saw fit, and the farmer would have to take it. In order to protect themselves the farmers got together an organization, a farmers' association, organized "the equity," as they call it, and built their own elevators. The members brought their stuff there and sold it from there to the terminal market. They did not sell to these people, so that we appreciate fully the benefits of cooperative organization. But what we are trying to get at now is why these cooperative organizations should be permitted to expand and become monopolies.

Mr. GIFFEN. Of course, when I said that I did not think that it was possible for an organization like ours to live without 75 per cent control, I was thinking of the old conditions where the other part of the crop would go into the hands of the packers. However, I think-to answer your question--that as far as the raisin business is concerned we would have very much the same results if we had a dozen different organizations organized along the line of our own organization. I do not know anything about the milk business or those other things, but so far as the raisin business is concerned, we do not sell from day to day as milk is sold. We harvest in the fall a crop a large proportion of which must be sold during the rest of the year, and we do in a small way the same thing you speak of. Years ago, of course, it was a very much smaller business than it is now. We had 12 or 15 differ

ent growers' units.

Senator WALSH of Montana. I understand you to say that those were not organized on a proper basis because they had no capital, and that they failed chiefly for that reason?

Mr. GIFFEN. That was one of the reasons.

Senator WALSH of Montana. I may also add that they were feeble organizations and not properly financed, and failed for that reason. Mr. GIFFEN. Yes, sir.

Senator WALSH of Montana. And the cooperative idea not having taken hold of people they simply went back; instead of organizing themselves into units large enough to control the business they dropped back under the old system, and commenced dealing with the commission merchants again.

Mr. GIFFEN. That is true. They were small and weak. But here, as I see it, would be the result: We have a unit at Fresno and one at San Francisco, and one at Bakersfield, and we have them in those different communities. Naturally, each one of those units is anxious to sell their product in the fall. They want to get the money then. Unless you had a gentlemen's agreement, which we have found in California not very effective it is simply another way of beating the law-unless you had a gentleman's agreement between these different units that they were going to maintain the price, chaotic conditions would exist.

Senator WALSH of Montana. That is just exactly the condition that confronted the steel manufacturers of this country, is it not? Mr. GIFFEN. I am not familiar with that.

Senator WALSH of Montana. That is the benefit of competition. The steel manufacturers in this country, it is charged, got together at Gary dinners and entered into a kind of gentlemen's agreement that they would sell steel at a certain price, and that was regarded as inimical to the public interest, and that in the public interest there ought to be this free competition.

Now, I can very well understand from your standpoint and from the standpoint of the producer-not taking the consumer into con

sideration at all-that a gentlemen's agreement would be a good thing; and so, of course, would be the perfect monopoly. It would be a good thing. But we have got to look at this thing from the standpoint of both sides, from the standpoint of the consumer who gets some benefit from the competition, as well as from the producer's standpoint.

Mr. GIFFEN. Of course I feel, myself, that as I stated a while ago, the law of supply and demand is all the remedy you need for that.

I will say frankly that so far as we are concerned out there, call it a monopoly if you wish, we believe there is not any way for us to prosper there, with even comparative success, except along the same general lines that we have got, which means a monopoly so far as those raisins are there concerned.

Mr. PRESTON. Why not have 50 per cent? get along with 50 per cent?

Why could you not

Mr. GIFFEN. For this reason. Suppose that you had 50 per cent. Suppose your clients had had 50 per cent of this crop and we had had 50 per cent. There is 40 per cent of the crop left in the State at this time, and we would own that 40 per cent.

Your clients would have sold their 50 per cent. We would have sold 10 per cent and we would own 40 per cent that we would have there. We would have had the expense of carrying that 40 per cent, the insurance, the shrinkage, interest on the investment, deterioration in the quality of the goods; and we would not have had any money for our producers, and we could not operate at all.

Mr. PRESTON. I do not get you. Why could you only sell 10 per

cent?

Mr. GIFFEN. Simply for this reason. Say we had 50 per cent and you had 50 per cent. Somebody has got to make a price to start with. There has got to be some starting point in this thing. Naturally, the burden of that is up to an organization. The responsibility would be up to the organization. We would make a price on the 1st of August of 15 cents a pound. Your people would cut that price one-eighth of a cent or one-quarter of a cent, if they needed to do it, and they would sell their goods. If we cut the price another eighth of a cent to meet it, they would cut another eighth of a cent, and so on, and it would go down until you would have the same conditions. The only thing we could do would be to set our price and wait until you had sold your goods; and this year we would have waited up until now.

Mr. PRESTON. You could undersell any of them easier than they could undersell you.

Mr. GIFFEN. If it was a competition to see how low we could get the price, we could meet any price you made; but the theory of the organization is that we should get a little better price for the grower. Senator WALSH of Montana. The industry, in the steel business, is in very much the same situation. It seems to be pretty generally acknowledged that the United States Steel Corporation fixes the price of steel, and the others always follow the price fixed there. Sometimes they cut under it-the so-called independents do. That is the testimony. Usually the Steel Corporation does not go to price cut, so that sometimes the Steel Corporation's prices are higher than the prices exacted by the independents.

Apparently the world eats these raisins. They are consumed, some way or other. You get rid of them.

Mr. LINDSAY. If I may be permitted, just for a moment, to answer Mr. Preston's question, I think one answer is this, that if the California Associated Raisin Co. controls 75 per cent or more of the crops, it may market those crops under natural conditions and in conformity with the law of supply and demand of the market, so that the producer may receive a fair return and the consumer not suffer thereby; but if there is 50 per cent that is controlled by the California Associated Raisin Co. and 50 per cent controlled by the people represented by Mr. Preston, then in order to bring about the same result, to give the producer the same fair return for his investiment, there would have to be an unlawful combination either by a gentlemen's agreement or some other way, between the company and the concern represented by Mr. Preston.

Mr. PRESTON. Then your diagnosis is that you must have a monopoly, unregulated?

Mr. LINDSAY. We have not said that

Mr. PRESTON. Irrespective of all legislation?

Mr. LINDSAY. We have not said unregulated.

Senator WALSH of Montana. We would like to hear you about that.

Mr. GIFFEN. Just what do you mean, now, there, Senator Walsh, that you would like to hear us on?

Senator WALSH of Montana. You have now control of 85 per cent? Mr. GIFFEN. Ninety-three per cent of it.

Senator WALSH of Montana. Should there by any control of any character?

Mr. GIFFEN. You are speaking now, I suppose, particularly-there is just one vital thing and that is price you are speaking particularly of price, I presume?

Senator WALSH of Montana. Yes.

Mr. GIFFEN. I will say, then, that so far as the California Associated Raisin Co. is concerned, and so far as I am concerned as a raisin grower, if there had been a price-fixing tribunal of the Government, commissioned to fix a price on raisins, every year since we have been in business, I would have had more money, and the raisin growers of California, in my judgment, would have had more money. Of course, I do not know what those prices would have been, but they must have been based on reasonable interest on investment plus the cost of labor, plus the reasonable depreciation. That would have been the rule of arriving at it; and if a Government tribunal had fixed the price each year on those products, we, as raisin growers would have had more money than we have now. We would not have had as much last year. We would not have had a 15-cent price last year on that basis. But there were a lot that did not get that, so that the average result, in my judgment, would have been that we would have had more money under a price-fixing rule by the Government than we

have now.

Mr. PRESTON. Allow me to ask one more question. Is it your contention that you have been operating at less than the cost of production up to and including the year 1918, is it?

Mr. GIFFEN. No; I did not say that. I said that I considered that the average result of the fixing of those prices would have been more

for those years, and it would be too long a story to go into all the figures that it would take.

Senator WALSH of Montana. I would like to have you follow the line that you were pursuing.

Mr. GIFFEN. I think, however, that it would be, for the Government of the United States to go into the fixing of prices of all the products that the farmers grew in the United States, as an American citizen, while as I say, from our point of view we would have had more money-I mean, that as an American citizen I am not afraid, speaking of socialism, yet I certainly do not believe that the time should come in this country when the Government should try to do all the things that enter into our everyday life.

Senator WALSH of Montana. As it was understood until the other day, it was believed to be provided, under the protection of the statute which we are asked to enact, that if anyone should monopolize or restrain trade to such an extent as to unduly enhance the price, a complaint could be made to the Secretary of Agriculture or to the Federal Trade Commission, I believe, by whom the price should be fixed, and that to charge more than that price would subject one to contempt proceedings. Would you like to have us enact that statute in this form?

Mr. GIFFEN. Of course, I had been starting from a little different basis from what you had. Your statement the other morning was then, that there were just two horns of the dilemma, one of which was dissolution, and the other was price fixing by the Government. I had hardly looked at it in that way.

Senator WALSH of Montana. In what way had you looked at it? Mr. GIFFEN. Of course, I had not given this law any study. I had not even read it, and I did not come here to defend the law. I am not familiar with it, but, naturally, I have heard it discussed some, and I felt that it would only be in very extreme cases when that would ever come up. I felt, and I absolutely feel yet, that there can not be for any length of time a monopoly-I do not know of any farm products in which there can be for any length of time a monopoly. I do not believe it is possible, and I think in the end that this is going to be regulated by the law of supply and demand, and that that question is probably not going to come up except in very extreme cases; and I supposed that it would work out more along the line of suggestions by the Department of Agriculture, and that there would be only an extreme case now and then where there would be such a thing as actual price making, or actual dissolution. However, I saw the force of your point the other morning on that, that it would be pretty hard to have a halfway measure.

Senator DILLINGHAM. But the Secretary would be compelled to fix what in his judgment was a reasonable price before he could take any action.

Mr. GIFFEN. I will say frankly that if this bill carries with it price making by the Government of agricultural products, I would be opposed to the bill, because I certainly do not think it is a practicable thing. In the first place, I think it will cost the consumers of this country a big lot of money. I believe that the average price of farm products as determined by the law of supply and demand will be less than any price fixed. At times they will be higher, but on the

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average they will not be higher than the prices fixed by the Government. I think that it will cost the consumers of the country a lot of money; and, aside from that, I certainly think that everything can not be done by the Government. There must be some things left to be done by the people themselves. It would be absolutely appalling to me to think of the Government going into the business of fixing prices of all agricultural products in this country, and if they are going to do it on one they must do it on others.

Senator WALSH of Montana. Here is the language of the bill. [Reading:]

That if the Secretary of Agriculture shall have reason to believe that any such association monopolizes or restrains trade to such an extent that the price of any agricultural product is unduly enhanced by reason thereof, he shall serve upon such association a complaint stating his charge in that respect, to which complaint shall be attached, or contained therein, a notice of hearing, specifying a day and place not less than 30 days after the service thereof, requiring the association to show cause, etc.

Now we are agreed, I think, that with respect to most agricultural products it would be impossible, or next to impossible, so to monopolize or restrain trade as that the price of any agricultural product should be unduly enhanced thereby. But I want to take the case that actually happens, because that is what the bill says, if upon such hearing the Secretary of Agriculture shall be of the opinion that such association does monopolize or restrain trade to such an extent that the price is unduly enhanced, should he, in that case, have the right to fix the price?

Mr. GIFFEN. Probably the best instance is the one you have mentioned. That is the only one I can think of. I do not agree with you in that, but probably the nearest product to the raisin, that which comes nearer being in that shape than any other I can think of

Senator WALSH of Montana. And you might fall under it? Mr. GIFFEN. I was going to say, we might be the one. So far as the product is concerned, I am perfectly willing to accept the decision, one year with another, of the Secretary of Agriculture, as to what our prices should be. But as a general principle-and I do not see how the law can be made by the Congress of the United States to fit the Associated Raisin Co.

Senator WALSH of Montana. Certainly not.

Mr. GIFFEN (continuing). But if this bill carries with it price fixing, and if you are going to put the farmers of this country_upon the basis of a public utility, you really are going further than I ever thought it would go in this country.

Senator WALSH of Montana. You think, then, that the people who drew this bill had not reflected very carefully upon it?

Mr. GIFFEN. Of course I have not had any conference with anybody that helped to draw that bill, and I am just expressing to you as frankly as I can my own individual feeling about it.

Senator WALSH of Montana. Yes.

Mr. GIFFEN. I am not here as an advocate of the bill. I would be in favor of it in a general way, because I am interested in farmers' organizations, and am interested in their welfare; and I supposed that this was one step in the right direction; but I do not think the time has come yet when we want to make prices by the Government. If that is necessitated by the bill, I do not think it can be done.