The prices to the trade of the various varieties since 1917 are herein set out as follows: For Sunmaid seeded raisins in No. 16 cartons: Cents. It will be noted that the extraordinary situation is found in the above prices for the year 1920, not only in that they are higher by at least 50 per cent than the prices condemned by the Trade Commission in 1919, but also the unheard-of condition is found showing that the price of the loose raisin is fixed far in excess of the price of the seeded raisin manufactured from said loose raisin. In other words, the food raisin is the seeded raisin. The loose raisin is suitable for distilling and wine-making purposes, and in order to appeal to that particular trade and to destroy its competitors, the defendant fixed for its loose raw material a higher price than it exacted for its manufactured product. The effect of this, if successful, would be to destroy competition in food raisins, for the reason that no competitor could buy raisins, seed and pack them, and sell them for less than he would have to pay for the loose raisin itself. The defendant, however, could do this with impunity, for the reason that it does not fix 1 No price fixed. to its grower any particular price, but yields to them whatever net returns there may be upon all varieties of raisins combined. Nothing short of control of the market would give the corporation the power to fix and maintain such an artificial differential between the raw and the manufactured article. FOOD ADMINISTRATION PRICES OF 1918 AS COMPARED WITH PRICES OF 1919 AND 1920. From the above table it would appear that the price in 1918 of the Muscat raisin to the wholesale trade was 93 cents per pound. The same raisin in 1919 to the wholesale trade was 15 cents per pound. The same raisin to the wholesale trade in 1920 was and is now 21 to 23 cents per pound. The 1918 price was fixed by the Food Administration of the United States and the corporation admitted over and over that this price was a fair and reasonable price. The cost of production since 1918 could by no stretch of the imagination have increased to exceed 1 cents per pound. The profit to the grower at the present prices could not be less than the net amount of $200 per ton. The average yield is 1 ton per acre. This sum, it will be noted, is 5 per cent net on a land valuation of $4,000 per acre. Much of the land produces at least 2 tons per acre. The prices of 1919 were condemned by the Federal Trade Commission as unfair by decision rendered June 8, 1920. The 1920 prices are on an average 50 per cent higher than the condemned prices of 1919. THE LAW'S DELAY. On September 30, 1919, the Attorney General of the United States requested the Federal Trade Commission to examine the prices being charged by this corporation, and the request was in part as follows: "Wherefore the Attorney General hereby makes application to the Federal Trade Commission to investigate whether the said California Associated Raisin Co. is obtaining and maintaining more than fair and reasonable prices for its products, and to make recommendations for the readjustment of the business of the said corporation in order that the corporation may hereafter maintain its organization, management, and conduct of business in accordance with law; and to give notice of such proceeding to the said corporation so that it may appear and submit thereto." The usual notices were given, hearings had, brief filed, and the cause was expedited by both sides and also by the commission, but we were unable to get a decision until June 8, 1920, after a period of eight months had elapsed. The corporation not only did not lower its prices after the decision but increased them 50 per cent, as above noted, and the only adjustment it made of any consequence was the surrender of a 3-year option and the taking of a 15-year contract with the growers. The Department of Justice, being unable to get this concern to obey the law by peaceful means, filed a suit in equity at Los Angeles, Calif., on September 7, 1920, and prayed for a preliminary injunction, which was promptly denied. After this suit had been filed the prices, above referred to for 1920, were fixed and now obtain. The 15-year contracts were also taken after this suit was filed and the Department of Justice has been in every way defied by this corporation. The recent campaign for contracts was nothing more nor less than a referendum to the persons benefited by the operations of the corporation and, of course, they almost unanimously indorsed it. FARMERS' BILL. House bill 2373, in its present form, would legalize the above institution; in fact, the provisions of the bill would seem to have been drawn specially to legalize such a concern. This concern limits its dividends on capital stock to 8 per cent. There is no qualification for membership mentioned in the bill and the ownership of one share of stock of the par value of $1 would qualify a person as a member. There is likewise no limit of any kind upon the amount of capital that could be employed. There is no provision against the holding of stock by trustees or the control of corporations by voting trust agreements. There is no limit as to the number of acres a member must own of a given product. The above corporation could, in a moment, comply with this bill in every particular by simply issuing $1 in stock to any grower who has no stock and any stockholder who is not a grower could either become such by the purchase of a small vineyard or by the sale of his stock to any stockholder who was a grower. The contract with the grower provides that a portion of the purchase price of his crop may be paid in stock so he can not refuse to become a member within the meaning of this bill. OTHER CALIFORNIA PRODUCTS. The peach, the fig, the prune, the apricot, the walnut, the almond, and the olive products and possibly others could easily be controlled in the same way that raisins are now controlled. In fact, any localized product may be thus controlled with little or no difficulty. Many, if not all, the above enumerated products are fast following in the footsteps of the raisin corporation. Respectfully submitted. JUNE 2, 1921. JNO. N. PRESTON. OBSERVATIONS ON THE OPERATION OF THE VOLSTEAD FARMERS' BILL (H. R. 2373), AS APPLIED. TO LOCALIZED PRODUCTS. SECTION 1. This section provides no qualification for corporate membership, and the ownership of one share of stock would seem to meet the law as to such membership. The bill provides that the association may deal with the product not only of members but of any other person or corporation producing the same product. This would seem to be a provision authorizing the association to profit from the handling of the products of nonmembers, but, as above noted, this point is of little consequence in corporate associations, as one share of stock could be issued and thereby make such nonmember a qualified member within the meaning of the bill. An association, corporate in form, organized by three, five, or seven producers, however small, could by contract handle, process, and market 90 or even 100 per cent of the product of all other persons of that class. It would only be necessary for the corporation to contract with such growers and take over and pool the product, process, and sell the same for any price the traffic would bear. In other words, the bill simply means that a small group of capitalists or land speculators, if they are also growers or producers of an agricultural product, may organize a corporation, contract for a predominating control of the product for a period of years, and fix arbitrary prices thereon, and be subject only to section 2 of the bill. This section also, by the use of the word "process means nothing more nor less than to permit manufacturing of all the products and by-products of any of the classes mentioned. The fruit grower may engage in all the lines of manufacture to which fruit is put. The wheat growers could manufacture flour, breakfast foods, and all other by-products; the cotton grower could engage in any business where cotton is the chief article used in manufacture; the same is true if the tobacco grower. Not only this, but the bill especially authorizes a common selling agency between all or any of these associations. These powers are so broad that it would seem only reasonable and just to require proper safeguards against abuse, as human nature is the same in whatever line of endeavor it may be employed. SEC. 2. In a case where the control is not gained by violation of the law but is voluntary, and as a result of such control exorbitant prices are exacted, it seems that section 2 is the exclusive remedy therefor. In view of the provisions of section 5 on unfair competition of the trade commission act, section 2 would seem to be unnecessary or at least of little or no purpose. The power given to the Federal administrator by this section is only to enter an order to "cease and desist" restraining trade or monopolizing. It gives no affirmative power whatever. We will suppose that a proper case was presented to him and he desired to enter such an order; what would the defendant" cease and desist" from doing? The administrator could not dissolve the combination, as the statute would, in such case, especially authorize the combination. The administrator could not fix a price, as no such power is attempted to be conferred upon him. If the cause were docketed on the record of a court, the judge would have no power either to dissolve the combination or to name and fix a price. The power to fix prices has never been conferred by the Sherman Act or any other antitrust statute upon the court or any other body of men. Indeed, this power is expressly disclaimed by the courts in all their decisions. The court could not say that A and B must get out of the combination while C, D, and E may remain therein. The conclusion, therefore, seems irresistible that section 2 does not provide an adequate or, in fact, any remedy whatever that would protect the public against exorbitant prices from one of these associations. If, however, the bill provided that the association could not control to exceed a certain percentage of the commerce in such article, then an order to "cease and desist" if needed at all would have some vitality. Other objections to section 2.-Practically all agricultural products are seasonal and annual. Not only this, but the bulk of these crops move in interstate trade during a short period or season of each year. Under this bill the price must have become actually unduly enhanced in order to justify the Federal administrator to even take up the question of proceeding against such concern. After consideration of the question, he may cite the offender, but the hearing date can not be fixed until after the expiration of 30 days from the date of service. Conceding no postponements, the taking of testimnoy, the writing of briefs, the consideration of the subject and the issuance of a "cease and desist" order could not be expected in less than 60 days. The concern would then have 30 days additional to conform to the order. This it may refuse to do. The Department of Justice is then called in and begins its independent consideration of the case. It decides that a restraining order be applied for and petitions the court for this relief. The court in some far-away jurisdiction, after application to it, must have time to consider the matter before granting the injunction. From the docketing of the case until the granting and serving of the injunction, another 30 days at least would have elapsed. At least four months and probably six or eight months have elapsed; meanwhile, the crop is practically all sold at the exorbitant figures named by the association. The Federal Trade Commission informs me that where investigations are necessary, many months intervene before a decision can be obtained. That the average time is four months for a decision, but that if investigations are extensive, much more time is consumed. THE RAISIN CO. BEFORE THE TRADE COMMISSION. As an illustration of the delay that would result under the provisions of this bill, the case of the California Raisin Co. is again in point. The Attorney General requested an investigation of the prices being charged by this concern on September 30, 1919. The cause was despatched in every way possible by both sides; some 2,000 pages of testimony were taken and a decision rendered on June 8, 1920, after a period of eight months had elapsed. The trade commission condemned the price as excessive and unfair, but in the meantime, more than 90 per cent of the raisin crop of the United States had been sold and delivered at these condemned prices. Again, the crops being annual, the prices are fixed on the conditions appearing each year and the price for a single year would be no criterion for ensuing years. The whole procedure would therefore have to be reenacted each year. Indeed the raisin corporation instead of complying with the orders of the Federal Trade Commission retaliated at the next ensuing year by fixing its prices 50 per cent higher than the condemned prices of 1919. Again, why go to the district court instead of the Circuit Court of Appeals for relief? It would only prolong the litigation. Again, if the Federal administrator does not act, no relief of any kind could even be attempted and it would seem also unreasonable to have the Secretary of Agriculture administer this bill, thereby duplicating the work of the Federal Trade Commission and also being a person who could, in all probability, not refrain from being partial to the agriculturalists. SENATE AMENDMENTS TO FORMER BILLS. The Senate amendments to a former bill similar in character to the one under consideration proposed the control of the question of monopoly by inserting at the close of the bill a clause providing that nothnig in the bill should be construed as authorizing the creation of or the attempt to create a monopoly, nor to interfere with the operation of section 5 of the Federal Trade Commission act which relates to unfair methods of competition. There was manifestly an error in that amendment as drawn in that it referred to the wrong statute. But would such an amendment meet a case of voluntary combination and the fixing of an abnormally excessive price on the article? What relief could the court grant in such a case? The court could hardly say that the combination should be dissolved as the whole design of the bill is to expressly authorize such combination. In other words, the court could not say that the association should cut its control of the product down to a certain per cent for, by so doing, it would be the equivalent of saying to A and B, "You must leave the association, and C, D, and E remain therein." Neither could the court say that you should charge 10 cents per pound instead of 15 cents for your product. If the power to combine remains, this amendment would not reach the case unless it could permit the court to dissolve the combination. I can not see anything in the bill even with these amendments that would give adequate relief in a case such as has been supposed herein. The conclusion again seems clear that the only possible method of preventing abuse by these localized crop producers is to fix a percentage limit on the interstate commerce they are permitted to control. It is, of course, difficult to draft such an amendment, but I believe that it can be done and, as above stated, I believe that it is the only method of properly safe guarding the public. Respectfully submitted. JUNE 2, 1921. JNO. W. PRESTON. SUGGESTED AMENDMENTS TO HOUSE BILL 2373. SECTION 1. (a) Insert word "any" after the word "of", line 3. (d) Strike out "person so engaged" line 8 and insert words "their members" and close sentence. (e) Strike out all the remainder of Section 1 and insert in lieu thereof the following: "Such associations and their members may make the necessary contracts and agreements to lawfully carry out the legitimate objects of such associations: provided, however, That such associations (a) are operated for the mutual benefit of their members as such producers, (b) are not formed or operated with the intent to nor in such manner as to control such a proportion of the supply of any such product as will create or constitute a monopoly thereof or an unreasonable restraint of commerce therein, and (c) conform to both of the following requirements: "First. That no member of the association is allowed more than one vote because of the amount of stock or membership capital he may own therein and "Second. That the association does not pay dividends on stock or membership capital in excess of 8 per cent per annum. NOTE. The object of amendments (a) to (c), inclusive, is to prevent associations producing one agricultural product from combining with associations producing other agricultural products; amendment (d) is designed to prevent an association dealing in the products of nonmembers; amendment (e) is designed, first, to state the limit to which associations may combine and make it clear that monopolies are not authorized and, second, to prevent one or two men with capital from controlling and dominating corporate associations. SEC. 2. (a) Strike out words "Secretary of Agriculture" line 11, and insert "Federal Trade Commission." (b) After word "association," line 12, add the following: 66 'Although operating within the law, yet nevertheless, (c) Strike out words "monopolizes or line 12. (d) After word "trade" line 13, insert words "or lessens competition." Strike out word "he," line 14, and insert words "the commission." Strike out word "his," line 15, and insert word "its." Strike out words "Secretary of Agriculture," line 25. and insert "Federal Trade Commission." (h) Strike out words "monopolizes or "line 1, page 3. (i) After the word "trade" line 1, page 3, insert words "or lessens competition." After word "is," line 3, page 3, insert "or is about to become." (k) Strike out word "he," line 3, page 3, and insert "it." ་་ (1) Strike out word "him," line 5, page 3, and insert the word "it." (m) Strike out words "Secretary of Agriculture," line 20, page 3, and insert words "Federal Trade Commission." (n) Add the following at the end of the bill: 'Nothing herein contained shall be deemed to authorize the creation of or an attempt to create a monopoly, and, except with respect to acts expressly authorized and permitted by section 1 of this act, nothing herein contained shall be deemed to exempt any association organized hereunder or its members, or any of them, from the operation of, or from proceedings instituted under the act approved July 2, 1890, entitled 'An act to protect trade and commerce against unlawful restraints and monopolies,' or from the operation of, or any proceedings instituted under the act approved September 26, 1914, entitled 'An act to create a Federal Trade Commission, to define its powers and duties, and for other purposes,' or from the operation, or any proceedings instituted under, the act approved October 15, 1914, entitled 'An act to supplement existing laws against unlawful restraints and monopolies, and for other purposes.' NOTE. The objects of amendments (a), (e), (f), (g), (k), (l), and (m) is to change the administration of law from the Secretary of Agriculture to the Federal Trade Commission; the object of amendments (b), (c), (d), (h), (i) and (j) is to make it plain that the jurisdiction of the Federal administrator of this law is to confine itself to |