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Mr. HOLMAN. Yes, sir; for the reasons stated in connection with the theory of the Wisconsin law.
Senator WALSH of Montana. Let us see how that would work. Mr. HOLMAN. All right, sir. Senator WALSH of Montana. Mr. Armour is a farmer. He has a farm out near Lake Geneva, Wis. I know half a dozen other very wealthy men in the city of Chicago who have farms similarly. I visited on one of them last summer. These half-dozen men organize an association for the purpose of marketing their farm products, and they put in capital stock of $10,000 000, as they might easily do. Mr. HOLMAN. They could not do that either in Illinois or in Wisconsin.
Senator WALSH of Montana. Why?
Mr. HOLMAN. There is a limitation on the amount of capital which can be put in by any individual. I believe it is $1,000 in each case. You see, we have those safeguards in some of our cooperative laws. Senator WALSH of Montana. But I understood you to say there was not any law in Illinois.
Mr. HOLMAN. There is a type of cooperative law there, but it is not a one-man one-vote law; it carries a limitation of the amount of stock that an individual can own.
Senator WALSH of Montana. Well, let us say that they do not organize under the cooperative law at all; they organize under the general corporation law of the State of Illinois, and they put in a capital of $10,000,000; but they are going to deal only in the products of their own farms, and they are going to deal in like products. Here is a capital of $10,000,000, so they engage in the grain trade, and buy grain from other producers. They pay only 8 per cent on the capital and divide the remainder among the stockholders on the basis of the amount of product contributed by each. Is not that possible, Mr. Holman?—and with that they do annually $100,000,000 worth
Mr. HOLMAN. That might be possible, but it is hardly probable, sir. Senator WALSH of Montana. Why is it hardly probable? Mr. Armour is now engaged in the grain business, and he would get all the protection of this statute. Now, if there were a provision in this law like that, that Mr. Armour would have to divide up with the nonmember patrons 50 per cent of the profit or 75 per cent of the profit, that would catch them; but, as the thing reads, what is the reason why they can not organize a $100,000,000 corporation?
Mr. HOLMAN. As to the legal point as to whether Mr. Armour, under those conditions, could claim protection under this act, I can not advise you. I would normally answer that I think that they would probably catch him under the ordinary corporation laws in their relation to the antitrust acts.
Senator WALSH of Montana. This, of course, is to relieve the people who organize under this act from prosecution under the Sherman Act.
Mr. HOLMAN. It is to provide a way by which they can be prosecuted more satisfactorily.
Senator WALSH of Montana. He would be relieved from prosecution under this act, whereas five other gentlemen or six other gentlemen who are not farmers, who are located in the city of Chicago, who do not own any farms and are not dealing with any farm prod
ucts, would be open to prosecution, although they are both engaged in doing business of exactly the same character, except, of course, that Mr. Armour markets all of his farm products through this association, and his associates do the same thing.
Mr. LYMAN. Mr. Chairman, may I ask the Senator a question? I think this same question came up in the discussion with Mr. Volstead;, and to meet that suggestion-the suggestion that Senator Walsh has made now, that, for instance, the packers could organize in this way-I made the suggestion at that time that the word primarily" be inserted there. I think I made that suggestion at a hearing where you were present, Senator.
Senator WALSH of Montana. I do not remember it.
Mr. LYMAN. So that it would read "that persons primarily engaged," etc.
Senator WALSH of Montana. I do not remember that I was ever present when the subject was under consideration, even, Mr. Lyman. I never heard of it until this bill came before us here. We never contemplated such a thing. The other bill restricted operations to members of the organization.
Mr. CAMPBELL. Senator, may I ask whether the last proviso on that page there, the proviso that follows on the same page, at the bottom of the page, does not qualify that?
Senator WALSH of Montana. "Provided, however, That such associations are operated for the mutual benefit of the members therof"? Mr. CAMPBELL. "As such producers." Now, to go into a large business of like products, etc., would not be for producers; it would no be as producers. They would be then in the general trade.
Senator WALSH of Montana. Yes; but if they are permitted to buy the products of people who are not members, of course it would be to their benefit; but how would it be to their benefit as producers to buy the products of people who are not members?
Mr. HOLMAN. Senator Walsh, this thought that I have is entirely personal, and I have not had an opportunity to confer with any one else, of course; but in most of our State laws as we pass them now we are limiting the use of the word "cooperative cooperative" to corporations carrying out certain well-defined types of activity; and since this bill only has to do with the operations of these associations in interstate commerce, and they first have to get their charters from the State, I should think that the insertion of a word like that on line 5, "nut or fruit growers may act together in cooperative associations, corporate or otherwise," would not damage the bill.
Senator WALSH of Montana. I think that is a very good suggestion, Mr. Holman; but you would then be obliged to put in some kind of a definition of what the cooperative association is. Indeed, I believe that a perfect bill ought to extend the benefits of this act only to cooperative organizations, and the character of those ought to be defined in some such way as you have to some extent elaborated in your discussion of the subject here, so that the benefits of it should not be taken by organizations that are just merely in form cooperative associations, but in effect are not such at all.
Mr. HOLMAN. This bill, of course, is not all that we would like to have.
Senator WALSH of Montana. Now, of course, we need not say that the "malefactor of great wealth," and the fellow in whom cupidity
is the governing emotion, will take advantage of this act, if he can, and thus the whole thing would be brought into discredit.
Just one further matter.
Mr. HOLMAN. Mr. Lyman also would like to make a short state
Senator WALSH of Montana. Just one other question. Mr. Holman, I want to know from you whether you think that a provision in this law to the effect that it should not be construed to authorize the creation of a monopoly would be a serious impediment to the organization of cooperative associations?
Mr. HOLMAN. Yes; I do, Senator Walsh.
Senator WALSH of Montana. Let me inquire about that, then. just what kind of business would you like to see a monopoly?
Mr. HOLMAN. I would not like to answer that question in that way. In attempting to meet that question a little earlier in my statement, I said that mere largeness in itself was not a condition of evil. We might as well face this fact, Senator Walsh.
Senator WALSH of Montana. My own opinion is that as a rule it is a beneficent thing rather than an evil.
Mr. HOLMAN. Frequently. The farmers of the country can no longer stay in their condition of local organization. The local elevator companies-take 5,000 of them, for example, that I know of, that are farmer-owned and most of them cooperative. At the present time they are very much aroused over the condition of the wheat market. They feel that there is a great deal of waste, at least in the matter of commission men, in the handling of their grain. There are movements on in the Middle West-the farm papers and the daily papers are full of it-showing the desire on the part of these farmers to effect certain economies..
For example, on the Chicago Board of Trade there is a commission house for practically every local elevator in the State of Illinois; and if three or four hundred of these elevators should form together in a central selling agency to go on to the board of trade, they would be effecting certain economies. I pointed out that Denmark did not fear the growth of large aggregations of farmer cooperatives. The Siberian creamery system which I referred to consists of 1,300 creameries and 1,400 stores banded together along 2,000 miles of railroads. They are organized for the international sale of their products. We are having difficulty at the present time in finding foreign markets for a lot of farm crops. We want the privilege of being able to reach out and find and develop consumption fields of our products. Consequently, we do not think that at the present time, since the courts have not apparently definitely defined "monopoly," it should be undertaken to define "monopoly" for cooperatives without defining it for other types of corporations.
Senator WALSH of Montana. With all due deference, Mr. Holman, I must say that you have not answered my question. Let us get down to a concrete basis. Let us take the supply of milk for the city of New York. Your association now supplies 60 per cent of it. Do you want us to pass a law which will authorize the consolidation of all those producers supplying milk to the city of New York in one single organization?
Mr. HOLMAN. I can see no harm in that per se. I think it is the acts of the organization that should be considered, and not its structure or size.
Senator WALSH of Montana. You can not? Well, let us see. If that is the case-and that is the case, of course-could you see any reason, then, for not giving exactly the same right to producers of farm machinery?
Mr. HOLMAN. Åre they not exercising that right at the present time?
Senator WALSH of Montana. Whether they are or not I do not undertake to say. The question is, shall we legalize it? Shall we now authorize a single combination of producers of farm machinery in this country? Of course whether it would do harm or whether it would do good would depend upon the wisdom and the humanitarian impulses with which it was operated.
Mr. HOLMAN. Of course our answer to that is that they are now legalized, and there is a bill in the Senate which recognizes their existence and is seeking to provide a method of supervising one of these great combinations, or a series of them, the so-called packers' bill.
Senator WALSH of Montana. The trouble about that is, Mr. Holman, that you are complaining that the law is not enforced. That is not the point. The question is, shall we repeal the law? Shall we permit them to go on and organize a complete monopoly, a perfectly legal monopoly; and if we shall not, what is the difference between a monopoly of the supply of milk in the city of Chicago and a monopoly of the production of farm machinery?
Mr. HOLMAN. I attempted to show that essential difference a little earlier when I brought out the human character of the cooperative corporation. It is democratic; it is nonexclusive; it is educational; and it can be relied upon, I think you will find, Senator. Of course you are discussing a pure theory of law there.
Senator WALSH of Montana. I want you to bear in mind that your ideal law in the State of Wisconsin is not a general law at all; and if it were, this act is not restricted in its operation to such associations at all, but it extends to all of them. Whether they can be organized in the State of Wisconsin under another law or not I do not undertake to say; but there are many States that have no such law, and they would organize under the ordinary corporation statute, and they would not be democratic at all. They might be entirely exclusive. They might be limited, as I pointed out to you, to six men.
Mr. HOLMAN. Do you think, Senator, to use your case, if those men organized under the corporation statutes of Illinois, that they could claim the privileges which are given in this bill?
Senator WALSH of Montana. I can not see why they should not. They are organized for the purpose of marketing their products. Mr. HOLMAN. Well.
Senator WALSH of Montana. And then they are permitted to deal in the products of other people who are engaged in producing similar products. That is all that this bill requires.
Mr. HOLMAN. I understand.
Senator WALSH of Montana. But let us pass that. Now let us follow this subject of monopoly a little further. What particular product do you feel it would be advisable to permit to be handled through a monopoly? What monopoly would you like to organize? Mr. HOLMAN. Unless we can arrive at a meeting of minds on what constitutes a monopoly, we can not answer that question definitely.
Senator WALSH of Montana. "Monopoly" is a term that has been in the law for many years. Let us assume the case that I put the other day, that all of those now supplying the City of Washington with milk over in Virginia and over in Maryland were in one association, and they established their own distributing agency, and thay got rid of the distributors, so that they supplied the entire City of Washington with milk. Now, as you have very vividly illustrated, there is a certain drainage basin, as we might say. Everybody in this drainage basin is in that one association. Of course they might act with high-minded and unselfish purposes, and they might allow the natural selfishness of human nature to get everything there is in it to control their operations. Now, of course, as pointed out by the other gentlemen, you could easily expand it; if they charged prices that were too high, milk would come in from the adjacent country; but you appreciate, of course, that it would be here under disadvantageous circumstances.
It would have to be carried a long distance; it would have to organize its separate and independent agency, and then of course the local association would come down in its price, and they would be competing under disadvantageous conditions by reason of their distance. They could sell their milk better in Philadelphia or Wilmington or Baltimore, or somewhere else, and they would soon go to pieces. I should say that under those circumstances this association that I assume has a monopoly of the supply of milk to the City of Washington. I hope I have made my idea of monopoly clear.
Mr. HOLMAN. That would be true if the association dealt directly with the consuming public; but looking at the facts in the case, notthe hypothetical situation, the dealers are so well organized, the distributors, that they have no difficulty in getting milk
Senator WALSH of Montana. But I assume that they have done the sensible thing, and put in their own distributing system. Mr. HOLMAN. That the farmers have?
Senator WALSH of Montana. Yes.
Mr. HOLMAN. Then you bring up, Senator, an entirely new theory of social control, when an organization reaches that state of perfection.
Senator WALSH of Montana. That is just what the raisin growers did. Now, let us take the case of raisins.
Mr. HOLMAN. Let us carry that other illustration a little bit further. Senator WALSH of Montana. Very well.
Mr. HOLMAN. Let us assume that the Maryland and Virginia association gets to the point where it buys out Oyster & Co. and the other distributors here and becomes the exclusive selling and distributing agent for this territory, handling 100 per cent of the milk. Under this law that organization would be permitted to go right ahead practically naming the price of milk. That is what it would be doing. So long as its acts were reasonable there would be little or no complaint. If, on the other hand, it pushed the price of milk up to where the public began to suffer, there would be recourse on the part of the citizens' associations of the city through the Secretary of Agriculture. But the biggest factor in that is this, Senator, and we discussed it very sincerely at the meeting of the National Dairy Marketing conference in Chicago the other day: That the more