On the 6th of April, 1917, war was delared. The question arose at once whether the farmers should stand by their contract. They determined to do so and they stood by the contract until October. The price of milk per 100 pounds for September, 1917, was $2.30, and the farmers in that district as well as elsewhere were losing a great deal of money, because the price of feed was very high and was going higher.

In August, 1917, the Food Administrator, Mr. Hoover, called the representatives of these organizations west of the Mississippi River together, to get the farmers to act as a unit. I understand he likewise called in the dealers, and he told them to go back to their members and advise them not to buy feed, because the cost of feed would be lowered very considerably through his department, but the producers must produce as much milk as they could, and he assured them that they would get the cost of production and a reasonable profit.

He also appointed a committee to ascertain the cost of production. The committee had expected to report before the 1st of October, but failed to do so. Because Mr. Hoover had not ascertained the cost of production through his committee he requested these farm organizations to make a contract for one month covering October, 1917, rather than for the six months' period as had been their custom for years.

The farmers met in Chicago and ascertained the price which they fixed for this month. They secured a member of the faculty of the University of Illinois, Prof. Pierson, who is an expert on the cost of production of milk, and he served on Mr. Hoover's committee to prepare a formula by which the farmers could make an easy calculation as to the cost of milk, a formula known throughout the west as the Pierson formula, which is practically the same as the Warren formula for New York and other formulas.

The farmers then selected one man for each of the milk-shipping stations where they had a local organization, and gathered the farmers in from each local organization, took the formula and applied it, and came back and made an estimate of the price, which was $3.42, a raise of $1.12 a hundred pounds.

Immediately the Government grew very active. The State's attorney for Cook County made a raid upon the offices of the Milk Producers' Association. He issued a subpoena duces tecum, and instead of serving it upon the officers, he sent police officers over to the offices of the Milk Producers' Association, and took from that association its contracts, its records, and correspondence, minutes, and took them over to the State attorney's office.

Shortly after that they were indicted. Then the Government began an investigation almost immediately through the food administrator for Illinois.

I was then employed by the Producers' Association. We went to the Government and stated to the food administrator that the farmers of that district would submit to an arbitration of the cost of production, and a reasonable profit, and a commission was appointed. We were given notice that we would receive the cost of production and a reasonable profit.

The commission sat for about three months, nearly daily, hearing testimony in reference to the cost of production. A final award was

made from which an appeal was taken, and the Government modified the award somewhat. The award continued in force until the 1st of July, 1918.

In the meantime another indictment was secured against the milk board of the Milk Producers' Association, the board that had to do with the executing of the will of the organization.

The CHAIRMAN. That was under the State law?

Mr. DENEEN. That was under the State law. Three additional members were indicted; five under the first and three added to the second, one of them a member of the commission that had to do with fixing the price of milk, chosen by the farmers.

The Government then established this procedure. A member of the Food Administration came to Chicago about the middle of the month, and brought with him data gathered in the various departments of the Government, as as to the cost of feed for the month preceding the day of his arrvial, and then applied the formula. The dealers, the farmers, and the representatives of the Government sat and agreed upon a price to extend until the 1st of January, 1919.

When the armistice was declared we were notified to prepare for trial in December, and after some preliminary motions, which consumed about nine months in their hearing and adjudication, we went to trial in September of last year. The trial lasted seven weeks, and we were acquitted.

The CHAIRMAN. That trial was under the State law?

Mr. DENEEN. That trial was under the State law.

In April, 1919, I think I have the date here but I will not stop tc make it definite-the Federal Government through the district attorney for Chicago issued a subpoena duces tecum to two officers in Chicago, the Milk Producers' Association, and the Cooperative Marketing Co. They served this subpoena as a subpoena had been served by the State a year or two before, by coming into the offices and taking the documents, taking the correspondence between the Milk Producers' Association and the Marketing Co., and the minutes, and they are now in the office of the district attorney of the United States.

That matter has been investigated by the district attorney since. April last. We do not know what course the Governmet intends to pursue in reference thereto, but it has not returned our documents, and we presume that the investigation is being carried on.

In the meantime, to show the situation in Illinois, a bill was submitted to the general assembly of our State in June of last year and passed, and I should like to submit it here. It is very brief. It is an amendment to our conspiracy law. I do not know whether you would care to have me read the conspiracy law. It is a law providing that a conspiracy is a combination of two or more persons to do an illegal act prejudicial to public justice or interfere with trade.

The amendment which you will be interested in is somewhat after the form prepared here. It provides that

Contracts, agreements, arrangements, or combinations made by such associations or the members, officers, or directors thereof for making such collective sales, marketing and prescribing terms and conditions thereof are not conspiracies, and they shall not be considered to be injurious to the public trade.

That was passed by our general assembly and signed by the governor, and became effective. It amended the definition of the

conspiracy law. On the trial the court held that the meaning reverted back to the passage of the law originally; not that it was retroactive, but that it defines the word, and we submitted the law as one of the defences in the trial we had in the State courts.

The CHAIRMAN. A sort of legislative definition?

Mr. DENEEN. A definition of conspiracy. It was submitted for that purpose and passed with the full knowledge of its intention, I think, and it was submitted to the jury by the court that tried the case, and the jury acquitted the farmers. We were indicted there for conspiracy to fix the price and also to eliminate competition among independent milk dealers. That was the charge. It varies in a number of counts, but that was the substance of it.

The trial lasted seven weeks and they were acquitted, and, as stated by Senator Capper, I assume that like charges were made in these various States, in California, Minnesota, and Ohio.

I might add this, that in looking up the law-and we gave it an exhaustive investigation we were unable to find a case, either in our own country or in England, where farmers had been convicted for acting together in selling products collectively, where the upper court sustained the conviction. Not only our own office but others who were brought in made a search to find whether there was a case, and there had not been any. The conspiracy laws have been leveled against the middleman and against the man in the large towns and cities in reference to dealing in the products of the farm, but we failed to find a single case where farmers had been convicted of conspiracy in acting collectively. That very briefly is the situation so far as the facts are concerned.

Now, I want to advert very briefly to the situation so far as the policy of the State is concerned. A situation has grown up there which, if carried out as it should be, is probably an economical arrangement. There is no necessity for having two processing plants in any one town. In our State, by a municipal ordinance, the milk is treated, pasteurized, bottled, cooled, and brought into the market. There is no more occasion for having three or four or five plants in a town than there is for having five or six or eight post offices in a town. There would be waste in a duplication of plants. In fact they could not exist. Our business has affected it so that there is one plant in the village or shipping station, for the group of farmers surrounding the station within 5 or 6 miles. It can not be handled economically when the distance is greater. That is the reason why we have 230 shipping stations in that large district.

Now, when you get a situation like that somebody has to make the price. Heretofore the dealer made the price. It was revealed in evidence before the commission and likewise at the trial that up to 1909, and following it, the Borden Co., which was the largest at that time and I believe still is among the dealers, fixed the price in this way: The superintendents of the Borden Co. were requested to ascertain the financial condition of the farmers, by inquiries at the banks and stores and by observation, and determine their relative prosity. These superintendents were called to New York City before the price-fixing day arrived, a general consultation was had of the superintendents with the officers. The price then was determined by the officers. It did not appear whether the superintendents did any of the determining or not, but having been determined, a letter was sent

to the superintendents about a week or more before the price date, inclosing another letter, sealed, with the notation "To be opened on the price day." On the price day the letter was opened at 8 o'clock, and the farmers were required to sign a contract before 4 o'clock that day to sell their milk for the ensuing six months or the company would not buy the milk; and if the farmer could not sell his milk to the company, he had no market. He could not arrange to have it Pasteurized and cooled and shipped to market in Chicago. He could not care for it by manufacturing it into cheese, butter, or evaporated milk. It simply was a dead loss for the ensuing six months. Оссаsionally, and I believe frequently, farmers who were dilatory were fined in this way: They were offered after haggling with the company two or three days, from 10 to 20 cents less a 100 pounds for the ensuing six months as a penalty for not being prompt. The point is that the dealers fix the price and fix it absolutely.

Then, another matter came up. The farmers were encouraged to produce the very largest amount of milk that Chicago could consume in any one day. For instance, in the summer time, on a very warm day a vast amount of milk is consumed in the form of ice cream. The next day may be cool and very little ice cream is sold, but the cow gives the same amount of milk. The result was that that created a surplus all the time, and the dealers have made the excuse that they would not pay a fair price, which would include the cost of production and a reasonable profit, because there was such a surplus of milk that the market would not absorb it. So the farmers have gotten together in our district, and I assume in other districts, to remedy that condition, and have formed a marketing company. The farmers take care of their own surplus. For instance, if I am a farmer and produce a thousand pounds of milk a day, one day I sell a thousand pounds and the next day the market does not demand that, and they can take only 800 pounds. The marketing company takes the other 200 pounds and through its machinery transforms it into butter or cheese or evaporated milk. Then I am paid for the 800 pounds of milk which goes to the consumers of milk and for the cheese, butter, or whatever it may be. The farmer in that way takes care of the surplus.

There was an agreement made as to the cost of production. I omitted to state that in hurrying through my statement. It worked out in a way that the Federal Government agreed on a formula, 20 pounds of purchased grain, or 24 pounds of home-grown grain or corn, 110 pounds of hay and three hours labor. The Government fixed that as a factor to ascertain the cost of production. When it was applied back for a number of years, for 10 years, it was found that the farmer before organization was effected was receiving about 7 cents an hour for his labor. They agreed first on 30 cents an hour during the war, and now on 40 cents an hour, for the labor in proproducing 100 pounds of milk. The farmers feel that they should have the right to bargain collectively. They realize the objections that are made, and you are of course familiar with them. If you desire we will prepare a brief on that matter, but the theory that has developed is this: In the first place the objection is made that the laws will not be equal in their application to farmers; that there will be a preferred class. But there are two ways of answering that. One way is by facts and the other way is by law. If the dealers can

bargain collectively, if labor can bargain collectively, if the manufacturers can bargain collectively, it will be strange indeed that farmers should not have the right that men in every other line of business have, and I assume that the right to bargain collectively is not challenged per se. It is in regard to its application to certain classes that the question arises. Now the farmer, if he has the right to bargain collectively, must do it on an adequate scale. Otherwise it is not effective. I believe that the courts have announced the rule that men have the right to form organizations that tend to monopolize provided the elimination of competition is an incident to the original purpose. So competition is eliminated by entering into a partnership. Competition is eliminated by organizing a corporation. Competition is eliminated in many ways, and the farmers will eliminate competition among themselves to a degree, and that is the purpose of it, so that they can bargain as a whole and bring about the economies which will come to them by reason of such authority.

I will not pursue this question, because Mr. Miller, who assisted in drafting the law, is familiar with it and has presented the matter to the Judiciary Committee in the House.

I just want to speak for one moment about the economies which I want to state, and I believe then I shall have completed what I have to say.

The farmers in our own State not only desire to sell collectively so that they can get the cost of production and a reasonable profit they are not asking more and they only got the cost of production during the war-but they desire to buy collectively. We have organized this company so to do. We expect to eliminate the profit of the jobber, the wholesaler and the retailer in this way, and it will be done without cost. As I said, we charge only 1 per cent of the gross, and it is cooperative. If that amount is not all used it is redistributed to the farmers.

Senator BRANDEGEE. Is there anything now that prevents cooperative buying?

Mr. DENEEN. No, nothing that prevents cooperative buying. This would not be applicable to the point, and I only state it as a matter of general information. I do not know whether it will be necessary to state it.

Senator BRANDEGEE. To state what?

Mr. DENEEN. To state what we are doing. It would not apply-
Senator BRANDEGEE. Not as far as I am concerned.

The CHAIRMAN. Are the House Judiciary hearings printed?
Mr. DENEEN. They are printed and we have copies here.

Senator BRANDEGEE. Then we can get them from the document

room.

Is there any appearance here by the Department of Justice?
Mr. MILLER. No, sir

Mr. DENEEN. For the purposes of the record probably I had better state what they intend to do. We have been the object. of very severe attack in the newspapers and on the public platform. The trial was had, and since then we have escaped the customary attacks.

We expect to effect economies in this way: We deal at wholesale. The station buys whatever it needs in car lots. For instance, if I were desirous to buy 5 tons of alfalfa, the local station buys it by the