment which defeat this clear intent, and defeats what we believe to be essential public policy, that we at this time ask for the enactment of the Capper-Hersman bill, to clearly set forth this principle, which we believe to be right, the principle set forth in the resolution quoted above. I wish you would express to the committee as positively as possible what I have expressed to me at every meeting of farmers and granges that I attend, that organized farmer producers have a right to ask this law at the hands of Congress so that there may be no further misunderstanding about it. The need of the day is for increased pro- duction, and it will not be met if the efforts of the producers to market their products continue to be hampered by the denial of the clear right to market cooperatively, just because this law is not clearly defined. Farmers everywhere are united on this subject, and I trust there will be no weakness in the way this fact is presented to the committee and to Congress. Yours, fraternally, S. J. Lowell, Master of the National Grange Now, Mr. Chairman, I went over this ground pretty thoroughly before the House Judiciary Committee, so far as any personal opinion is concerned, and I would not care to repeat it here, because that statement is available in print, and I do not care to take any further time. Unless you wish to ask me some questions, I am through. Senator Noeris. Is there anyone else who wants to be heard now ? Mr. Maesh. Mr. Chairman, I would like to be heard, unless you want to go up on the floor of the Senate. Senator Norris. Is there anyone else besides Mr. Marsh to be heard ? Miss Haver, doyou want to be heard. You represent consumers. Miss Haver. We have not had this bill before our organization, Mr. Chairman. I just wanted to find out about it. Senator Norris. Very well. You may proceed, Mr. Marsh. Per- haps we can finish the hearings to-day. STATEMENT OF ME. BENJAMIN C. MARSH, REPRESENTING THE FARMERS' NATIONAL COUNCIL, BLISS BUILDING, WASHINGTON, D. C. Senator Norris. Please State your name and whom you represent. Mr Marsh My name is Benjamin C. Marsh, and I am secretary and directof of legislation to the Farmers' National Council, with offices here in the Bliss Building, Washington. Mr Chairman, I would like to address my remarks, if I may, more directly to the general principles of cooperation rather than to any specific biU because after discussing the Capper and Hersman biUs 48 LABOR, AGKICtJLTTJRAL, DAIRY, ETC*, OBGANIZATIONS. r for about an hour before the Hduse Committee on the Judiciary, Chairman Volstead informed me that he realized, as to the very pomt that I raised, that we have got to make over our entire national legislation dealing with trusts, and we have got to recognize a new attitude and policy of the Government in relation to aggregations of -capital, which are all involved in these two bills. May I state that we realize thoroughly how interested the farmers, and city workers as well, are in this (question of cooperation. I am now working, giving a part of my time to the AU-American Farm Labor Cooperative Congress, which is to hold the largest congress on cooperation ever held, at Chicago from the 12th to the 15th of next month. I have been out on a trip as far as Dakota and Nebraska with the gentlemen who are discussing cooperation and I know that the farmers of the country are absolutely awake to the need, not only for legislation, but for direct connection which will eliminate these speculative middlemen — and please note that I say "speculative middlemen," and not the necessary men between the farmers as producers and the city workers and other workers as consumers, and also between city workers as producers and farmers as consumers. Now, briefly addressing myself to these two bUls, I want to say that I understand that neither Senator Capper, whom I am glad to see has come into the room and with whom I have discussed this matter, nor Congressman Hersman, if I am correctly informed, drafted these bills themselves, and I think they realize the need for some amendment. . Taking up first Senator Capper's bill, with the explanation I have given the committee, we understand that it was drafted by certain farmers' organizations. We wonder, for instance, why on page 2, line 2, of this bill, w-hich purports to protect farmers' organizations engaged in legitimate cooperative effort, these four words are put in, "not conducted for profit." Mr. Chairman, how can anyone say, if he represents a farmers' organization, by what process of legal, rustical ratiocination can he say, that in a farmers' organization profit coop- eratively shall not be permitted? Why, that is what they are organized for. This is the most monstrous joker ever perpetrated by anybody pretending to represent four or five million farmers, or any number of farmers. I presented this to a number of farmers' conferences, for instance the National Farmers' Conference at Hagers- town, Md., in last October, and to committees down at the National Farmers' Union at Memphis, Tenn., last November. They were completely astounded. They said, "Well, what does that mean? Of course we are organized for profit. That is what we go into coop- erative business for." And, Mr. Chairman and Senator Capper, I think that you will agree that legitimate profit is an inceptive, and a proper incentive, for action. If we do not have any pfofits, how do these friends of the farmers suppose that the farmers are going to live, for pity's sake ? Now, let us assume, for the sake of argument, that that is an over- sight; but that is most strange, that a grave lawyer shoiHd be guilty of such a tragic oversight. Then, taking up this other bill, the Hersman bill, it is unfortunately true 'that under this bill I think that members of the committee will agree that the packers can qualify as cooperative organizations. LABOR, AGRICULTURAL, DAIRY, ETC., ORGANIZATIONS. 49 Senators Norris. The Hersman bill, of course, is not before us. Mr. Marsh. No ; I am going to lay down some of the principles that we think ought to apply. f f Senator Norris. I have not seen that bill, myseK. benator Capper. Here is a copy of it [handing bill to Senator Mr. Marsh. I understood— am I correct, Mr. Chairman— that you are considering the whole legislation connected with this work? Senator Norris. Yes; it is perfectly proper, but I had not seen the Hersman bill before. I have a copy of it now. Mr. Marsh. Now,- of course we know that , the packers are very cai)able gentlemen — they are capable of anything, even of getting a whitewash from_ the Department of Justice. They are capable of being agriculturists and packers, of being horticulturists and packers, dairymen and packers; and every other sort of activity under the Sim they are capable of. We have discussed this matter, I say, Mr. Chairman, with men who were doing active cooperative work, and they agree absolutely with our position. If you will pardon me the reference, a week ago last night I talked at Fargo, N. Dak., at the annual convention of the cooperative ex- change, to some four or five hundred farmers from five States. They are doing cooperative work. They authorized an increase in their capital stock froni $1,000,000 to $9,000,000, which indicates that they are not in the piker class, and they recognized, as I think most farmers' organizations really endeavoring to serve others, that you have got to protect farmers in your amendments to the Sherman antitrust law or the Clayton Act or any other antitrust law. .You have got to provide specifically in any legislation, it seems to us, at least the following minimum precautions, in the way of defining what constitutes a legitimate cooperative undertaking. in the first place there must be a limit, if any such cooperative organizations are to be attempted; and we agree that probably for the time being they must be exempted from any prosecution under antitrust law, and i am going to take that up later. The bill must specifically declare and make it unmistakably clear and I think, in order to do that, you ought to have legal phraseology applied, and fortu- nately we have farmer-lawyers in this gathering, which is a splendid combination — that no matter how much stock a person owns in a cooperative organization, or how much stock any other organization owns in a cooperative association — i am speaking of the agriculturists in the broader sense; now, dairymen or whoever it may be — they should have but one vote. Second, there should be a limit on the amount of stock that can be owned. I am not going into details and read this bill, S. 3066, intro- duced also by Senator Capper, providing for the incorporation of cooperative associations in the District of Columbia. I merely cite the fact that at Senator Capper's request, if I recall, this bill was drafted by Mr. Jackson H. Ralston, of the Washington bar, who has made a very careful study of questions of cooperation and legal pro- cedure in incorporating cooperative organizations; and may I suggest this for the information of the committee, if it is not presumptuous. I know you have it already before you. "1 know that you have care- fully studied the laws and the precedents and put in this measure 171150—20 50 lABOE, AGBIOULTURAL, DAISY, ET.C., OEGANIZATIONS. paragraphs which will limit the application of the law to those organizations. It was the intent of the introducer, as I know it is the intent of Senator Capper and of Congressman Hersman in the bills they have introduced on this subject, to limit it specifically to those organizations intended to be specifically benefited or protected thereby. Now, under the Hersman bill, and certainly under the bill handed to Senator Capper — I do not like to say Senator Capper's bill; I said before you came in, Senator Capper, that I understood the situation — the Illinois manufacturers of course can capture the farmers' organiza- tions overnight. It is pie for them. We have got to recognize the facts as they are. It seems to me that these are provisions that should be incorporated in any legisla- tion to protect farmers in these cooperative imdertakings; and they have got to be protected. Many of the unrestrained profiteers in America are raising a hue and cry that the farmers are profiteering. I want to put that right in here, if I may without going into details because I think it is important that it should be considered in connection with the con- sideration of legislation to provide farmers an opportunity to market their products collectively or to purchase supplies collectively; it is a sickening, disgusting charge, absolutely unfounded, that the farmers are profiteers or are making money in that way. May I give a little illustration from yesterday? An old college friend of mine came into the office to see me. 1 think this bears right on this subject, and I know the difficulties you gentlemen are going to meet in securing legislation which will be stigmatized as class legislation. It is not. It is democratic legislation, as I think it should be applied; another effort of the American people to secure control of the machinery of distribution and exchange. This friend of mine graduated three years after I did, out in Iowa. He went immediately to farming in Minnesota. He and his wife worked very hard. . They had no children. They broke down in a few years and had to quit farming. They were just a Uttle ahead of the game, because the land values had increased and they had a 320-acre farm and they were able to dear something on' that. Now, the tragic fact is that American farming is not a profitable industry. If you ehminate the increase in the value of the soil, the increase in the price of farm land — may I quahfy that? A very large proportion of the farmers of America, both those who own their farms,, subject, of course, to the heavy mortgages, and the tenant farmers, are in the position of pretty nearly serfdom. They can quit. The farmer does not strike collectively in the way in which labor strikes, but farmers quit. That is all they can do when they can not make a Uving. Some such legislation as this is very much needed because the farmers have got to act collectively. Now, the charge is made that farmers are requesting exemptions from the political aspirations of callow district attorneys seeking pohtical notoriety or preferment or from some sincere men who do not reahze the pohtical conditions, who are making plays against the farmers, and rushing them into jail. The farmers are suffering from that sort of action, and they have got to be protected. Laws can do something, and we need legislation which will assure that the LABOR, AGEICUIiTTJBAIi, DAIRY, ETC., ORGANIZATIONS. 5 shall have this opportunity, but the farmers with i 51 farmers shall have this opportunity, but the farmers with a small income are not in the same class with an enormous aggregation of capital. Anybody who will say that any farmers' cooperation in America is in the same class, or will get the same treatment before the law in this country, as the United States Steel, Corporation, whose president can bid defiance to the President of the United- States, does not know the situation. We have got to have this legislation, and we want to be thorough ; but we must make sure that m drafting this legislation there shall not be any loopholes for the United States Steel Corporation, which, as Mr. Miller has pointed out, is in effect a cooperation, and may qualify as a cooperative organization and be exempted from prosecu- tion under the Sherman antitrust or. any other antitrust law. The farmers' cooperative associations are not in the same class with these vast aggregations of capital in the coal, the steel, the rail- road or the packing business or anything else. They have got to be protected, and they and they alone should secure this special treat- ment; which leads to this suggestion, if I iaa.j go into it, because I found that the members of the House Judiciary Committee were extremely interested in it. The gentlemen of Congress have passed two laws — Senator Norris was in Congress then, as I remember. I know his position, though — two laws have been passed by Congress in order to control the Standard Oil Co. monopoly. In order to control the Standard Oil Co. monopoly you passed an antitrust law. What happened ? You never feazed the Standard Oil Co. Its stock has been going up. Its profits are beyond conception, almost. But you have mter- fered--this is not by way of criticism, but by way of suggestion — you have made it possible for a little group of dairymen and milk producers and other farmers to be not only haled before a court, which would be bad enough, but to be arrested on sight, you might say; while these big corporations get off Scot-free. You gentlemen, members of the committee, know of the suggestion of Commissioner Colver of the Federal Tr^de Commission, and you doubtless know of the bUls introduced by Congressman Steele, of Pennsylvania, which we think have a bearing on this question. We have men like Mr. Gustafson, who is well known to members of the committee who are present, whose organization is doing a business of 1100,000,000 a year cooperatively, buying and selling. We frankly feel that mere legislation, sumptuary, drastic, restrictive legislation, or minor exemptions and criminal prosecutions, are not going to be the final word iQ dealing with aggregations of capital. Senator Norris. Now, Mr. Marsh, let me ask you about that. You mentioned Mr. Gustafson and his farmers' organization as doing a very extensive business. In the business they are doing, are they intejTupted now by the law as it stands ? Mr. Marsh. Not so seriously as at their beginning. I can not five the details, but I know that thej^ were much interrupted and ampered in their first year by not being able to get a seat on the grain exchange. That is not what you refer to, is it? Senator Norris. No, sir. Mr. Marsh. I did not quite get your question. Senator Norris. Of course that is something that this bill would not remedy, anyway, but we are seeking now to change the antitrust 52 LABOR, AGEIGULTTJRAL, DAIRY, ETC., ORGANIZATIONS. laws, and you have cited to us one of these farmers' organizations that is now doing such a large business, that it is necessary to see^ if any other organization is doing the same as they are, and what law is necessary ia order that they may do any legitimate thing that they are not able to do now under existing law. Mr. Marsh. I do not think that would have very much effect, frankly, because they are a pretty large organization now, and pretty well established. I do not know what opposition may arise, or what they can do, running the organization. They are in position now to compete with some of these big organizations, and, as they put it, if the big aggregations of capital had been wise to what was doing, they might have Deen fighting them. Senator Norris. Could they not be stopped now? Mr. Marsh. I do not know, Senator. Senator Norris. If they can go on so successfully, could not any- body do it ? And the query then is, what is the necessity of amending the law? Mr. Marsh. I was going to come to that proposition. Your ques- tion anticipates what I was going to say. Senator Norris. All right; take it up in your own way. Mr. Marsh. If I do not answer, say so, and I will try to do it. It is extremely difficult for the most able and conscientious lawyers in the country to draft law which is going to be applicable in the rapidly changing industrial, economic, and financial conditions. The Steele bill in substance provides just conditions improving this situation, recognizing that you can not have a law for much more than a year in this country, apparently, without its being out of date; that it is much better to have a systematic Federal supervision over large aggregations of capital; and we need not deceive ourselves but that there are going to be large aggregations of capital among the farmers' cooperatives in the near future; that you can not attempt to control this by legislation but that you have got to have a supervisory Government agency which keeps abreast of the changing conditions, industrial, economic, and financial, which keeps a sort of tab on these aggregations of capital. The Steele bill .provides that every corporation may secure an elective license. It may elect to secure a license from the Federal Trade Commission subject to the terms and conditions of the Federal "Trade Commission. It says, of course, "the Federal Trade Commis- sion," but it is not necessary that that be the body, but some Gov- ernment body. So long as that business organization, whether it be the Steel "Trust or the packers, or a large or small farmers' cooperative organization, or whether it be these mills and factories which they are conducting and operating successfully — as long as that organization complies with the rules and regulations incorporated and made a part of the license issued by this governmetal regulating agency, it is not liable to prosecution under any existing antitrust law. If I under- stand it correctly, that applies to State laws as well as to Federal laws, but I am not enough of a lawyer to .know whether the Federal Governirient has such jurisdiction. However, that is my under- standing of the bill. That point is of importance, because it was raised earlier. The New York State Legislature, if I understood Mr. Miller, has passed LABOR, AGRICULTURAL, DAIRY, ETC., ORGANIZATIONS. 63 antitrust legislation which is stisfactory to the farmers of that State in their efforts to produce dairy products cooperatively. But they can not bind any succeeding legislature. Any subsequent legislature may turn around and pass a law which would be grossly unfair to the farmers' cooperative organizations.- Any State can do it. It seems to us, of course, that the Steele bill, recognizing the neces- sity of these antitrust laws, further provides that any business corpo- ration which does not elect to take out a license under the Federal Trade Commission, which under the terms of that bill is to issue licenses, is then subject to prosecution either under Federal law or the State antitrust law. Now, we have there a system where vir- tually they say, "Now, here are your chief aggregations of capital^ — corporations. You agree to subject yourselves, voluntarily to sub- subject yourselves, to rigid, continuous supervision and control, of course with provisions that the Trade Commission will not give away trade secrets, or the Government agency; or, you stand liable to prosecution for violation of antitrust laws." The burden of proof, of course, rests upon the corporation which does iiot elect to take a license under the terms of the Steele bill. Now, these are our chief suggestions. As to the nature of the legislation to deal with cooperatives, which would apply, it' seems to us, equally to the cooperative manufactiu'- ing by workers, which is going to develop very, very rapidly in this country, of course we do not need to say we believe in cooperation. The organization of this Ail-American Farm Labor Cooperative Commission, of which Mr. Gustafson is chairman and Mr. Warren H. Stone, who is grand chief of the Brotherhood of Locomotive Engi- neers, is treasurer, shows our interest in this subject. We believe in 100 per cent cooperation, which means, of course, aU-Government ownership of railroads and of the merchant marine, instrtunentalities essential to successful conduct of business which must belong to the Government in order that we may have freedom for the farmer as well as other cooperative organizations. Those are owe suggestions, gentlemen of the committee, in brief, and if you have questions I will be' glad to try to answer them. I do not want to take your time with a lot of figures and arguments. We frankly do not know how to put oxa statements into exact legal phraseology because, if we correctly understand it, you are in the same position as the House Judiciary Committee, and plan a revamping of the whole' range of legislation dealing with corporate legislation, of which cooperative legislation would be a part. Senator Capper. Mr. Chairman, I would like to say just a word to Mr. Miller's remarks, by way of objection to the objections he has raised to certain provisions in the bill. The bill was prepared by a committee which came to me and presented the matter; and now, in my own State of Kansas, practically all of organized agriculture is withm the ranks of the Farmers' Union and the Grange. On that committee, which had something to do witjji preparing the bill, were the representatives here in Washington of those two organizations, and they heartily indorsed the bill, and it seemed to me they knew what their organizations wanted, and I, of course, was glad to take an interest in it and to get behind it. Now I, of course, womd like to see this measure broadened to take in all cooperative organizations, whether organized for profit or not 54 LABOR, AGEICXJLTUEAL, DAISY/ ETC., OBGANIZATIONS. organized for profit, and I think the members of the committee who were interested in the bill and prepared it woTild take the same view of it; but as I understand it, probably there was grave question as to whether we could get such a bill through Congress, which would cover any more ground than is now covered by this bill. If it can be done, and if there are no constitutional objections, and we can get that through Congress, I think of coijrse we would all like to see it handled in that way. Mr. Marsh. I meant to make it clear, Senator Capper, in starting, before you came- in, that we understood this bill was. given to you. We can not understand how anybody should attempt to limit the operation of such a decidedly meritorious measure, as to farmers' cooperative organizations not organized for profit. Farmers' organ- izations have to have a profit. So do the farmers, or they can not do business. I remember we discussed it earlier, and in these very words. It would seem very unfortunate, with the ordinary quali- fications, for I do not suppose that 5 per cent of farmers' organiza- tions are not conducted for profit. If they are not conducted for profit, what is the advantage of them ? Senator Capper. I would like to see the Hersman bill, which is a httle different from this and covers more ground, substituted for this if we can get it through, here. Mr. Marsh. I think. Senator Capper and Senator Norris, that the farmers of America realize the constant friendship that you gentle- men have shown to them, and they know that you work only for a measure Avhich is for what the farmers generally want and need. On one point we were not quite certain. In line 3, page 2, of the Hersman biU, we were not quite sure what was the significance of that phase, there. Why limit it to "dividends on stocks or member- ship capital investment" no greater than the "minimum legal rate of mterest of the State where organized " ? Senator Norris. I suppose that was put in to help the biH through and to show that they did not want to make a big profit. Mr. Marsh. This says, "the minimum legal rate." Senator Norris. Yes. Mr. Marsh. Is that the customary expression ? Senator Norris. No: I suppose they meant to use the words "maximum legal rates." There is not any minimum legal rate. Mr. Marsh. This does not look like a carefully drafted bill. That means nothing. Senator Norris. You can not get down so low that you can get to the minimum. Any possible small rate would be a minimum. Usually the State laws provide for a maximum legal rate. But one suggestion made by Mr. Capper, I think, you ought to consider. Mr. Marsh. Yes. Senator Norris. There are two things very important to be con- sidered by those who want legislation of this kind. First, they do , not want anything that thyey do not believe to be fair. I think that goes without saving. Second, they have to be guided somewhat by what they think they can get enacted into law. We have a very difficult proposition before us if we take up this program, to get it through. My own idea is that we ought not to go into detail to define these corporations. Just as sure as we do we will get into difficulty on every detail we set up, and we wUl open it up for debate LABOR, AGKIOXJLTUBAL, DAIRY, ETC., ORGANIZATIONS. 55 and discussion. Why should we try to say — ^if we decide to report a bill why should we try to say — ^in the law just how the corporations should be organized, and so forth ? Why not leave that open, and let them organize any corporation whose general purposes comply with the law? Why should we say, for instance, as you have sug- gested, that every stockholder should have only one vote, regardless of the amount of stock that he might have ? That is a very good thing. All farmers' unions are organized on a basis of that kind, and they have been very successful and the divi- dends that they declare are limited by their articles of incorporation as I imderstand it. But after dividends have been declared, what- ever profit, if any, is made by the corporation, whatever business it may be engaged in, is divided up not according to the stock owned by the individuals, but in accordance with the amount of business that each individual has done with the corporation. It is a new method. That is one of the reasons why the unions were not able to get into the grain exchange. There were objections urged, and there are objections urged, against that kind of a corporation; but I think it is conceded by those who have studied it that such a pro- vision in a cooperative corporation is a sure preventive against the control of that corporation being secured by somebody who might want to divert it to some other purpose or to destroy its usefulness. But should we, in passing a law, go into those details and say just how they should organize it ? Mr. Marsh. I am not a lawyer, and maybe the analogy which occurs to me, illustrating and explaining the suggestion that we make, is not pertinent, but it seems to us the situation is something like this: The courts have held that the railroads are affected with a public interest because of their relation to the general public. They have received grants of land, they have received subventions. They are accorded, or should be, a certain treatment different from that of independent organizations on their own feet. Now, we have certain laws against conspiracy in restraint of trade and certain antitrust laws. Meeting the point you raise as to the action of the Congress toward such legislation which may be sub- mitted to it, which will be stigmatized by the Wall Street-owned press of the East as class legislation, it seems that the purpose of such legislation, to protect farmers' organizations, is thoroughly meritorious, but it is based not solely, at least, upon the desire to do business, but it is based upon the fact that they proposed, if I may use an old expression, to "help pass prosperity around." It is to stimulate and encourage such legislation, to stimulate and encourage cooperative action for the benefit of large groups of people. Now, perhaps it seems like a paternalistic proposal that the Government should have any restrictions, or any say as to the organization's conduct of business; but, on the other hand, the very impulse and necessity which brings these farmer's organizations to request what may be regarded as class legislation is the reason why the Govern- ment should say, "Very well, we are going to exempt you from the terms of certain legislation, from the operation of certain legislation, and we therefore feel that we have a right — a duty in fact — ^to see to it that the group as a whole, engaged in these cooperative organiza- tions of farmers, shall jointly share the benefits and shall jointly control this concern." Now, as I look at it, if it looks like the big 56 LABOR, AGRICULTURAL,, DAIRY,, -ETC., OBGANIZATIOWS. interests have gotten hold of some farmers' organization or alleged farmers' organization, that is not a matter for the Government. ' The farmers should clean that up themselves; but the Government could prevent the farmers' organizations being grabbed by big business, and this looks to me like an awfully clever opportunity for big busi- ness to get control of farmers' organizations, and it is reported that they have done it. I am not prepared to furnish legal proof of that. Mr. Miller. Why do you not give your authority for that ? Mr. Marsh. Is Mr. Miller a member of the committee. Mr. Chair- man? Senator NoRRis. No.- Mr. Marsh. I will repeat, that it is reported, and I am not pre- pared to give the avenue now. I think that T am within my rights in making that statement. Senator NoRRis. Go ahead; there is no doubt about that; although it is verv proper to have you give an instance of it, if you can. Now, "do you think, Mr. Marsh; if this bill was passed that there would be danger of some of these big corporations going into the daily business or the farming business or something of that kind ? Mr. Marsh. Not directly, oh, no ; but indirecliy. Senator Norris. And if they did, why not let them do it? Mr. Marsh. Because we want to know for whose benefit we are legislating. Senator Norris. Exactly. Now, we must not limit this law to say that nobody but poor men shall go into it, or anything of that kind. When we have passed a law, il anybody can come in under it, no matter who is he, let him come. Mr. MArsh. That may be the correct attitude, but it seems to us that the whole fundamental principle of the Rochdale plan which is "the greatest good to the greatest number," and not the creation of more multimillionaires, requires a little different treatment; that they should be limited as to the amount of stock, and that they should collectively control their own organizations. I do not see any hard- ship to be attributed to that. 'The Chairman. No; I think that is the right kind of a cooperative organization. I think that is right; I think experience has show^n it. At the same time, 1 would not like to pass a Federal statute here that would try to. dictate the details of any organization. I would not want to surround it with anything that would prevent its being used for any legitimate purpose. But just as soon as we commence to go into detail and define these various corporations that shall be organized, and to state about their stock, etc., it seems to me we are opening up a field of opposition and debate that is dangerous. Mr. Marsh. Are not the suggestions which I make merely elabora- tions and making practical the provisions of line 1, page 2 of the Hersman bill ? Or, may I refer back to the first page, line 8, which reads: Nothing contained is the antitrust laws shall be construed to forbid the existence and operation of labor, agricultural, vineyardists, dairy, or horticultural organizations instituted for the purposes of mutual help. Now, how are you going to assure that the application of this bill shall be confined to those organizations institutea for the purposes of mutual help, in the light of our experience of the gentlemen of astute . LABOR, AGKICULTUEAL, DAIRY, ETC., ORGANIZATIONS. 57 qualifications in large business in this country, unless you make some specification which will limit it to those organizations « T^nless you are, of course, trying to amend the tentire antitrust law, which I would hardly think it would be the purpose of the farmers' organiza- tions— it certainly is not ours— to- exempt them from the antitrust Jaws and provisions against conspiracies in trade. But if you are not trying to do that, you have to define what is legally as well as practically a cooperative organization. It would seem to us that that would be a logical corollary of that first line on page 2. What is a cponerative organization ? If T remember correctly, I do not want to misquote an eminent lawyer like Mr. Ralston, but it is my memory that he told me that there IS no existmg definition in law— I think I am correct— of what constitutes a cooperative organization. Certainly, if there be any, it is so vague and indefinite that it does not meet the present situation as to cooperative organizations. It goes into detail as to what this act does for certain organizations instituted for the purposes of mutual help. You remember Mr. Armour said that Armour & Co. was a family affair; that it was Armour & Co., a cooperative organization instituted for the purposes of mutual help. Likely it would be brought right in under this proposition, because they could all of them buy a little farm, you know, with the profits of one second. No; that is exaggeration; they could buy a farm for one hour's profit. I want to be accurate. Now, I want to say in conclusion that when you get such a bill that the committee on legislation of this All-American Farm Labor Cooperative Congress, which is now in process of organization, and the whole congress will get back of it, what can we do ? May I not just remind you, Mr. Chairman, that less than three weeks ago I left this town to tell the people of the Middle West and the Northwest, starting with Michigan, about this scandalous steal of the railroads. Before I had been gone a week there were delegations in here from Michigan and from Iowa, and two delegations from your own State; and I want to assure you that we will get behind with energy the legislation which is going to enable the farmers and the city workers to recognize their joint interests, despite the effort to conceal that joint interest; we will get behind this legislation with these forces, and if the Congress does not pass it the representatives of the farmers and the workers have said in seven States, "We will elect a Congress that will"; so that I do not think we need worry about being held up long on the question of real democracy in this country. If there are no further questions, Mr. Chairman, I have kept you here much longer than I intended to address the committee, and I am perfectly willing to rest the case in your hands with these suggestions. I think you will agree that there is some force in our suggestion that that top line on page 2 might be defined more specifica% in this bill or some other that the expression should be defined specifically before we know what is a cooperative organization. It is getting, popular, and everybody will want to be doing it, if I may use a slang expres- sion, for very different purposes than those that actuate the farmers. May I leave copies of the bill that Mr. Ralston drafted for a co- operative organization? Senator Norris. That is the bill providing for the District of Columbia ? 58 LABOR, AGRICXJLTXJEAL, DAIRY, ETC., ORGASTIZATIONS. Mr. Marsh. Yes; providing for the organization of cooperative organizations in the District of Columbia; and I do not know whether you are aware that Mr. Ralston is counsel for the American Federa- tion of Labor, and at the request of Senator Capper and the Federal employees of the District Mr. Ralston drew that bill. Senator Norris. I wonder if Mr. Ralston wants to be heard by this subcommittee ? Mr. Marsh. I have no doubt, Mr. Chairman, that he will be very glad to comply with a request from you or from any member of the committee to be heard on it. I have talked this subject over with him, and I admit very frankly that I have gotten a good many of these ideas from him "as to the legal end, and he can put it in legal phraseology, an attainment of which, owing to my academic tram- mg, I have been deprived. The Chairman. Is there anyone else to be heard ? STATEMENT OF MR. CHARIES S. DENEEN— Resumed. Mr. Deneen. Will this complete the hearing ? Senator Nokris. I think so, unless there is somebody else to be heard. Mr. Deneen. May I just say a word, and then I can leave the city this afternoon. It will be only a word. - Senator Noeris. All right, Governor. Mr. Deneen. If I understand the statement made by Mr. Marsh, his organization is in favor of the cooperative law, they having no suggestions to make for framing a law for cooperation, except of a general character, and I understand that they make specific objec- tions to Senator Capper's bill, and the part to which Mr. Marsh has directed his attention is on page 2 of Senator Capper's bill, line 2, the words "-not conducted for profit." Those words appear now in section 6 of the Clayton Act, and I understand they were enacted into law in 1914. I think there is a misconception entirely of the force of those words by Mr. Marsh. The Congress tried to make the distinction, which was a proper one, between the corporation as an entity and the mem- bers of it. The corporation could not be conducted for profit, nor could the association; otherwise it might accumulate funds like some of the large corporations, and possibly in the minds of some men become a menace. Whatever profits there are may go directly to the producers and at once, so that the corporation can not grow and develop and in that way become an aggregation of capital that is very large or indulge in profiteering. That, I think, is the plain English of the phrase. Senator Norris. Now, Governor, is it not true that every one of these corporations, if this became a law, would be organized for profit, you might say ? Mr. Deneen. Profit directly to the members, distributed each year, but no profit to the organization that would allow it to accumulate funds, or a surplus, like a bank of a manufacturing corporation or a mine. Senator Norris. I suppose the idea that Mr. Hersman had in his bill was to avoid every possibility of danger. Mr. Deneen. Yes. r.ABOK, AQRIOITLTtrRAL, DAIRY, ETC., ORGANIZATIONS. 59 Senator Noeris. When he used this expression — and pay annually no greater dividends on stocks or membership capital investment than the minimum legal rates of interest of the State where organized. Mr. DeneiJn. Yes. I intended to refer to that. I speak with reluctance about a purpose, but I gathered that from reading the report of the House committee and then reasoning from the effect to the cause. I assumed that that was placed in there for this reason. This oi^anization indulges in packing to a large extent. The ques- tion is now far the cooperative laws allow them to proceed in prepar- ing their products for market. I assume what they intended to do there, and what they do do, is to create a corporation, and in doing that they wovdd have to accumulate the funds from men who would make investments, and they would have to provide as to the maxi- mum legal rate, so that there could not be any undue profit, and then those certificates of stock would be sold, and rather than allowing the profits to 'accumulate, because it is very plain why that should not be done; in the first place, for public policy, and in the second place there would be a very great difficulty in unscrambling the eggs, because when a man ceased to be a member of the fruit growers' association or the milk producers' association, if he should remain in the association for four or five years and then cease to be a member, there would be a question about the equity in the distribution of the value of his stock if a large surplus was accumulated by the organiza- tion preceding his entering into it and succeeding later. Senator NoKRis. Take the milk producers' association; what arrangement do they have about the profits of the association 1 Mr. Deneen. The law of Illinois defines that. No one can take more than two shares of stock and no share of stock can be worth more than $500; and the vote is according to the amount of business done, as in this Nebraska organization. That is a limitation. Then, I think there is a provision — I have not it in mind, but I will state it in the record — as to how much could be saved. They are permitted to make a little saving for the purpose of providing for the depreciation that occurs in such matters; but no accumulation of a surplus to amount to anything. Senator Nokeis. As an association they own some property ? Mr. Deneen. They expect to own. I think they have made some small purchases. They have bought trucks to take the milk from one station to another where they got in trouble with the dealer. They have purchased also nine distributing wagons in Hammond, Ind They are negotiating for the purchase of a distributing agency in Elgin, and, if I am correctly informed, to an aggregate £^ount of, in money paid in now, I thiak, 1250,000, and that will enable them to have the facilities for their own farming, and milk for the cheese and butter, and to take care of the surplus which is produced and which can not be regulated in reference to the fluid Senator Noeris. Do you suppose it would be right to say that that particular association tp which you have reference was not conducted for profit ? r,. ■ .> i Mr Deneen. It is not conducted for profit m the popular sense of the term It is conducted for profit for the individual members. The law says "for mutual help." The words "mutual help" precede 60 LABOR, AGRICUiTUBAL, DAIRY, ETC., OEGAJflZATIONS. the words "not for mutual profit." The distinction is between the corporation as an entity and those who are served by it as cooper8,tive individuals. We have 12,000, and the percentage of overhead is 1 per cent, which is very small. The money for the pToducts^goes directly to the farmers, less the 1 per cent There is no accumulition itf the corporation except the payment for this stock. : Senator Noreis. The money collected is collected by the corpora^ tion? Mr. Deneen. By the corporation's agents. Senator Noreis. How long is themoney held? Mr. Dejteen. Sometimes a day or sometimes two days. It is distributed at once. According to the by-laws it must be distributed before the 15th. Senator Noeeis. As to the point raised in that connection, suppose we passed a law j;Ust such as we have put before us here, which in- cludes tlje words "not conducted for profit"; would there be danger that a court would hold that your particular organization there had not complied with the law ? Mr, Deneen. We think not. We would not hesitate at all to accept such a provision. Senator Noeeis. Assuming that we eliminate those words and do not have them, in here, would that bring about danger ? Mr. Deneen. Well, I think the worst of what would happen would appear by eliminating that language. For instance, let me illustrate. Take the supply of labor to the farmers. The labor organization is an organization of, it may be, thousands of people; but assuming, for the sake of the argument here, that 1 00 per cent is supplied, do you think it is possible you can separate from the wage of $6 a day, what is the cost of production and what is the cost of the wage earner 1 I think you would need a new chemical process. That is exactly what the farmer gets with his milk. The law does not say whaib is the cost of production there, and what is a reasonable profit. He sells it for that amount of money. The distinction in the law, as I understand it, was made to separate the organization, the machine as an entity, from the people who belonged to it and were served by it. That is the purpose of the language, as I understand it. The words "conducted for profit" mean, further, that the corporation shall not, per se, accumulate profits; that it shall not distribute, say, 90 per cent, and keep 10 per cent, untU finally it gets in an enormous amount of money. It is simply an agent through which the work is done, and that is the proper interpretation of it. For instance, in our State this company that I represent does a business of about $2,000,000 a month. It does not retain a cent at the end of the month — I mean, in the corporate funds. Ninety-nine per cent of the money is paid to the men who produce it, or turned over to those in whose name it purports to be. That would be in the name of the cooperative producers. That would be paid by the association. They retain 1 per cent, and 99 per cent goes back, under the present rule, to the producers. Now, suppose we get $2,000,000 in a month. At the end of that month, if we have collected $2,000,000, 99 per cent of that is distrib- uted to the fa,rmers, and 1 per cent goes to the agents, to the office boys — overhead. If the expenses should be larger, for instance if a trial should be had or an exhaustive investigation brought about LABQK, AGEICULTUEAL, DAIEY, ETC., ORGANIZATIONS. 61 by reason of the conduct of government, the spread might be li or 2 per cent. If 1 per cent has created a surplus, then the next month the producer gets 994 per cent. In other words, if we should make any profit, then the State of Illinois would bring proceedings through the attorney general to dissolve our organization. Senator Norris. Assuming we report a bill here, what is actually ta'Kng place is interesting, but at the same time it is not final. We would have to stand on tne law tho,t we pass. If we pass a law and eliminate those words, or if we do not eliminate them and they organize like you do, and even though they had only 1 per cent they would let it accumulate, it would be only 1 per cent, but some other organization might have 10 per cent, and they might have a large amount of money. Mr. Deneen. Yes. Senator Nokris. The point that I am getting at is, ought we to meet any possible situation of that kind by incorporating in the law the proper provisions to prevent it ? Mj. Deneen. The question would arise here as to whether the State should be allowed to pursue the policy which has heretofore obtained, of attending to corporation matters excepting where the corporation does an interstate commerce business. Then the ques- tion, of course, is whether the Government has the power. Pro- vided the Government has the power, it has a governmental function. Senator Norris. Oh, we could put in the provisions, but ought we to do it ? Mr. Deneen. I think not, at the inception. Congresses come and go, and most of the good laws are made to meet facts that exist, but not anticipating. It is utterly impossible to anticipate a lot of facts that may occur and may not. Senator Norris. The point has not been raised, but it is an inter- esting fact that Mr. Marsh does raise, as to whether these corporations which we are going to provide shall be exempt from prosecution, may not be controlled eventually by great aggregations of wealth, and other persons,' so that we may reall}^ nullify the very thing that we are trying to bring about. Mr. Deneen. May I make a statement on that ? Senator Norris. Yes. Mr. Deneen. I think we should argue first about the facts, and then we can forsee how matters are going to occur. Suppose the United States Steel Corporation, and Mr. Armour and his family, should go into the dairy business in Illinois and become a member of our cooperating marketing' company. They would have 2 votes among the 16,000, and that is all they would have, which would not be a very great peril. Senator Norris. Right there, ought we to provide in the law that they should have only 2 votes ? That is what Mr. Marsh wants, too, as I understand it. Mr. .Deneen. There would be no danger in not providing that in the milk business, because there could not be any peril that would be so infinitesimal. It would be simply cumbering up the statutes. If, later, these men should reach out and buy up all the land so that they owned the dairy district, the question might arise. Other- wise it could not be done under the laws of our State and other States. 62 LABOR, AGBICTTLTUBAL, DAIBY, ETC., OEGAinZATIOlfS. ,tor NoEKis. Might it not be that by getting the oontro. Senator Noekis. Might it not be that by getting the control of the corporation they could get control of it? Mr. Dbnben. They could not, under oiu- statutes, get more than 5 shares. Senator Norris. Yes ; I understand they could not in your State, but suppose we pass a law just like this here, and there is a corporation organized, and you and I go out and buy up stock; unless we pro- hibit it here we could do it, and we might not be dairymen, but we could control the corporation by our votes. The point I make is, are we or not in this law trying to meet a possible situation of that kind and prevent it ? Mr. Deneen. I dislike exceedingly, as you do, to ofPer, offhand, opinions about the law, but no such provision has been placed in the Sherman antitrust law or in the Clayton Act regarding other organiza- tions. They have left that, as you stated some time ago, to be inter- preted later. If two or three men should go in and, for example, buy up all the great manufacturing concerns and others, the court would look through the phantoms in the facts and language in the law, and say that it was purely a pretext by which they acquired a monopoly, and would deal with them accordingly, regardless of the language and the form. That is, legally, what would be done. I hesitate to give an opinion, offhand, on those matters, but those matters can not be dealt with in advance, as matters of form. That is the way we would deal and do away with the danger of capital getting control of all concerns. It never has been done, any more than a few men could conduct a labor market. Now, that is the answer that I would make to that language "not conducted for profit." So far as we are concerned, the only real objections we make to this law are, first, that they make a distinction between corporations aot conducted for profit, and an association. We would be per- fectly content with the statute remaining just as it is, and leave the corporation not conducted for profit and an association, because we could meet those conditions "not conducted for profit," and that would keep out all these corporations or gentlemen that might care to join. The other objection which we would make and which has been made by all is little more definite from the legal and definite point of view. We do not care to have a corporation to be formed by the membei-s to be placed in position to accumulate vast profits. They are un- necessary, and they are not in the business for that purpose. Senator Norris. No; I think it is conceded nobocly wants it, and we want to avoid it. Mr. Deneen. No, sir; and the present law — I do not know how it would meet your situation, but I know it would meet ours — simply places an association not for profit upon the same plane as a corpora- tion. That would meet our requirements. But then we would like to have clarified what they mean by "legal and legitimate objects." Senator Norris. That would be pretty hard. Mr-. Deneen. This is pretty hard, and the elasticity of it makes all the trouble. Different district attorneys have taken different views upon the matter, and there have not been any definitions of the words as used in that section as they apply to organizations like ours by force of ultimate authority. liABOE, AGMCULTUBAL, DAIBY, ETC., ORGANIZATIONS. 6b Senator Nobris. I hate to branch out in the law on a new statute hke that, because there are thousands of things that break out that were never thourfit of. Mx Deneen. The interpretation has been placed upon it by very- good lawyers. It is not only the fear of an actual prosecution that is giving us the trouble. Senator Noeeis. Governor, we will never be jible to escape trouble, of course. Some ignorant prosecutor or some maUcious prosecutor or some prosecutor moved by lofty motive, but overenthusiastic and not knowing really what he is doing, will make trouble many times. We have had many illustrations of that since we have had drastic statutes, since the war. I believe that everybody concedes that You put the power in soniebody's hands and make it great, and there is always danger of it being abused, and I presume always will be. I do not know any way to avoid it. Mr. Deneen. The difficulty comes now, when everybody is trying to eliminate waste. You take an organization of 12,000 persons, like'ours, and you go' into the equity courts or the chancery courts of the Federal Government, or before the grand jury, and you begin either a suit or a prosecution. The whole organization is likely to be disintegrated by the fight. Then, furthermore, it creates a suspicion frequently that the persons who are causing these suits to be insti- tuted and prosecutions to be had are persons interested in breaking up the organization, and of course those are not producers of the Sroducts, and whether that is the fact or not it is not my purpose to iscuss it, but when you notice we have been indicted for fixing prices in the country for the producers of a product and are subjected to criminal prosecution for that reason, and then producers in the city fix a price thatis uniform for the city and escape not only suit but any investigation by the Federal Government, it constitutes a tyranny there that I might say not too strongly is odious. Senator Noeeis. Yes. Mr. Deneen. And it has happened. Senator Noeeis. Not only there, but the very suspicion that may arise will bear its fruit throughout 10 years afterwards in bad laws. Mr. Deneen. Yes; and it creates a bad state of the public mind. In a case that I defended, in which the farmers were interested, on my requesting a change of venue, we endeavored to settle it but failed, and we tried our case in the city, by city men, and the trial lasted five weeks and there was an acquittal. But it created a bad feeling. Every man on the jury bought milk. Every man was in- terested in the lowering of the price of milk. Every man on the jury had an interest in trying to affect to his advantage the organization for producing or distributing milk, to lower the price. It was not being tried by peers, but by purchasers; but we happened to be for- tunate in having a favorable jury. We were tried by our purchasers for the high price. , , ■ x- j i Let me call attention to this phrase, and the interpretation fol- lows. I read from section 6 as it is: Sec 6 That the labor of a human being is not a commodity or article of commerce. Nothing contained in the antitrust laws shall be construed to forbid the existence and operation of labor, agricultural, or horticultural orgamzataons, instituted for the purposes of mutual help, and not having capital stock or conducted for prott. 64 LABOR, AGEICVJ^TURAL, DAIRY,. ETC., ORGANIZATIONS. Now, there is the. alternative, and if it should read "or conducted for profit," if it is in the alternative, we are safe. If it is not in the alternative but in the conjunctive, we are in a very embarrassing sit- uation. It is not very clearly expressed. Senator Noeris. In other words, if you change "and'' to "or" ? Mr. Deneen. If you say, "or capital stock," the -district attorneys construe it to be "not having capital stock"; but if you just leave it "not conducted for profit," we feel safe. Senator Norris. You do not have capital stock ? Mr. Deneen. We have capital stock and we must have to be a cooperative concern under the new law. Senator Norris. You do not pay any dividends 1 Mr. Deneen. No; we do not pay any dividends. We are limited in paying dividends to interest. We consider it a loan and pay in- terest on it. We have to have enough to get the machinery to con- duct our business. Now, on the other difficulty I might say this, I would like to take time for this. If we do not have corporations, every one of our 12,000 men is liable. That is why they have to come under a cor- poration law. So the law is framed so that you could have a corpora- tion not for profit, that would accumulate no funds at all. We are under the inspection of the State. If we do, we violate our charter, and should be disintegrated. That is the way we propose to conduct it, and there is no way of conducting it any other way and doing it successfully. We do not want to make any money. The money is distributed at once, as it comes in, and it goes right out; and we are able to do that by not charging more than 1 per cent overhead. Yours, Mr. Miller, is how much, your overhead in your expenses of the organization '< Mr. Miller. We take 1 cent per 100 pounds of milk, which makes it about one-quarter of 1 per cent. Mr. Deneen. -Ours is 1 per cent, because we have other expenses. Senator Norris. Let us see how that would work with another branch of agriculture.. Suppose the wheat farmers did that. They could not distribute wheat like the milkmen can distribute their product. Mr. Deneen. No; but. they could distribute it at the end of the year. I imagine that it would not be wise to limit a cooperative concern by the producers of wheat, and hold the wheat back year after year. Senator Norris. No; but it would be all right on the same line for the same reasons, to permit wheat farmers to cooperate and handle their own grain. Mr. Deneen. At cost? Senator Norris. Yes. Mr. Deneen. Yes. Senator Norris. But they would not know — they would lose money occasionally on the wheat by shifting of the market. They could not turn it all over and pay for it on the same day that the wheat was delivered. They might have to wait until the close of the season before they would mow whether there was a profit to distribute, and in the mean time they would have the money. Mr. Deneen. They would have to make it on the release of pm-- chases. And we could do in a measure what you suggested about LABOR, AGEICULTXJEAL, DAIRY, ETC., ORGANIZATIONS. 65 wheat. For instance, butter is a summer product. The cheapest Y^f-y to make it is to feed the cattle on grass, remote from big cities. 1 he. butter represents the pasturage 'cost plus storage cost. You could not make butter for $1.50 a pound if you did it on winter milk. Here is the position as stated yesterday. If I have 1,000 pounds of milk to sell, and fluid milk consumes only 800 pounds, and they transform that into butter at any season, we might hold it m the summer time for winter and make some money, but we would be involved in packing to that extent, and we sell it at the market, at the average of 30 days. We contract for 30 days. But each month we change the price at Chicago because we take the Federal fornaula and apply that each month on the production, The cost varies with the fat. So we make it absolutely cooperative. That is the way we pursue it, and the State can regulate it; and we conduct it in such a way that we invite inspection and regulation of the Federal Government. They have 10,000 of our contracts in the district attorney's office to-day, obtained through a subpoena duces tecum. It was really a search warrant in its effect. Senator Noeris. Would you not have been able to have pre- vented them from doing that? I understand they tried to do it with the packers, but the packers did not let them have it, and they did not get it. Mr. Deneen. They get a contract before they get a lawyer; that is the trouble. The lawyer comes in too late. We have' not any- thing to conceal, but we do not want to be abused that way. We conduct it on the theory of the open door, and the open desk, too. They could have had it all if they had asked for it, but we did not want to be raided. They raided 35 of our offices at the same time, and some of them are scattered all through Indiana and Illinois. Of course a subpoena duces tecum only requires us to produce what it calls for; but the agents come in and read the subpoena to the farmer or the official, and tell him that they do not care to take his whole office, but make it general, which makes it legal, and then they say "Bring all your books in this office." That would mean the corporation's sheets, also. They say, "We do not intend to cart it all over. We want only four or five books from the office, and we will take only what is necessary;" and the farmer thinks that a favor is being extended to him; so that they just rummage through and take what they want. It is really a search warrant, that is what it is. Senator Noeeis. When the Federal Trade Commission tried to do that with the packers they were met with an injunction and the injunction was sustained. Mr. Deneen. Yes; the packers were better advised; and the farmers would get along better if they had had more faith in then- lawyers, and if they had had the Chinese idea of medicine, which is not to prevent sickness, but they wait until they are sick and then send for the doctor when it is too late. That was the trouble. The packers are wiser, from actual experience. The packers are m the milk business, by the way, but on the condensing end. The packers are the great buyers of milk, and condensers. They buy immense quantities of milk and we have no end of trouble in our negotiations. They are not producers of milk but they handle it and the profit is theirs. 171150—20 5 66 LABOR, AGRICULTURAL, DAIRY, ETC., ORGANIZATIONS. STATEMENT OF ME. JOHN D. MILIER— Resumed. Mr. Miller. Mr. Chairman and gentlemen, a word to supplement what Gov. Deneen has stated. The Capper bill was prepared in consultation with a number of attorneys representing the farmers ' cooperative associations actively engaged in making cooperative sales of farm products, and the effect of the words which now appear in section 6 "not conducted for Erofit" was considered and discussed at length, and I am infornied y some gentlemen that in the Senate and the House took part in the preparation of the present section 6, that like discussions were had at that time, and it is the consensus of opinion of all of these gentlemen that the words "not conducted for profit" qualify the association itself, and have no reference to the incidental benefits which come to a member of the organization by reason of receiving an increased price for his product, if he does receive any increased price. The word "profit," as to the member is not, perhaps, strictly accurate. What he does receive, if any particular benefit in the way of money return, is a higher price for his product, and there is a material distinction between the association as an entity making a profit, and the incidental benefit to the member because of the activities of the organization. Indeed, the well-known rule of con- struction — well known to you, Senators — that such a qualifying phrase refers to the first antecedent, surely and clearly shows that it refers only to the organization as such. Now, the reason why, therefore, that language which now appears and is in the present section 6, was continued in the amendment, was that it might not be charged that the association was a money-making profit associa- tion, the profit to be distributed to the members not m accordance with the quantity of the commodity they contributed, but according to their investment in it. The thought is that every dollar of receipts other than the necessary expenses of the organization will go to the members, not as profit but as their part of the price that has been received by the organization for their products. Senator Norris. I think I understand the distinction. I have no doubt that you are right about it myself. Mr. Miller. Yes. Senator Norris. But still, it was a question that I had not heard raised before Mr. Marsh raised it. Now let me ask you this : Reference has been made quite frequently to the farmers' union, and I may be mistaken as to some of the details of the nature of the illustration, but that will not be material. I understand, however, that the farmers' union was organized in some locality by farmers to handle their grain and their hogs and cattle. Now, let us say that they later organize a corporation with a capital stock of $5,000. The farmer puts up his money and gets a certificate of stock. It is, let us say, at 6 per cent, and there never can be a greater dividend than 6 per cent. He is not compelled even to sell his own grain to that corporation unless he wants to. But they buy an elevator and stock yards and do business just the same as any other grain elevator or stockyards. They buy grain on the market at the market price and sell it on the market. This corpora- tion is to take the place, or is intended to, take the place, of the mid- dleman that would otherwise handle the products. Whatever profit there is comes to the farmers. LABOR, AGRICULTURAL, DAIRY, ETC., ORGANIZATIONS. ' 67 Now, if at the close of the year the profits, if there are any — and, as I understand, in the farmers'' unions there have been very great profits; it has shown that it is a profitable business — the profits are first used to pay 6 per cent on the capital stock, who ever owns the ■capital stock gets it. The balance of the profit is divided up amongst the stockholders in proportion to the amount of business they have furnished to the corporation. Mr. Marsh. Right there. Senator. It is distributed to the mem- bers of the association in proportion to the amount of wheat that they have sold through the association. Senator Nokris. Or corn, or whatever it may be? Mr. Marsh. Yes; or corn, or whatever it may be. Senator Norris. Yes. Mj". Marsh. But not in proportion to the stock they hold. Senator Norris. No. Mr. Marsh. That is the distinction. Senator Norris. If you did not happen to raise any wheat and owned stock, you would get the 6 per cent on your stock and that is all you would get ? Mr. Marsh. Yes. Senator Norris. And some other man who was not a member of the association might sell his wheat to them— they will buy any- body's wheat — and his deal would be finished when he sold his wheat ? Mr. Marsh. I do not know as to the operation of that particular association to which you are now referring, but our mutual organiza- tion is now being reorganized, as I before stated, under a recently enacted cooperative law, and by the terms of it— and it was with the full acquiescence of the farm organizations of the State— there is a provision that if they do handle the products for nonmembers, they can only charge them the cost of handling them. In other words, that they should have a square deal. i, . ^ ^x, „i + ^ Senator Norris. The farmer who sold his wheat to the elevator if he had to wait until the wheat was sold there, might have to wait a good while before he got his money. Mr Marsh. Yes. They borrow money. They use this capital stock, and if they do not have enough I suppose they borrow at the bknks, and the seller gets cash for his wheat when he sells it. Senator Norris. A man who did not own stock, however, would have his wheat all mixed up with everybody else's wheat lust like any other buyer's wheat would be,, and the q".f tion I wanted to ask vou is, would that be a corporation for profit under this law? Is [hi^ such an organization now that if they were arrested and they sa d "We are a corporation, and we are not organized for profit, and the prosecuting attorney said they were, what would be your ^''m'miliu. K that association is buying wheat from nonmembers, pa^ng them the stipulated price, and sellmg that at a higher price an^ thus realizing profit and distributmg that profit among the stockhoTders of thi company, in my judgment, they would not come wTthin the protection of this act, nor do I think that they ought to. c-p"ntor Norris Now, it seems to me that they ought to. Mr M™ I differ, for this reason. Senator, that farm organiza- tions should not be permitted to have any greater advantage than 68 LABOB, AGRICULTURAL, DAIRY, ETC., ORGANIZATIONS. other organizations that are doing a like business. All that we are asking for is to be placed on an equality with other organizations. Senator Noebis. No; but let us see how that would work. We will say we want to permit this kind of association to organize. In my State they have done a remarkable lot of good for these pro- ducers of stock and grain, and they have eliminated the middleman, and whatever profit there is in it, the prodccers have gotten it. I think everybody concedes that they would like to have them do that. In some little country town perhaps they have the only ele- vator there, and if you are a farmer living 4 or 5 miles away ajid pro- ducing hogs or wheat, where are you going to sell your products * Mr. Miller. My idea would be not that they would not handle that man's products. They would handle it for him and distribute it upon the same basis that they did that for others. Senator Norris. They have to have some money to run that organization. Mr. Miller. There may be some justice in that. Senator Norris. The man who stays out would get the same as others; and they may have a fire and everything burn up, and all that. Mr. Miller. But what I am afraid of is, if that be permitted, if we will not open the doors, so that a profit-making association, one that goes out and buys and sells, comes within the protection of this law, then there will be great temptation for big business and capitalists to control these organizations. Senator Norris. I know. I realize that danger. Mr. Miller. But as long as we limit it, so that the organization aims to do business between all parties alike, we are protected. Senator Norris. I am not blind to the fact that your ideas are sound, there; but at the same time I would like to draft a law, if that danger exists, if that is lurking in it, so as to permit this corporation to do the business of the community. It really owes it to the com- munity. Mr. Miller. Yes. Senator Norris. You may not want to join this organization. Many farmers do not. You will say, "I want to sell my wheat and have it over with." You have a right to do that. You ought to be permitted to do so. But you ought to have a place to sell it; and this organization may be so satisfactory that in a little town there will be nobody competing with them there in that particular place, and a farmer might have to haul his wheat 10 or 15 miles farther fox a market. So that it is really a convenience for the' fellow that is not in. Mr. Miller. Mav I say this, that so far as I know, we would have no objection at all, if a method can be devised by which those associa- tions can be permitted, without opening the doors to these greater evils we have just discussed. We would be very glad. Senator Norris. That is just the thing that is bothering me, when we come to frame this bill. That is one of the difficulties. Mr. Miller. But it does seem to me to be reasonably easy for every one of these associations to do the business for all wheat pro- ducers, we will say, in that locality, at cost. Senator Norris. Now, how ? Suppose you represented this corpo- ration and you had an elevator, and I brought in a load of wheat, and I was not a member. LABOR, AGRICULTUEAL, DAIRY, ETC., ORGANIZATIONS.. 69 Mr. Miller. All right. Senator Norris. What would you do with me ? Mr. Miller. Assuming, as yoii have just stated a little while ago, that it is necessary for the farmer to receive the money Senator Norris. Yes. Mr. Miller. If it was not, he could wait, or sell and take his proportionate part of the sale. But it is necessary and reasonable in cases. Therefore it is necessary to have the means to advance to «ach producer, as the association finds can be advanced safely, awaiting sales; and then when the sale is made charging a man with the advance that has been made to him and finding out how much the wheat has been sold for in connection with the other wheat, nda giv- ing him everything that is saved, after deducting the advance made. Senator Norris. That is giving him an advantage over the mem- bers of the association. Mr. Miller. There is this advantage, that he is making no invest- ment. Senator Norris. And he is running no risk? Mr. Miller. No, sir. Senator Norris. If all the farmers were like him, they could not have the organization. Mr. Miller. But can that be avoided without opening the doors to these greater dangers 1 If it can be, we would be very glad to have it done. The Chairman. I do not know how to avoid it unless we follow some suggestions made by Mr. Marsh and follow some corporations in detail. . ,.,,„,. Mr. Miller. If we go into that once, attempt to go m a bill oi this •character into the eternal details of manageinent of these associations, we would have to have about as many provisions as there are States in the Union, because these associations must of necessity be managed under State laws. , . r, t Senator Norris. Put it up to those m your business. Suppose i am a dairyman and do not join your association, and you are buying at a little station in the country; would you buy my milk? Mr. Miller. Absolutely. Not buy it; sell it. Senator Norris. I can see how that would be comparatively easy, because you would get the returns on it, probably the same day; within a week. But now the wheat farmer comes m, and it it should be a year when there was much wheat raised, or at a time of shortage of cars which is a common thing, the elevator would be full of wheat ; and my little load would be stuck in with the wheat of everybody else, and it might be 60 days before my wheat was sold. Mr Miller. Under the alternative of the proposition. Senator, once 'opening the door to profit-making associations, permitting associations to buy and sell at a profit, they are domg exactly then what men engaged in other lines of industry are doing, and we might be justly charged with asking for farmers then special privileges, which we are not asking under this bill. Senator Norris. Yes, that objection could be made. Of course, in the case I put, the association would really be domg a public duty, to take the wheat of a man who is not a menaber, and pay him; and if he wants to sell it that way, and they sell it for a bigger price and make a profit on it, there would be nothing wrong, about it. Mr. Miller. Nothing morally wrong. 70 . I.ABOK, AGEICULTUBAL, DAIRY, ETC., OEGANIZATIONS. Senator Norris. No. If it would open a door, and by opening a door induce some evils to creep in and thus defeat the very purpose of the law Mr. Miller. There is the only question in my mind. If your com- mittee could rewrite this bill so as to cover the difhculty you have in, mind without opening the door to greater evils, we would be gla(|) to have it done. Senator Norris. The great trouble is that there are not enough fellows interested in it, and they have so much to do that they will not go into details with it, and there is difficulty in getting it passed^ Mr. Miller. Again, may I call your attention to the words "not conducted for profit" because I think there has been a great deal of misunderstanding as to the effect of that language, in certain circles* that it is the contention of the attorneys who are representing the now growing concerns making sales of farm products, that those words qualifying the association itself, distinguish it from a profit association, and that it in no way is intended, nor will it be construed> to prevent the incidental benefit to the farmer from a better price. STATEMENT OF ME. BENJAMIN C. MAESH— Resumed. Mr. Marsh. May I have about two minutes ? Senator Norris. Yes. Mr. Marsh. I will b'e very brief. I repeat our position, that the bill ought to be explicit on this question of profit, and I would like to add this in answer to a point raised by Gov. Deneen. The farmers have got to have their cost of production, or they are going to be liable to the charge of being profiteers. If they are not on a business basis they are going to be up against it all the time. They are not to blame if the Department of Agriculture does not give thena the information currently, and it is extremely important that it should; be done. ■ Now, as to the position and development of cooperative organiza- tions, may I suggest if you will permit me, Mr. Chairman, that 1 have noticed that the Federal Trade Commission has cases of several Federal cooperative organizations of farmers for profiteering — for unfair practices. It occurred to me — and I cite this although I regret to have to admit the fact; but it is a fact, and there are of course black sheep ia every fold — it occurred to me, if you could get ■from the Trade Commission, who have been investigating, just exactly how business has secured control, or unfair business methods which we want to avoid in the conduct of cooperative organizations have crept in, those two gentlemen — I know Mr. Colver would and possibly Mr. Houston — might give very valuable information in regard to the framing of a bill to meet the situation 'and to do what we want. We want these farmers' cooperative organizations to be conducted for profit, legitimately — a fair profit and with fair methods. I believe that a bill can be framed to cover the situation, and I am sure that with the light which Mr. Ralston on the practical principles of the phraseology, because of his very intensive work on this subject recently, and the trade commissioners, could give you, the committee will be able to draft such a bill which will work at least temporarily. Now as to the point of distribution, this question may I ask, Mr. Chairman ? It may not be effective in the arafting of this bill, but more and more the farmers' cooi)eratives want to sell directly to Cornell University Library HD 1484.A4 1920a Labor, agricultural, dairy, and horticul 3 1924 002 436 461