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Mr. FISHER. The total of contracts made by Montes as the result of this patriotic agitation and effort to raise the price, as you have described it, was 220,000 bales, was it not?
Mr. BAYLEY. That is my recollection.
Mr. FISHER. All the remainder of the production was open for purchase and sale in the open market by anybody who wished to buy or sell it, except that it would naturally be affected by the price which had been paid for this large purchase of 220,000 bales?
Mr. BAYLEY. The price on the balance was not affected by that 220.000 bales. It was affected by the price which was being offered for the daily production outside of those contracts.
Mr. FISHER. Then you do not think the price actually paid or contracted for these 220,000 bales did of itself affect the market for the remainder of the production?
Mr. BAYLEY. Only that it left so much less available.
Mr. FISHER. I say the price, however paid, did not affect
Mr. BAYLEY. I do not think the price affected it.
Mr. FISHER. Let us go back to this patriotic agitation. There seems to be some "smile" about it. I have taken your description of it. I wish you would tell the committee what the reports were which reached you from Yucatan as to how this thing was carried on down there.
Mr. BAYLEY. The report was that Montes had said that if sufficient farmers would agree to sell him their product for the following 12 months, so that the total would be a substantial amount-I think 400,000 bales-that he would take it at a price which, as I remember, was 10 or 101 Mexican currency in Progreso, and in order to put the thing through there was a meeting in the chamber of commerce and all farmers were advised to sign this paper. Then various committees were sent to the towns.
Mr. FISHER. Committees of whom?
Mr. BAYLEY. Why, I think they were inspired by Montes, but I think they were nominally from the chamber of commerce, and these committees held public demonstrations in the towns, calling on the farmers as a patriotic duty to sign these contracts, so that these higher prices for sisal could be realized. Then, when the total reached 220,000 bales, Mr. Montes announced he would not wait for any more and closed the contract.
Mr. FISHER. So he did not make the assurances he had given as to prices, depend on getting whatever the amount was, 400,000 bales, the exact amount of which you do not remember, he did, as a matter of fact, when the amount which was contracted for reached 220,000 bales out of a total of over 600,000 bales, close the contracts and say he was willing to be bound by that agreement?
Mr. BAYLEY. Yes, sir.
Mr. SPENCER. I understood the witness to say he would buy 400,000 bales.
Mr. FISHER. Certainly.
Mr. SPENCER. And when it reached 200,000 bales he closed?
Mr. FISHER. That is, he did not make the closing of the contracts signed up to 220,000 bales in any way dependent on getting any more sisal?
Mr. BAYLEY. No, sir.
Mr. FISHER. So that left 400,000-odd bales of sisal production, normally available for open purchase on the market, so far as this transaction was concerned?
Mr. BAYLEY. Approximately 400,000 bales.
Mr. FISHER. I was only trying to give it approximately. Now, after that, when you saw that was a real transaction, and that it was resulting in contracts up to this amount, then you entered the market actively yourselves?
Mr. BAYLEY. When it got to the point that we saw this thing was real business, or likely to be real business, not merely one of the demonstrations which goes on from time to time in Yucatan for advertising purposes, we tried hard to get our customers to sign a similar conditional contract, the condition being that we would sign it with them if Montes signed with his customers. We got a few that way, but not a great many. When this went through the market price at Yucatan was immediately raised to higher figures, and we advised all our customers in the United States to buy manila hemp and leave sisal alone for the present.
Mr. FISHER. Let us take what you did down in Yucatan. Did you continue to buy sisal that season after Montes announced that he was willing to go ahead with the 220,000 bales?
Mr. BAYLEY. Yes, sir.
Mr. FISHER. Did you enter actively into the purchase of sisal after that time?
Mr. BAYLEY. Why, fairly actively. Our business was greatly reduced. We bought daily.
Mr. FISHER. The business for the whole year was reduced in the figures you have given us?
Mr. BAYLEY. Yes; and a lot of our customers had signed these big contracts, and we lost them in that way.
Mr. FISHER. That is to say, those were the planters who had been accustomed to deal with you, but who had signed the contracts with Montes with this stipulation, which you call a patriotic campaign there; naturally those people did not sell their production to you for that season?
Mr. BAYLEY. No.
Mr. FISHER. But you did, however, purchase for that season one hundred and sixty thousand and odd bales, as near as we can now recall the figures, and could you tell the committee how much of that one hundred and sixty thousand and odd bales you purchased after Montes announced that he would take his contracts definite up to the extent of 220,000 bales?
Mr. BAYLEY. If I could get those statistics back which I loaned for the record, I could show our shipments month by month for that time.
Mr. SPENCER. You allowed us to put them in the record.
Mr. FISHER. I will postpone this point until after recess, and perhaps bring it up after 1 o'clock. As a matter of fact, Mr. Bayley, the price of binder twine in 1909 was 7 cents in the United States, was it not, or do you recall?
Mr. BAYLEY. We do not deal in binder twine.
Mr. FISHER. And in 1910, according to a memorandum which I have here, which, I think, is correct, it was 7 cents. Now, you said in
answer to Mr. Mayer or Mr. Spencer that you never heard of that car question until it was raised here; that is, this complaint that the shippers down in Yucatan had difficulty in getting cars. Did your concern or Peirce have any difficulty at any time in getting the necessary railroad transportation for shipping from the interior to Merida or from Merida to Progreso the sisal hemp which you were buying from the planters?
Mr. BAYLEY. Mr. Fisher, either I misunderstood the question or you misunderstood my answer to that first question. I was being asked what complaint we heard that the farmers had against other merchants than ourselves, and we were asked if we ever heard any complaints that the farmers could not get cars to ship sisal to Progreso.
Mr. FISHER. That is it.
Mr. BAYLEY. And I answered, "We never did." But from February, 1915, I think it was, the whole situation was changed.
Mr. FISHER. Go on and tell the committee about that.
Mr. BAYLEY. And from that time on we could not get cars to move the sisal that we bought. Sisal was up country and in Merida, but we could not get the cars. The sisal in Merida had an extra duty imposed on it. It had been there for a month or more, and one morning it had an extra duty on production imposed on it, because it had not reached Progreso, which, if I remember rightly, was about 36,000 pesos. But still we could not get cars. I think we had sisal up country for four to six months before we could get any cars assigned to ship it to bring that sisal into Progreso, where we could ship it. Mr. FISHER. Four to six months following what date?
Mr. BAYLEY. Following February, 1915, if I remember correctly. Mr. FISHER. Who was then in control of the railroads in Yucatan? Mr. BAYLEY, I have not in mind the dates when the various Governments changed, but
Mr. FISHER. But was it the Government?
Mr. BAYLEY. It was. Unless hemp was sold to the Government commission it was not possible to get it moved.
Mr. FISHER. Was that the first experience which you or Peirce have had, so far as you know, of having any substantial difficulty in getting railroad cars in Yucatan to transport sisal?
Mr. BAYLEY. Yes; any substantial difficulty. We could not get the sisal down promptly at times when there was a congestion, just as one can not move freight here promptly; but it was all in the day's work and there was no special complaint, and frequently it happened that the warehouses in Progreso were filled up; then the sisal stayed back in Merida; but when we had a steamer in port and we would agree to put the sisal on board the steamer and not stop it in the warehouses in Progreso we could get solid trains of cars from Merida to get what stock had accumulated there, to put it on board steamer and out of the country.
Mr. SPENCER. I may be wrong, but I do not think any witness has testified that Peabody & Co. had any trouble in getting cars.
Mr. FISHER. The suggestion has been insinuated into the record at various times, rather counsel than by witness, as I recall it, that Mr. Montes' concern in some way exercised an unholy control over the railroad so the other shippers could not ship, and I am
asking Mr. Montes' principal competitor in this business during all these years whether he ever had any difficulty of that character, and I have had the answer.
Now, to take up the specific question which Mr. Spencer has injected into the case by his reference in previous testimony.
Mr. Bayley, did you or did Peirce, your agent, ever exercise or attempt to exercise any control over the transportation facilities of Yucatan, so as to prevent persons from selling to others than you from having adequate facilities for transportation?
Mr. BAYLEY. Oh, absolutely not.
Mr. FISHER. Was Mr. Evia, one of the witnesses who testified here, one of the customers whom you had during all these years?
Mr. BAYLEY. His father had been a customer of ours for a great many years. After his father died the son did not do as much business with us as the father had done.
Mr. FISHER. Did Mr. Evia ever complain or suggest to you that he was having difficulties in selling the sisal to others than you or Montes because of failure of adequate transportation facilities?
Mr. BAYLEY. No; I never heard that point raised until it was raised here.
Mr. FISHER. You never heard it raised by anybody?
Mr. BAYLEY. No, sir.
Mr. FISHER. Mr. Evia's relations with you were rather exceptionally cordial, on the whole, were they not?
Mr. BAYLEY. Very friendly. Dr. Evia sent his daughter in our care to be placed in school here, and Mr. Domingo, who has testified here, when he was in college here, relied on us for his financial arrangements. We always thought a great deal of Dr. Evia and were very close friends with him.
Mr. MAYER. What college was that-Harvard?
Mr. BAYLEY. Bucknell College.
Mr. FISHER. So that all these years, in spite of these very close personal and friendly relations between yourself and Dr. Evia, or his son, who testified here, did they ever suggest in any way that they were meeting any difficulty whatever in selling their hemp or sisal where they chose on account of transportation facilities being inadequate, did they-Mr. Peirce or Mr. Montes, or anybody else?
Mr. BAYLEY. If he ever complained Mr. Peirce never reported it, and I never heard it in conversation with him or in conversation with any of the submanagers of our office.
Mr. FISHER. And they never mentioned it to you?
Mr. BAYLEY. No, sir.
Mr. FISHER. Mr. Mayer has undertaken to go into the legality of this sisal combine or monopoly and has tried to extract your opinion or the opinion of your counsel. Have you any objection to Mr. McKenney, if he is willing to do so, stating to this committee his opinion on the law and the reasons on which it is based?
Mr. BAYLEY. Not the slightest.
Mr. FISHER. I should like very much indeed at this time, or whenever it may suit the committee, to have Mr. McKenney make a state
The CHAIRMAN. The committee has no objection to hearing him at this time or whenever you wish.
Mr. FISHER. Mr. McKenney, will you tell the committee what you think about the law of this case?
The CHAIRMAN. You are simply asked your opinion and not for an argument. Just state your opinion.
Mr. MAYER. Shall we be allowed to state the opinions of leading counsel of the United States on this subject?
The CHAIRMAN. We are going to let you gentlemen argue this when you get ready.
Mr. FISHER. I assume this is merely a statement
The CHAIRMAN. You brought this out by your own question, Mr. Mayer, and we are going to let this attorney state just what he told. Please do not argue it with us, Mr. Mayer. We must have some end to this case. You brought it out, and we will let Mr. McKenney state what he told his client.
STATEMENT OF MR. FREDERICK D. McKENNEY.
Mr. MCKENNEY. I was out of the room during this colloquy, and hence am not at all familiar with what happened.
The CHAIRMAN. The witness stated, as the Chair understood it, that he asked you to give him an opinion on the validity of this Reguladora and its business transactions here, and you read to him this morning from the Sherman Antitrust Act and referred to some decisions.
Mr. MCKENNEY. I did.
The CHAIRMAN. And he said he could not tell it very clearly; he is not a lawyer, and I think it is fair that you state just what you told him. We do not wish an argument; we just wish what you told him.
Mr. MCKENNEY. I understand perfectly. In a conversation with Mr. Bayley this morning I advised him respecting the inquiry which was put by the chairman yesterday-as to what suggestion he could make to alleviate this condition. I told Mr. Bayley that if the facts were as I had gathered them in the few sessions which I had attended I strongly believed that the second section of the Sherman antitrust law furnished a reasonable ground upon which the United States might take hold of and handle this situation.
Mr. Bayley stated, as I have repeatedly heard it said in the course of these sessions, that the American Banana Co. case apparently put an end to the applicability of the Sherman antitrust law in the circumstances of this case. I responded to Mr. Bayley that so far from this case being controlled by the American Banana Co.'s case, that that case scarcely, if at all, touched the periphery of the matter.
The American Banana Co. case was the case of a complainant who sought to recover treble damages under certain provisions of the Sherman antitrust law from an American corporation engaged in business both in this country and in a foreign country, with respect not to the business or any part of it done by the American company in this country, but with respect to things which that company had done in the foreign country. The things which it did in that country were subject to and apparently not prohibited by the law of the country where done. The Supreme Court of the United States, as I have analyzed and understood its opinion, said that the law of the United