is milk or whether it is raisins; not even in the case of as small a crop as raisins. Now, I can see that in the case of a small crop it might be possible, for a very short time, through strong organization, to exact a price that would be an unreasonable price, but the success which might attend an effort of that kind would in itself break the whole thing down. You take the case of some fruit growers in California. While I am not familiar with all of the details, I know in a general way their experience. They organized in that way, under what is known as the Shapiro plan--you have heard of it, no doubt-and they did not undertake to fix a price, but that put them in a strategic bargaining position so that they were able to get a better price than they had been getting. What was the result? They had to reach out for an enlargement of the market in order to maintain their high price, if you want to call it a high price. I do not know whether it was or not, but it was a higher price than they had been getting. That in turn stimulated the production again, until the last time I heard Mr. Shapiro talk they were talking about entering on a big advertising campaign reaching over into China, to get a market there for their products. The thing carries in itself the germ of its breakdown. I can not conceive of a monopoly in any big agricultural crop. They do not exercise a monopoly. Anybody can come in and produce, who wants to do so. Senator WALSH of Montana. If that is the case, could you see any possible objection, then, to a provision in the bill that it should not be deemed to authorize the setting up of a monopoly? Secretary WALLACE. No; I see no objection to forbidding, in terms, the creation of a monopoly, because I do not think you can create a monopoly. Senator WALSH of Montana. I am fully agreed with you, Mr. Secretary, as to practically 90 per cent of the agricultural products of the country. I am perfectly satisfied that you could not get a monopoly of the cotton crop or of any of the cereal crops. Probably you could not get a monopoly of sugar. You apparently agree in the view, Mr. Secretary, that in respect to crops grown only in a very limited area, or that will not bear transshipment, it might be possible for a time to establish a monopoly; and if it is true that a monopoly can not be established, you apparently agree, then, that there would be no harm in such a provision as that. Secretary WALLACE. I think that the farmers themselves are not asking to have any special favors. They are not asking for permission to create a monopoly. Senator DILLINGHAM. I think you are right about the farmers as a class throughout the country. I do not think you are right, in that, about their representatives. all. Secretary WALLACE. Well, I do not know. I do not know them You take the case of wheat. There are a group of farmers who in the enthusiasm of the time undertook to organize in the Southwest and hold their wheat for $3 a bushel. Now, take the practical working out of that sort of thing. Suppose that those one-crop farmers, the wheat farmers of the Southwest, should be able to organize and should succeed in maintaining that price for wheat at $3 a bushel for a period of a few months. What would happen? They would bring into production the farmers of Iowa, Illinois, Indiana, and Ohio; they would bring in all the winter wheat country, which in recent years has not produced much wheat. The farmers of those States would simply kill off those one crop wheat farmers of the Southwest. They would absolutely kill them off. The minute you got a price far out of line with the price of other grains, it would bring in the farmers who had not been producing that particular crop, and it would be the worst thing that could happen to those one crop farmers. It would not need to be an unfair price, but if it was materially out of line with the prices of other grains it would produce that result. Senator WALSH of Montana. Then, in the case of all those farmers, their self interest would forbid the setting up of a monopoly? Secretary WALLACE. Sure. The worst thing possible for them would be to set up an organization so as to secure a price that would be far out of line with the prices of other staple grains. Senator WALSH of Montana. That is all that I care to ask the Secretary. Now, Mr. Williams, what have you to state concerning the letter from which I quoted to the Secretary? Mr. WILLIAMS. That letter that I submitted to the Secretary was in response to a discussion I had with the Secretary with reference to the Senate amendment to this bill at the last session of Congress, which had inserted a provision that nothing in the bill should be construed to authorize a monopoly, or to remove these associations from the restrictions of the Clayton Act; and after considering the matter very thoroughly, I came to the conclusion, and so advised the Secretary, that it was a matter about which he need not give himself very much concern; that it made very little difference whether the Senate amendment went in or stayed out. If it stayed out, I felt that the bill still would not authorize the creation of monopolies, or restraints of trade, in those unlawful organizations that are prohibited by the antitrust laws. That was my construction of section 1 of the bill. Senator WALSH of Montana. What does it accomplish, in your judgment? Mr. WILLIAMS. In my opinion, it does no more than to remove certain restrictions that seem to have been placed upon farmers' organizations by section 6 of the Clayton Act. Senator WALSH of Montana. Section 6 of the Clayton Act took certain associations out from under the operation of the Sherman Act, did it not? Mr. WILLIAMS. No, sir. Section 6 of the Clayton Act said this: Nothing contained in the antitrust laws shall be construed to forbid the existence and operation of labor, agricultural, or horticultural organizations, instituted for the purposes of mutual help, and not having capital stock or conducted for profit, or to forbid or re train individual members of such organizations from lawfully carrying out the legitimate objects thereof: nor shall such organizations, or the members thereof, be held or construed to be illegal combinations or conspiracies in restraint of trade, under the antitrust laws. That section raises a strong implication that agriculturists and horticulturists could not organize an association if they had capital stock, or if it was conducted for profit; that the instant they conducted the organization for profit or that they had capital stock, they were forbidden to exist by this section 6. Senator WALSH of Montana. What was the purpose of that section 6? Mr. WILLIAMS. I am not sure, Senator, what was the purpose of it. Senator WALSH of Montana. The history discloses it very well. It was held in a number of cases that labor organizations, labor unions, particularly railroad organizations, were subject to prosecution under the Sherman Act, and in a number of cases they had been enjoined under the Sherman Act. Mr. WILLIAMS. Yes. Senator WALSH of Montana. And it was intended to relieve those organizations, as well as farmers' organizations, such as are there mentioned, from the peril of prosecution under the Sherman Act. It went, however, only so far as to exempt associations which had no capital stock. Mr. WILLIAMS. Yes, sir. Senator WALSH of Montana. And this bill just extends that exemption to those organizations which do have capital stock; and so the purpose of that act to exempt certain organizations from the peril of prosecution under the Sherman Act is extended by this bill to embrace certain other organizations, so that they will be relieved, as they want to be relieved, from prosecution. Now, if that is not the case we would have to change this bill, because that is what we want to do. Mr. WILLIAMS. Yes; and it was my opinion that if the farmers want to create monopolies or want to engage in unfair practices in commerce, this bill certainly would not give them the right to do it, and they would have to get another bill. The strong implication of this language is that these farmers' organizations can not exist at all Senator WALSH of Montana. By virtue of the Sherman Act? Senator WALSH of Montana. By virtue of the Sherman Act? Senator WALSH of Montana. Yes. Mr. WILLIAMS (continuing). Or conduct their business for profit. Senator WALSH of Montana. We want to take that peril away from them so that they shall not be in danger. Mr. WILLIAMS. But I have understood that section 1 of this bill does that—allows them to have capital stock and conduct business for profit. Senator WALSH of Montana. It extends the exemption of section 6 of the Clayton Act. Mr. WILLIAMS. Yes. Senator WALSH of Montana. Section 6 of the Clayton Act took out from under the operation of the Sherman Act labor, agricultural and horticultural organizations having no capital stock. Mr. WILLIAMS. Yes, sir. Senator WALSH of Montana. This bill, as we understand it, extends that exemption so that horticultural and agricultural associations having capital stock but paying no more than 8 per cent interest and otherwise conforming to the provisions of this bill, will be exempt from prosecution under the Sherman Act. But your letter says that they remain just the same as before, when we have passed this bill; that they would remain just as they were before, subject to all the perils as they were before. Mr. WILLIAMS. I thought so. It would simply allow them to have and conduct their business on a profit basis, with a capital stock. They would still remain subject to all the antitrust laws. That was my view of it. But I am free to say that it is rather doubtful just what effect the bill would have. Senator WALSH of Montana. Suppose that we passed this bill and then a lot of farmers in my State, engaged in the production of wheat, believed that they could subserve their own interests best if they would organize a corporation and build a line of elevators and build terminal elevators in Minneapolis and in Duluth and market their own products that way. Mr. WILLIAMS. Yes. Senator WALSH of Montana. And then some one came along and wanted to prosecute them because they were an association in violation of section 1 of the Sherman Act. Would this bill furnish them no protection whatever? Mr. WILLIAMS. I do not believe it would. Senator WALSH of Montana. It says Mr. WILLIAMS. If they were creating a monopoly. Senator WALSH of Montana. I am not speaking about a monopoly at all. I am speaking about section 1 of the Sherman Act, which forbids combinations in restraint of trade. Mr. WILLIAMS. In restraint of trade; yes, sir. Senator WALSH of Montana. Yes. Mr. WILLIAMS. Well, if they are not restraining trade Senator WALSH of Montana. If they were not restraining trade, they would be in no peril? Mr. WILLIAMS. None at all. I do not think they would. Mr. WILLIAMS. Yes; assuming that this bill is passed, I do not think they would be an any peril. And the courts have decided, as you know, that it is not all monopolies that are illegal; it is not all combinations that are illegal. There may not be such a restraint as is illegal. Secretary WALLACE. I think, perhaps, Senator, I ought to say this, that there may be some confusion between you and the solicitor, for this reason. I asked him to give me an opinion as to the effect of the amendment which the Judiciary Committee put on the bill when it was up before you at the last session of Congress, and his approach to it is from that angle, as to the effect of that amendment which was added to it at the last session of Congress. Senator WALSH of Montana. Yes. Mr. WILLIAMS. And I thought that even without the amendment. Senator, these organizations would not be allowed to adopt any illegal means or methods of conducting their business. Senator WALSH of Montana. Yes; but the question is, would these means be illegal? Let me suppose, for the purpose of the case, that this bill is passed without the Senate amendment at all, just as it stands there, and the producers of milk within the territory supplying the city of Chicago as I understand, there are half a dozen of these organizations supplying the city of Chicago with milk-all unite in one organization so that they have a monopoly, and no one else can sell or does sell milk in the city of Chicago; and no one can sell by bringing it in from this remote country where it would be competing under practically impossible circumstances with this organization in the city. Suppose we pass the bill and it becomes law just as it is there, would you think that that association would be subject to prosecution under the Sherman Act? Mr. WILLIAMS. I think if they entered into agreements or contracts which would operate to restrain trade to restrain other persons from selling their milk as they saw fit-or if they engaged in any unfair practices in doing it Senator WALSH of Montana. No; I want you to eliminate all those things, but just simply assume they organize in an association, and they have a monopoly of the whole thing. They have not used any unfair practices at all, but they have all gotten together and they have considered it to be for their best interests-not the best interests of the consumers but their best interests-to unite in one association, and they have all united in one association. Mr. WILLIAMS. I do not think it would be an illegal monopoly. Senator WALSH of Montana. I am not questioning whether they would be an illegal monopoly. What I am questioning is, and what I am considering is, whether this act would permit of such an organi zation. Mr. WILLIAMS. Yes, sir; I think it would. I think it would. Senator DILLINGHAM. And if without this act they would be subject to prosecution under the Sherman Act, your opinion is that with this act they would not be? Mr. WILLIAMS. No: I do not think they would be, unless they engaged in some practice that prevented other people from selling their milk. I do think that if they did that, they would be subject to the antitrust laws. It says they may collectively process, prepare for market, handle and market their products. It does not say they may create a monopoly in doing so I mean an illegal monopoly-or that they may adopt any unfair methods of competition. Such associations may have marketing agencies in common. There is no legal objection to that. Senator WALSH of Montana. None whatever. The only question is, How far can they go under this? Mr. WILLIAMS. I do not think they can go any further than they did under the Clayton law, and I go back to the original Senator WALSH of Montana. If that is so, there would not seem to be any object in the legislation at all. Mr. WILLIAMS. No, sir; I am somewhat inclined to think that that is true, except to get away from that implication that arises from section 6, that they could not enter into organizations having capital stock or doing business for a profit. Secretary WALLACE. That is the whole point, though. That is what you want the legislation for, to get out from under that legislation. Mr. WILLIAMS. That is what I understood. Senator WALSH of Montana. Section 6 of the Clayton Act imposes no restrictions whatever. Section 6 of the Clayton Act takes out from under the operation of existing laws certain organizations, leaving every other organization which theretofore was under peril under the Sherman Act, still in peril. Mr. WILLIAMS. Yes, sir. Senator WALSH of Montana. Section 6 imposes no liability on anybody. |