The foregoing is as complete a reply to the Senate's question as the commission has been able to prepare during the time at its disposal. It must be stated that the instances cited are by no means a complete catalogu 2.

All of which is in support of the statement of the President, when, in his address to a joint session of Congress on May 27, 1918, he said:

The profiteering that can not be got at by the restraints of conscience and love of country can be got at by taxation. There is such profiteering now, and the information with regard to it is available and indisputable.

THE FEDERAL TRADE COMMISSION,
WILLIAM B. COLVER, Chairman.

JOHN FRANKLIN FORT, Vice Chairman.
VICTOR MURDOCK.

There is also printed by order of the committee the following: ANSWER OF SWIFT & CO. TO THE FEDERAL TRADE COMMISSION-REPort of June 29, 1918, ON PROFITEERING.

In its report of June 29, 1918, on "Profiteering," the Federal Trade Commission has done the packing industry of the country a gross injustice by making misleading statements with regard to its profits and by making serious charges that are not substantiated by any proof.

Swift & Co. bases its criticism of the Trade Commission's report on the following points:

1. The report contains unfair and inaccurate comparisons of war profits with prewar profits.

2. The report contains an absolute misstatement of fact with regard to the prices of hides.

3. Profit figures are presented in such a way as to give a totally false impression as to their magnitude.

4. The Trade Commission does not mention that profits on meat have been limited by the Food Administration since November, 1917.

5. The report does not mention that it has been necessary for the packers to leave the bulk of their profits in their businesses to finance heavy inventories, and to build additions and improvements made necessary largely by war demands.

6. The report definitely accuses the packers of having a monopoly and of breaking the law, without giving any facts to substantiate this accusation.

The whole report is a sensational and one-sided affair. It has already aroused protests from leading business men and newspapers against a department of the Government which requires the confidence of business men in order to do effective and constructive work.

If the large packers were in the habit of issuing such misstatements and manipulated figures as appear in the recent report of the Federal Trade Commission on war profits, there might be some cause for the serious and unsubstantiated charges made against the packers by the Commission.

The Federal Trade Commission was designed originally to serve a useful and nonpolitical purpose; it has already been used as a stepping stone for political aspirants, and it is degenerating into a vehicle for the issuance of sensational and misleading statements about American business.

There can be no objection to a fair statement or investigation of war profits on the part of the Government, as a foundation for excess profit taxation, but there can be no excuse for seizing such an opportunity to discredit honest American business concerns, especially those that have done their utmost, and successfully, to meet war demands. The packing business has kept quiet for so many years under frequent attacks that everyone feels free to make sensational charges against it at any time. Swift & Co. at least does not intend to stand for this kind of treatment any longer, and considers it a public duty to combat false accusations, and to give out accurate information. Otherwise, the packing industry might be reduced by shortsighted Government interference to the condition that the railroads have been reduced to during the past few years. No other industry has been able to fulfill war-time demands so promptly and efficiently as the packing industry.

The two most glaring perversions of fact about the packing industry in the recent report of the Trade Commission are the comparison of war with prewar profits, and the insinuation that the packers have been responsible for the high prices of hides and leather. The paragraph on this latter subject includes an absolute misstatement of facts.

1. UNFAIR AND INACCURATE COMPARISON OF WAR WITH PREWAR PROFITS.

In comparing war profits with prewar profits, the Trade Commission figures are inconsistent and misleading, and apparently compare a three-year total war profit with a one-year prewar profit. It states that the average one-year profit of four packers for the three years before the war was $19,000,000, and that the aggregate profits for all three war years was $140,000,000, showing an increase of $121,000,000 during the three war years. Such a comparison, which has been given wide publicity by the press of the country, is obviously unfair.

The figures in the last column are obtained by adding the "excess" for each year to the average prewar profit. The sum of these shows a total profit of $178,000,000 for the three war years. Either the figures which total $178,000,000, or the statement that the total profit was $140,000,000, is incorrect.

The $140,000,000 corresponds with the published statements of the four packers concerned. Possibly the Trade Commission has included certain appropriations to reserves in obtaining the figures which total $178,000,000.

The important point is that the Trade Commission's own statement of profits, in the same paragraph of the report, do not coincide with each other, and the inclusion of an inaccuracy of this sort, whether favorable to the packers or not, tends to discredit the value of the whole report. Whichever figure represents the true profit of the packersthe $140,000,000 which corresponds with the published statements, or the $178,000,000, obtained by adding figures presented by the Commission, the packers are ready to defend as reasonable and just, considering the volume of business handled, the returns made to stockholders, and the need of greater funds to finance the business during war times.

2. MISSTATEMENT CONCERNING HIDES.

As for the reference to hides, the Trade Commission says that during 1917 the prices of hides, particularly packer hides, were advanced very rapidly, notwithstanding that during the period of advance great supplies of hides were withheld from the public. The statement that hide prices advanced during 1917 is absolutely false. The following figures, taken from the Yearbook of the Chicago Drovers' Journal, show that, except for the hides from heavy native steers, the general tendency of native packer hides was downward:

Prices of hides per hundred pounds, Chicago, 1917.

The insinuation that packers advanced the prices of hides arbitrarily is without foundation. The large packers are not only in keen competition with each other, but with many outside dealers. The domestic supply of hides in 1917 was the largest in the history of the country, and the demand did not keep pace with the supply. Swift & Co. sold 20 per cent more hides in 1917 than during the preceding year and got rid of them as rapidly as the market could absorb them, and suffered losses on many of these sales.

Swift & Co. wrote to the Federal Trade Commission in March, correcting misstatements in the preliminary report of the Trade Commission on the hide and leather situation, issued last January, but the Trade Commission has apparently paid no attention to these corrections and explanations.

3. UNFAIR TREATMENT OF PROFIT FIGURES.

In addition to the comparison of war with prewar profits referred to above, the whole presentation of the matter of profits is misleading and tends to give a false impression. Where it is said that the packers "have preyed upon the people unconscionably, one might infer that the high prices of meat have been due to large profits of the packers. To be entirely fair, the Trade Commission might have explained that these profits amount to such a small fraction of a cent a pound that if eliminated entirely there would have been practically no effect upon the prices of meat or live stock. Where it is said that the total profits of the four large packers for the three war years amounted to $140,000,000, it should have been explained that this profit was made on a total volume of business of $4,570,000,000 and amounted to only about 3 cents on each dollar of sales.

4. THE REPORT DOES NOT MENTION THAT PROFITS ON MEAT ARE LIMITED BY FOOD

ADMINISTRATION.

The Federal Trade Commission should also have explained that since November, 1917, the Food Administration has limited the profits of the five large packers in their meat departments to 9 per cent on the capital employed, amounting to about 2 cents on each dollar of sales. No profit whatever is guaranteed.

5. SENSATIONAL METHOD OF STATING MORRIS & CO.'S PROFIT.

Another indication of the unfairness of the Trade Commission is the way in which it featured the fact that in 1917 Morris & Co. earned a profit of 263.7 per cent on its capital stock. It is true that the Trade Commission says that this was equal to a rate of 18.6 per cent on the net worth of the company, but to have emphasized the fact that the profit was 263 per cent on the small nominal capitalization of $3,000,000 is evidence of the commission's desire to present sensational and misleading information. The extent to which the press dispatches throughout the country have featured this 263 per cent, without any explanation, is ample proof that the commission was unjust in presenting the figure the way it did.

The report goes on to say that while the other packers have made lower returns on their common capital stock it is because they have from time to time declared stock dividends and in other ways capitalized their growing surpluses. Speaking for Swift & Co., this statement is entirely untrue. Every cent of the $100,000,000 capital upon which the earnings have been computed has been paid in in cash. Furthermore, there is nothing reprehensible in the practice of issuing capital stock for earnings that have accrued and been allowed to remain in the business.

6. IT IS NOT EXPLAINED THAT WAR PROFITS HAVE BEEN NECESSARY.

Furthermore, the impression is given that these packers' profits quoted in the report were earned in cash and distributed to the owners of the business. The Trade Commission says that they were "pocketed." As a matter of fact, speaking for Swift & Co., after the payment of 10 per cent dividends to 20,000 stockholders out of the 1917 profit, the remainder was put back into the business to finance operations and to build extensions and improvements.

In discussing war profits, a distinction should be made between those industries which earn a clear cash profit which can be taken out by the owners, and those businesses which have to keep their profit tied up in the business. At the very high prices prevailing during the past year, Swift & Co. has found it difficult to finance its business; whereas, inventories ran from $50,000,000 to $75,000,000 before the

war,

they have been running as high as $150,000,000 during recent months. Even with over two-thirds of our net profits of 1917 put back into the business, we have had to issue more stock in order to raise money to properly finance the business.

Another fact that should be considered in connection with war profits is that they have been earned on continuously rising markets. Prices have advanced so rapidly, even between the time of purchasing live stock and the sale of resulting products, that unexpected, as well as necessary, profits were earned. We do not feel, however, that these profits are entirely earned, because sooner or later there is bound to come a period of receding prices, when our profits will not only be smaller than anticipated, but may even turn into losses. It is necessary, both for our own business and for the welfare of the country, that we protect ourselves against this occurrence.

7. THE MONOPOLY CHARGE.

Finally, the trade commission openly accuses the packers of having a monopoly and of manipulating the market without regard to law. This is a very serious charge and no department of the Government should make it unless it has the facts to prove its case. The Federal Trade Commission has no such facts, because they do not exist. Swift & Co. stands ready to prove to any unprejudiced person that it is in open competition with the other packers; that it has no power to manipulate prices, even if it desired to do so; and that it has lived up to the law in every respect. The whole report of the Federal Trade Commission is a one-sided affair. It not only ignores business fundamentals, but willfully misrepresents the facts. The industries affected have been given no opportunity to explain their side of the case and the commission gives no explanations of the business reasons for the facts gleaned from the packers' books. We protest that this is not a proper way for such an important department of the Government to proceed.

(There is also inserted the summary contained in Part I of the Federal Trade Commission Report, authorized incorporated on page 200 of these hearings.)