to said association of such filing. Such district court shall thereupon have jurisdiction to enter a decree affirming, modifying, or setting aside said order, and may make rules as to pleadings and proceedings to be had in considering such order. The place of trial may, for cause or by consent of parties, be changed as in other causes. The facts found by the Secretary of Agriculture and recited or set forth in said orde shall be prima facie evidence of such facts, but either party may adduce additional evidence. The Department of Justice shall have charge of the enforcement of such order. After the order is so filed in such district court and while pending for review therein the court may issue a temporary writ of injunction forbidding such association from violating such order or any part thereof. The court may, upon conclusion of its hearing, enforce its decree by a permanent injunction or other appropriate remedy. Service of such complaint and of all notices may be made upon such association by service upon any officer or agent thereof engaged in carrying on its business, or on any attorney authorized to appear in such proceeding for such association, and such service shall be binding upon such association, the officers, and members thereof. [H. R. 13931, Sixty-sixth Congress, third session.] AN ACT To authorize association of producers of agricultural products. Be it enacted, etc., That persons engaged in the production of agricultural products as farmers, planters, ranchmen, dairymen, or fruit growers may act together in associations, corporate or otherwise, with or without capital stock, in collectively processing, preparing for market, handling, and marketing in interstate and foreign commerce, such products of their members; and such producers may organize and operate such associations and make the necessary contracts and agreements to effect that purpose, any law to the contrary notwithstanding: Provided, however, That such associations are operated for the mutual benefit of the members thereof, as such producers, and conform to one or 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, or, Second. That the association does not pay dividends on stock or membership capital in excess of 8 per centum per annum. SEC. 2. That if the (1) Seeretary of Agriculture Federal Trade Commission shall have reason to believe that any such association restrains trade or lessens competition to such an extent that the price of any agricultural product is unduly enhanced by reason thereof, (2) he the commission shall serve upon such association a complaint stating (3) his its 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 thirty days after the service thereof, requiring the association to show cause why an order should not be made directing it to cease and desist from so restraining trade or lessening competition in such article (4), and the place named for the hearing shall be within the Federal judicial district in which the principal office of such association or corporation is located. An association so complained of may at the time and place so fixed show cause why such order should not be entered. The evidence given on such a hearing shall be reduced to writing and made a part of the record therein. If upon such hearing the (5) Seeretary-of-Agriculture Federal Trade Commission shall be of the opinion that such association restrains trade or lessens competition to such an extent that the price of any agricultural product is, or is about to become, unduly enhanced thereby, (6) he it shall issue and cause to be served upon the association an order reciting the facts found by (7) him it, directing such association to cease and desist therefrom. If such association fails or neglects for thirty days to obey such order, the (8) Seeretary-of-Agriculture Federal Trade Commission shall file in the district court in which such association has its principal place of business a certified copy of the order and of all the records in the proceeding, together with a petition asking that the order be enforced, and shall give notice to the Attorney General and to said association of such filing. Such district court shall thereupon have jurisdiction to affirm, set aside, or modify said order, and may make rules as to pleadings and proceedings to be had in considering such order. The facts found by the (9)Seeretary of Agriculture Federal Trade Commission and recited as set forth in said order shall be prima facie evidence of such facts, but either party may adduce additional evidence. The Department of Justice shall have charge of the enforcement of such order. After the order is so filed in such district court and while pending for review the district court may issue a temporary writ of injunction forbidding such association from violating such order or any part thereof. The court may upon conclusion of its hearing enforce such order by a permanent injunction or other appropriate remedy. Service of such complaint and of all notices may be made upon such association by service upon any officer or agent thereof engaged in carrying on its business, and such service shall be binding upon such association, the officers, and members thereof (10): Provided, That nothing con tained in this section shall apply to the organization, or individual members thereof, described in section 6 of the Act entitled “An Act to supplement existing laws against unlawful-restraints-and-monopolies, and-for-other purposes," approved-October-15, 1914, known as the Clayton Act. Nothing herein contained shall be deemed to authorize the creation of, or attempt to create, a monopoly, or to exempt any association organized hereunder from any proceedings instituted under the Act entitled "An Act to supplement existing laws against unlawful restraints and monopolies, and for other purposes," approved October 15, 1914, on account of unfair methods of competition in commerce. Senator DILLINGHAM. Mr. Preston, from California, wants to be heard in opposition to this measure. Mr. Preston, will you please give your name, residence, occupation, etc. STATEMENT OF MR. JOHN W. PRESTON, ATTORNEY, HOBART BUILDING, SAN FRANCISCO, CALIF. Mr. PRESTON. My name is John W. Preston. I appear for the American Seedless Raisin Co., the Bonner Packing Co., Rosenberg Bros. & Co., Guggenheim & Co., and Chaddock & Co. Senator WALSH of Montana. Who are these? Mr. PRESTON. These people are competitors of the California Associated Raisin Co., and my interest in this matter comes from appearing for them before the Federal Trade Commission and before the Department of Justice in the litigation now pending in the Los Angeles Federal district, brought by the United States against the California Associated Raisin Co. Senator WALSH of Montana. You were once district attorney for the Northern district of California, were you not? Mr. PRESTON. I was; yes. Senator WALSH of Montana. For what period? Mr. PRESTON. From 1913 to 1917. I was also special Assistant Attorney General during the war, in charge of war work in that district. Senator WALSH of Montana. Just tell us, for the present, briefly, about what this California raisin growers' association is? You will go into details later, but just briefly, now? Mr. PRESTON. I wrote a little outline here, as brief as I could possibly make it. I do not know whether I could state it so briefly or not. Senator WALSH of Montana. Do not go into detail now. We will come to that later. Just tell us now, in brief, what it is. Mr. PRESTON. The California Associated Raisin Co. is a commercial corporation in form. It was incorporated in 1912 by a few men, some of whom were raisin growers and others of whom were ordinary business men, such as merchants and bankers. The raisin market at that time was more or less demoralized, and this corporation was formed for the purpose of engaging in the business of selling dried fruits. The first thing the corporation did was to propose to take over the crop of the growers by a long term contract and guarantee them certain prices for their product, dependent upon the degree of control obtained by the contracts-3 cents a pound, for instance, for 60 per cent control, 34 cents a pound for 75 per cent control, and 34 cents a pound for 85 per cent control-but the contracts were not to be binding unless $750,000 was subscribed to the capital stock, the capital stock being at that time $1,000,000. They went out among the growers and succeeded in getting about 88 per cent of the crop signed up on contracts of this character. They also succeeded in getting the $750,000 capital stock subscribed, principally by business men, and only by about one-third of the growers that were signed up. The next thing they did was to call together all the competitors that were in existence, all the dealers in this country in existence, and a written offer was made to them to become selling agents of the corporation; that is to say, that they go ahead and solicit business and be furnished such raisins as they could seed, pack, and sell. Twenty-four competitors were then in existence. Contracts were made with about 20 of them. Am I going into too much detail, Senator? Senator WALSH of Montana. Why, that is not exactly what I wanted to get, in the first place. I wanted to find out about these parties whom you represent, first, and what relations there were between them and the California raisin growers' association. Apparently the California raisin growers' association was an association of certain business men and certain raisin growers. Mr. PRESTON. That is right. Senator WALSH of Montana. The purpose being to deal in the raisins grown by them, and possibly by others. It was organized, did you say, in 1912? Mr. PRESTON. Yes. Senator WALSH of Montana. Let us understand, now, if you please, about who these people are whom you represent? Mr. PRESTON. The American Seedless Raisin Co. is the originator of the Thomson seedless raisin. They are the largest single growers of that variety in the United States. Senator WALSH of Montana. Of seedless raisins? Mr. PRESTON. Yes; the American Seedless Raisin Co. Senator WALSH of Montana. Where are they operating? Mr. PRESTON. They are operating in California and elsewhere. Mr. PRESTON. The next is the Bonner Packing Co., which is a local grower and packer of raisins. Senator WALSH of Montana. Located where? Mr. PRESTON. Located at Fresno, Calif. Senator WALSH of Montana. Now, just a moment. Take the first, the American Seedless Raisin Co. Who are the real parties there? Mr. PRESTON. A man by the name of Franklin P. Nutting. Senator WALSH of Montana. Does he live in Fresno? Mr. PRESTON. He resides in San Francisco. Senator WALSH of Montana. And Mr. Bonner? Mr. PRESTON. Mr. Charles G. Bonner has been for three years a raisin grower and packer in Fresno. fruit dealers on a very large scale, their activities. Rosenberg Bros. & Co. are dried making raisins only one line of Senator WALSH of Montana. Located where? Mr. PRESTON. Their headquarters are at San Francisco. The same is true of Guggenheim & Co. They make their headquarters at San Francisco. Chaddock & Co. is another firm of raisin packers that has been in the raisin business in Fresno for 30 or 40 years. Senator WALSH of Montana. In brief, what is the nature of the controversy between these people whom you represent and the California raisin growers' association? Mr. PRESTON. The clients I represent are charging that this concern is a monopoly; that it was organized for that purpose; that it has been guilty of monopolistic conduct, and that it has extorted unfair, unjust, and unreasonable prices from the public, and has put them out of business, practically. Senator WALSH of Montana. I gather from what you state that a proceeding was instituted before the Federal Trade Commission? Mr. PRESTON. It arose in this way. The wholesale grocers of the United States started this proceeding by calling on Attorney General Palmer in the summer of 1919. The Attorney General ran into this clause in the appropriation bill about not prosecuting associations organized for the purpose of obtaining and maintaining fair prices, and seeing that that might be an obstacle in the matter, he referred it to the Federal Trade Commission under a certain section of the Federal Trade Commission act, and asked the commission to report on two points; first, whether this association was charging a price that was unfair and unreasonable, and also how the concern might adjust its business so as to conform to the law. Now, the item referring the prices to the Federal Trade Commission apparently is not really in the law, but it was referred among other things to the Federal Trade Commission, and the Federal Trade Commission took the matter and noticed it for hearing, as it would in any other case, and evidence was taken for a period of three or four weeks in the fall of 1919, and on June 8, 1920, the commission made its findings, that the prices for 1919 were unfair and unreasonable. you Senator WALSH of Montana. Can you read from those findings? Mr. PRESTON. I am not sure I have that. I thought I mailed a copy of the decision. Did you turn it over to the committee or have you got it? Senator WALSH of Montana. It may be in my file in my office. Senator DILLINGHAM. Will you furnish a copy of that to the committee? Mr. PRESTON. Yes; counsel agrees to furnish a copy of that. (The document referred to was later furnished by Mr. Preston, is here printed in the record, as follows:) FEDERAL TRADE COMMISSION, SIR: On September 30, 1919, you requested the Federal Trade Commission to make an investigation of the California Associated Raisin Co. (hereinafter called the Raisin Co.) and to advise you whether that company, first, "is obtaining and maintaining more than fair and reasonable prices for its products; and, second, (under sec. 6 (e) of the Federal Trade Commission act), to make recommendations for the readjustment of the business of 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." In In compliance with your request the Federal Trade Commission instituted an inquiry, giving notice thereof to the Raisin Co., in the course of which a large amount of testimony was given, a transcript whereof accompanies this report to you. addition, the commission heard argument and received briefs on behalf of the Raisin Co., as well as on behalf of the American Seedless Raisin Co., Bonner Packing Co., Rosenberg Bros. & Co., Guggenhime & Co., and Chaddock & Co., packers of raisins, and the National Wholesale Grocers' Association of the United States. Copies of these briefs are also transmitted to you with this report. The essential facts disclosed and the conclusions and recommendations of the Federal Trade Commission thereon are now submitted for your consideration. Before proceeding to the examination of the two questions propounded by the Attorney General to the Federal Trade Commission a general statement with respect to the raisin industry may be useful for the purposes of an understanding of such a discussion. THE CALIFORNIA ASSOCIATED RAISIN CO. AND THE RAISIN INDUSTRY. The raisin industry in the United States is at present practically confined to a district within a radius of less than 50 miles around Fresno, Calif., where conditions for growing, but more particularly for curing raisins, are peculiarly advantageous. Prior to the organization of the Raisin Co. the raisin growers were virtually at the mercy of those engaged in the business of packing and selling raisins, and realized from their efforts a varying and uncertain return in the marketing of their crops. Those packers being in control of the purchasing power, secured to themselves the larger profit, while the grower frequently failed to realize the cost of production. Seeking to remedy this condition, the growers repeatedly attempted cooperative organizations, which failed largely because the form of the various organizations did not include adequate provision for finance and credit. Other devices were attempted without success and until the organization of the Raisin Co. the condition of the growers was, to say the least, unfortunate. Whether there was or was not a combination, or agreement without actual combination, among the packers who were then the purchasers of the raw supply, is immaterial to this inquiry. The inequality of their situation forced the growers to enter the contest for control, at least so far as control was necessary, for the protection of their individual interests. This effort on the part of the growers has unquestionably been successful. The question now presented is whether the effort has outrun its proper bounds and in turn become a cause of oppression. The Raisin Co., being dependent upon the growers for a supply of raw material, entered into a campaign to secure contracts with growers which resulted in the securing of 76 per cent of the acreage, under contracts having a life of three years, binding the growers to deliver to the company their entire raisin crops for the years covered by the contract, with a liquidated damage penalty of $40 per ton for failure so to deliver. This control of acreage was increased to 90 per cent during the first year of the company's operations, but decreased to 80 per cent during the second and third years. At the end of the first three-year period covered by contracts renewals or new contracts were secured covering 80 per cent of the acreage, and the present control of the Raisin Co. is approximately 88 per cent of the entire raisin crop of the United States. While the contracts cover a period of three years, these contracts contain an option to the company for a renewal of three years, whereby the acreage control may be extended to a period of six years. The company having secured 76 per cent of the acreage control upon its organization, moved to secure control of the manufacturing and selling processes. Prior to the organization of the company raisin-packing plants were in existence, and after its organization the Raisin Co. entered into contracts with a number of packers, leasing some plants to be operated by itself and engaging the packing operations of other plants under contracts whereby the packers agreed not to pack, handle, sell, or deal in raisins on behalf of others than the Raisin Co. Likewise the selling facilities of some of the packers were obtained exclusively for the Raisin Co., and in some instances additional precautions were taken by contracts with packers requiring them to sell raisins owned by them to the Raisin Co. and to assign to it all outstanding contracts. These arrangements did not include all of the packing facilities in the raisin district. A number of packers were left to handle that part of the raisin crop which was not covered by the contracts which the Raisin Co. had secured. The company also purchased the property and business of certain packing interests, and through this series of purchases and contracts, acquired some of the packing facili ties of the raisin district. |
