Mr. WELD. They are not going to oppose their furnishing refrig erator cars. They have specifically stated that we approved of having the railroads forced to furnish refrigerator cars for people who need them. As for stockyards, we have never gone on record as to whether or not the railroads ought to own them or not after they are taken away from us. We have not expressed a definite opinion on that. I do not believe it makes much difference to us whether the railroads buy them from us or some outside people. Mr. MARSH. That is, you would not oppose that provision in this bill or in any bill to control the packers?

Mr. WELD. That thing is taken care of by the decree. We would oppose taking the refrigerator cars away from us; we are opposing that now. But we do not oppose the railroads furnishing cars to

whoever wants them.

Mr. MARSH. I understand; but I wanted to inquire specifically as to whether or not you oppose the railroads acquiring the stockyards the principal and necessary stockyards-whether you favor that; say, those at which there was done during the last calendar year a business of 100,000 head of cattle, or 250,000 head of hogs? Mr. WELD. I think it would be a mistake to pass a law requiring the railroads to own all stockyards in the country, if that is what you mean.

Mr. MARSH. I gave the description; that is, those that did such an amount of business.

Mr. WELD. I mean over that amount-to require the railroads to own them would be foolish. I know two or three railroads that do own them. I believe one instance is at Detroit, and I understand that the operation of those yards has not been very successful. But I have not looked into that particularly. As to selling our yards, I believe we would just as soon sell to the railroads as to anyone else anyone who would pay what they are worth-I do not know. Mr. MARSH. How would you reach the figure as to what they were worth?

Mr. CHAPLIN. I do not know. We can not answer that off hand. Mr. WELD. Of course, there are a number of things to be taken into consideration-earning power and physical assets.

Mr. MARSH. Would you be willing to take the criterion, for instance, of the Massachusetts Railroad Commission "actual prodent investment"?

Mr. WELD. I do not know; I do not know what that means.

Mr. MARSH. I am surprised, with your experience, that you do not
know what "prodent investment" means in the packing business.
Mr WELD. There are still some things I do not happen to know, but
Mr. Chaplin knows most of those I do not.

Mr. MARSH. You are going to oppose the license system?
Mr. WELD. Sure. You do not need to ask me that.

Mr. MARSH. Sure. I just want to get it into the record. You are going to oppose the commission?

Mr. WELD. Commission regulation of our business; yes, of course

we are.

Mr. MARSH. And you oppose also giving anybody power to tell you, subject even to court revision, what lines of industry you must refrain from engaging in?

Mr. WELD. We object to any law giving any commission any such power.

(The following exhibits were submitted by Mr. Weld and directed to be printed in the record at this point:)

ALLEGED COLLUSION IN CHEESE BUSINESS.

None of the correspondence introduced by the Federal Trade Commission on this subject was taken from the files of Swift & Co., and this company is not concerned to any great extent. It is true that the large packers together handle a considerable proportion of the cheese business of the United States. but the figures presented by the Federal Trade Commission, on page 134 of the report, exaggerate their "dominant position" in the cheese market of the Nation. The total production of cheese in 1918 appears to have been about 420,000,000 pounds (Standard Farm Paper Year Book, 1918-19), and according to estimates furnished us by the Bureau of Markets, United States Department of Agriculture, about 92 per cent of this entered trade channels. This means that about 385,000,000 pounds of cheese were traded in during 1918. Swift & Co. handled less than one-sixth of this total.

At the top of page 135 of the report, the firm of Pauly & Pauly is listed as a "packer-controlled" firm, because this firm sells 80 per cent of its output to Swift & Co. It is true that we buy very heavily of this concern, with whom we have had very satisfactory relations; but it is not true in any sense that this firm is controlled by Swift & Co. The alleged control of this firm is made use of by the Federal Trade Commission is an attempt to show collusion between Armour & Co. and Swift & Co., by introducing into the reproduction of a letter from Armour & Co.'s files (bottom of page 135 of the report), a parenthetical remark which was not in the original letter. This point is mentioned merely as an illustration of the methods used by the trade commission to imply collusion. Such implications have the force and effect of absolute assertions in the minds of many readers of Government documents.

In connection with this cheese business, Swift & Co. also wishes to state that we buy over 90 per cent of our Wisconsin cheese purchases from wholesale dealers, in whom we have no financial interest, and that we buy the remainder direct from cheese factories, none of which we own. We buy no cheese on the cheese boards in that State. We have never tried to affect the quotations on the cheese boards, and we have no agreements or conspiracies with other packers or dealers to affect cheese quotations or to divide territory in any way what

soever.

ALLEGED AGREEMENTS IN CREAMERY AND BUTTER INDUSTRY.

The Federal Trade Commission claims that there is a division of territory among the big packers in the buying of cream, which is used for making butter, and that there are price agreements among the local buyers and agents of the packers, who gather cream at near-by points for shipment to our plant.

In support of the first claim, the Trade Commission says that out of 1,561 creameries, condensaries, and cream stations, reported to the commission, 1,262 belong to Swift and 293 to Armour, and that there are only 29 towns where cream-buying stations of two or more packer groups are located. This is sunposed to imply a division of territory.

In the first place, it should be noted that the number of Armour cream-buying stations is very small as compared with the number of Swift stations. These cream-buying stations are located principally at small country points, and there are tens of thousands of such points where the packers might have representatives to buy cream. It is only natural that in developing a system of creambuying stations one packer should prefer not to establish a buying agency at the same shipping point where another packer has already become established, especially when there are so many thousands of places that may be selected. That Swift and Armour are represented in only 29 towns, especially when Armour is located at only 293 places in all, can not possibly be considered evidence that there is an agreement to divide territory.

Furthermore, Swift & Co.'s method of assembling produce is substantially different from that employed by the other packers. We rely largely on our own country plants, which collect, prepare, and ship those products to the other packers who buy more heavily from other dealers. This in itself indicates that

it would be practically impossible to divide territory; and, as a matter of fact. Swift & Co. have no agreement with other packers for this purpose.

As for the question of agreement among local cream buyers, this matter requires preliminary explanation before the correspondence introduced by the trade commission can be properly understood. In obtaining cream at country points. Swift & Co. employs agents who assemble the cream brought in by surrounding farmers and ship it to Swift & Co., receiving a commission for their services. These agents are men who are generally in other lines of business. They are often proprietors of local stores, or they may be cash buyers of poultry and eggs on their own account, who are acting as agents for Swift & Co. only in the purchase of cream on a commission basis.

In many cases there are two or more such cream buyers in a single town, and there are also cream buyers at shipping points within a radius of 10 or 15 miles, to any of which the farmers may haul their cream, depending on the prices offered by these different cream buyers.

It is perfectly obvious that the prices paid by competing cream buyers in the same town or in the same general locality must be substantially, if not exactly, the same, otherwise the buyer who offers, say, 1 cent less per pound for butter fat will get no business, and he has to fall in line with his competitors in order to hold his trade. On the other hand, if his price is too high, he gets the business but loses money on it. Because of this situation, it has always been very common for competing cream buyers to keep themselves informed as to the prices their competitors are paying.

This was the situation which confronted Swift & Co. when it entered the business, and is the situation it has had to contend with in the development of local cream-buying stations. We have employed agents who are representatives of Swift & Co. only in the sense that they receive a commission for such cream as they gather and ship to us; they have always been in the habit of keeping themselves posted as to prices paid for cream by other buyers in the same town or near-by towns, and in the very nature of the case the prices offered by these local cream buyers must be, and necessarily will be, substantially identical, even though the buyers are severe and jealous competitors of each other. One other complicated feature of the situation is that some States have "antidiscrimination laws," which prohibit one company from paying different prices for cream or other products at different points within the State, except as differences are justified or made necessary by differences in transportation rates. The object of such legislation is to prevent price cutting in single localities for the purpose of driving competitors out of business.

We have therefore been up against the problem of preventing price agreements in localities where prices are bound to be practically the same, even if there is no agreement, and at the same time of preventing differences in prices in different localities, as required by State laws, except as such differences are justified by transportation rates or are necessary to meet competition.

A careful analysis of the correspondence introduced (pages 147 to 154 of the report) shows the difficulties we have met in dealing with this situation, and shows at the same time the positive efforts we have made to prevent local price agreements among our country cream buyers. The matter is written up in such a way by the Federal Trade Commission as to imply that we are consciously having our agents enter into agreements with competitors, and that we are trying to cover up the matter by admonishing and instructing our agents to be careful in the phraseology of their correspondence. In this connection, the Trade Commission has failed to reproduce certain letters that it took from our files, which more clearly define our real attitude and policy than any of those which are actually reproduced in the report.

As an example of the Trade Commission's unfairness in this respect, it failed to reproduce the following positive instructions that were issued to our representatives on February 15, 1915, copy of which was available to the commission, and which shows our definite attempts to prevent price agreements. Similar instructions were issued from time to time:

"1. Managers should keep in mind the fact that buying prices and selling prices should be based on value, taking into consideration quality, freight rates, and competitive conditions.

"Attention is directed to the so-called antidiscrimination laws under which uniform prices must be paid. While these are construed to permit variations to meet legitimate competition, the conditions must be extreme to induce managers to make such variations.

"2. Managers must not, under any circumstances, enter into any agreements, verbal or written, restricting competition in any manner, or dividing territory with competitors or in any manner threatening or seeming to threaten shippers. Any acts that might be so construed should be avoided.

"3. Anything that might tend to affect the company from a legal standpoint should be called to the attention of the produce and legal departments, with all the facts thhat can be gathered concerning them."

Another evidence of the unfairness with which the Trade Commission handled this matter is shown by the method in which general instructions issued by Mr. L. F. Swift, ordering compliance with the old Supreme Court injunction of 1903, are introduced at the bottom of page 149 of the report. This incident is explained as though it were a special precaution taken by Mr. Swift at the time of the introduction of resolutions in Congress calling for an investigation of the packing industry. As a matter of fact, these instructions, based on the 1903 injunction, have been issued periodically by Mr. Swift to all heads of departmnets at intervals of about six months for many years. This matter was explained, and the instructions reproduced, on pages 11 and 12 above.

An attempt is also made, as on page 150 of the report, to intimate that auditors have been employed merely for the purpose of going about among our agents in order to destroy incriminating evidence. The truth is that one of the duties of our traveling auditors has been to check up the operations and correspondence of our representatives in order to prevent the actual occurrence of collusive practices. This is clearly shown by the letters reproduced at the bottoms of pages 148 and 151 of the report.

It is also significant that in reproducing the letter of March 9, 1916, on page 151 of the report. the Federal Trade Commission failed to reproduce the following letter of April 3, which was written by the head of our produce department to two submanagers in the department, which again explains our attitude and efforts, and copy of which was actually taken from our files by the Federal Trade Commission.

Messrs. J. Y. MARSHALL and L. E. DUNKER.

APRIL 3, 1916.

Question of making agreements with other produce dealers. Want you to take up especially with each manager, assistant manager, you visit, the question of making agreement of any character.

You fully understand our requirements in this matter. The managers are all under instructions from Mr. L. F. Swift covering the matter. We desire you to further handle as follows:

Explain to them clearly that they have been thoroughly instructed in this matter and any deviation from these instructions will revert against them in person.

You are to thoroughly and clearly explain to them that if for any reason they have a conversation with other dealers, they are not to make any statements of any character that could be construed as an agreement and unless this is fully understood by them and unless this is followed to the letter, we shall find it necessary to instruct them that no conversations of any character are to be had with any other dealers that touch any feature of the produce business. You are to make a definite memorandum of this conversation with each of these managers, showing the date thereon and hold same in your files as permanent record and responsibility is placed with you to see that interview of this character is had with every manager of the produce plants under your direction, within reasonable time.

*

*

It will be seen that in this letter the manager of our produce department said that it might be necessary to instruct our agents not to hold "conversations of any character with any other dealers that touch any feature of the produce business." That is to say, we were trying definitely to prevent our agents from entering into price agreements that we were thinking of instructing them to not even talk with other dealers about the produce business. Again, on page 147 of the report, the Trade Commission introduces a letter written to

Mr. H. B. Collins, on September 10, 1915, but fails to reproduce the reply written by Mr. Collins on September 20, copy of which was taken from our files by the Federal Trade Commission and which clearly explains our attitude:

Mr. R. C. MCMANUS.

Legal Department.

Answering your letter of September 10:

SEPTEMBER 20, 1915.

I may be mistaken, but I do not believe there is anything about these letters that proves clearly illegal.

Considering the number of agents we have, unless we say to them they are not under any circumstances to have conversation of any character with their competitors, there will be more or less communications reaching our creameries from these agents.

What do you think of instructing managers, as well as our traveling representatives, that where they receive a communication, either by telephone or by letter, from an agent which shows any trace of getting together or making agreement with a competitor, that they are to be written a clear letter specifically mentioning the communication, stating to them that under no circumstances are they to make an agreement, and that they are making themselves eriminally liable by so doing?

Believe this would have the effect

1. Of stopping possibility of their making agreement.
2. It would make our records clear.
Awaiting your reply.

PRODUCE DEPARTMENT,

Finally attention is called to the letter of September 1, 1916, page 153 of the report, which shows that because of the difficulties we were having in preventing our cream agents from entering into local agreements, in spite of positive efforts we had been making in that direction, we thought of actually doing away with cream agents in Missouri, where we were having the most trouble, and also of carrying out a similar policy in other States if it worked out satisfactorily in Misscuri.

In conclusion it is obvious from the foregoing discussion that the Federal Trade Commission not only misrepresented the facts with regard to the creambuying situation at country points, but that it also actually suppressed pertinent and relevant correspondence which it took from our files. The insinuation, which carries the weight of positive assertion in the minds of those who do not understand the matter, is that Swift & Co. was sanctioning local price agreements, whereas a true interpretation of the correspondence reproduced in the commission's report, and especially of the correspondence which the Trade Commission failed to reproduce, shows that Swift & Co, was doing its best to prevent illegal price agreements. Swift & Co, doubts if any other concern has made such definite efforts to cope with this difficult situation.

(The following is submitted by Mr. Marsh:)

THE FIGHT OF WISCONSIN FARMERS AGAINST THE CHEESE COMBINE, AS TOLD BY THEIR LEADER-BY HENRY KRUMREY, PRESIDENT WISCONSIN CHEESE PRODUCERS' FEDERATION.

The Wisconsin Cheese Producers' Federation takes in 3,500 patrons of 120 farmers' cheese factories. It has been in operation for seven years, with a steady growth of bu iness, in 1919 selling 14,980,021 pounds of cheese for $4,318,596, all receipts, after paying handling charges, going back to farmer members. It is one of the most successful cooperative enterprises of America. How the farmers were forced to organize for their self-protection is told by their leader.

Wiscons in now produces 70 per cent of all the cheese produced in the United States. The Big Five packers control the marketing of 75 per cent of this cheese. They receive cheese at 35 different places in Wisconsin, where they have warehouses which are run in the name of a packers' agent, who usually owns some of the stock.

Each appa

The packers do not compete with each other in buying cheese. rently has his territory allotted to him. The price which farmers get is established on the Plymouth cheese board, just as the price of butter was es tabli hed on the Elgin butter board until the Government had this board