PROPOSED MERGER OF MEAT-PACKING CORPORATIONS.

MONDAY, JANUARY 8, 1923.

UNITED STATES SENATE,

SUBCOMMITTEE OF THE COMMITTEE ON AGRICULTURE AND FORESTRY,

Washington, D. C.

The subcommittee met, pursuant to call, at 4.30 o'clock p. m., in room 224, Senate Office Building, Senator Kendrick presiding.

Present: Senators Kendrick (chairman), Norbeck, and Keyes. Senator KENDRICK. The meeting will come to order. Two bills have been referred to us for consideration-that is, one resolution and one bill. (The measures referred to are here printed in full, as follows:)

[S. Res. 389, Sixty-seventh Congress, fourth session.]

Whereas it is currently reported in the public press that Armour and Company, one of the five largest meat-packing corporations in the world, is forming a corporation under the laws of the State of Delaware with a capital stock of $160,000,000, with the announced purpose of taking over the interests of said corporation in Chicago, Illinois, and elsewhere; and

Whereas it is common knowledge that negotations have been pending for some time between said Armour and Company and Morris and Company, another one of the five largest meat-packing establishments in the world, with the avowed purpose of the merging of said meat-packing corporations under the name of Armour and Compay; and

Whereas it is currently reported in the public press that the total amount of stocks and bonds to be issued upon the combining of said corporations is very materially in excess of the amount of property involved; and

Whereas the carrying out of such proposed merger of two of the largest packing establishments in the world is liable to be detrimental to the public interests and to unlawfully restrain trade (1) in that such merger will tend further to limit the number of large purchasers of live stock from farmers and producers, and (2) will very materially reduce competition in the production of meats and packing-house products and thereby tend to increase the cost of living to the consumers of the country: Therefore be it

Resolved, That the Federal Trade Commission be, and it is hereby, directed to make a full and complete investigation of the organization of said proposed investigation of the organization of said proposed corporation under the laws of the State of Delaware and also of the proposed merger of the said two corporations, and report to the Senate whether the organization of said corporation and the combining of said corporations are in violation of law and to what extent, if any, the carrying out of such merger will tend to eliminate competition in the purchase of live stock and to increase the cost of living to the consumers."

[S. 4110, Sixty-seventh Congress, fourth session.]

A BILL To amend the act of August 15, 1921, entitled "An act to regulate interstate and foreign commerce in live stock, live-stock products, dairy products, poultry, poultry products, and eggs, and for other purposes."

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the packers and stockyards act, 1921, approved August 15, 1921, and entitled "An act to regulate interstate and foreign commerce in live stock, live-stock products, poultry, poultry products, and eggs. and for other purposes," is hereby amended by repealing paragraph (b) of section 406 thereof and substituting in lieu of said paragraph the following: (b) Nothing contained in this act shall affect the power or jurisdiction of the Federal Trade Commission nor deprive the said commission of any power or 1

jurisdiction conferred upon it by the act entitled "An act to create a Federal Trade Commission, to define its powers and duties, and for other purposes," approved September 26, 1914, or by an act entitled “An act to supplement existing laws against unlawful restraints and monopolies, and for other purposes," approved October 15, 1914, or by any other act.

STATEMENT OF HON. HENRY C. WALLACE, SECRETARY OF THE DEPARTMENT OF AGRICULTURE, WASHINGTON, D. C.

Senator KENDRICK. Can you give us any information as to whether or not the incorporation recently carried out by Armour & Co. in the State of Delaware, includes in its plans, the merging of the two packing companies of Armour and Morris?

Mr. WALLACE. Mr. Armour and Mr. White, who has long been Mr. Armour's right-hand man there and who has since become the president of the new Armour Co.-the Delaware Co., accompanied by their general counsel, came to see me, and in brief, said they had in contemplation the plan to purchase the assets of Morris & Co.-not the stock but the physical assets of Morris & Co. They said that due to the need of meeting war demands they, and the other packers also, had been obliged to greatly expand their various plants, adding new plants and new equipment, and in general, enlarging their whole operating equipment to take care of the increased run of stock which was produced to meet war demands; that with the decrease in the market they found themselves, just as we know many other businesses have found themselves, with an overhead which the decreased business could not carry and an enlarged equipment which they are not able to utilize. For example, in their Chicago plant, Mr. Armour said they were able to run at only 60 per cent of the capacity. He said that condition applied to Morris & Co., as well as Armour & Co., and perhaps to a somewhat less extent, to the other large packing plants-the Big Five as we call them. That they had been endeavoring during the past two years, which had been a period of very heavy losses, to readjust their operations and meet these conditions, and that they had lost during the year 1921, about $31,000,000, for that one year. Morris also lost heavily.

Senator KENDRICK. Let me ask whether or not the claim was made that this loss was sustained through the operations of the packing house or through the subsidiary companies, like the grain dealing?

Mr. WALLACE. I think the grain deal is not included in that at all-many of the subsidiary plants, but not the grain business. Armour & Co. had lost $31,709,817. Morris lost $11.972,540, making a total loss for Armour and Morris combined, of $43,682,358. The combined loss of the three other Big Five was almost $18,000,000 for the same period, 1921. Now, in casting about for ways to meet the situation, they had decided that one of the most economical things they could do would be to combine the business of these two concerns, by buying the physical property of Morris & Co. In that way, they would be able to effect economies as nearly as they could estimate of not less than $10,000,000 a year. They would do that by cutting down their overhead, largely administrative and legal overhead, which is considerable. At Chicago, for example, putting in a viaduct between the two killing plants, holding the Morris plant as a reserve and doing all of the killing in the Armour plant, which would take care of it without being taxed to its capacity, and using the Morris plant to take care of the peak loads, and by a large number of economies which would suggest themselves to anyone familiar with the packing business. Without going into the matter in further detail, that in brief was the statement they outlined to me.

Senator KEYES. If the Armour company bought the physical assets of the Morris company, what would the Morris company have left-anything? Would they go out of business?

Mr. WALLACE. They would go out of business so far as using the Morris name was concerned for a certain definite period. The situation as to Morris is this: About 80 per cent of the stock is held by inactive stockholders, mostly women, and by Ira Nelson Morris, the ambassador to Sweden, and I understand those stockholders would like to get their money out.

Senator NORBECK. It amounts to a liquidation of the Morris company? Mr. WALLACE. The Morris company is run by young Nels and by Eddie, who are said to own not quite 20 per cent of the stock. They are in entire charge of the Morris outfit. These inactive stockholders, not getting dividends,