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Mr. BALDERSTON. And also to educate the farmers along the lines of improved production; to cooperate with all State and Federal institutions in every way.
The CHAIRMAN. Do the farmers own their own milk cans?
Mr. BALDERSTON. Some companies own their own, which is not good practice, we think, from the farmer's point of view, because it makes them more dependent.
The CHAIRMAN. In Philadelphia do you deal direct with the firm that distributes it to the ultimate consumer?
Mr. BALDERSTON. Our Philadelphia concerns either distribute it direct to the ultimate consumer or to stores, hotels, and restaurants. The small dealers in Philadelphia get their milk from farmers who live near and have it trucked in or send it in by trolleys or train.
The CHAIRMAN. Have you ever been threatened with prosecution or investigation by State or Federal authorities?
Mr. BALDERSTON. We have had an agent of the United States Department of Justice going all over our records, and we have been endeavoring at all times to keep our operations in such shape that they will not in any way interfere with the Clayton Act, but it has been a very difficult proposition on account of the ambiguous verbiage of that act. Our farmers in Pennsylvania are a very conservative lot. Most of them either have Quaker or Pennsylvania-Dutch blood in them, and some of us have both, and these farmers are very much averse to anything that will give them trouble in the courts. In fact, some of the Mennonite people won't go to the courts to sue anybody, and for that reason it has been doubly difficult for them to feel free to organize under the Clayton Act, because they realized that this threat was hanging over them all the time, and they were dubious about taking a chance.
The CHAIRMAN. Especially the officers.
Mr. BALDERSTON. Yes. Mr. Chairman, we have certain cooperative associations in our territory that do own their own plants. They have had to issue capital stock, because some of the farmers have more money to put in than others. They are going to have more trouble from the Clayton amendment than even our parent organization, we feel, because they have had to do certain things that we, as a selling organization, have not had to do. They own property, and in many cases a big distributing plant, which takes in all the milk from a sinall city, like Du Bois, Pa., or Dover, Del., and then distributes it, after processing it and putting it in bottles. This, of course, is more economical than where small dealers have to do it.
The CHAIRMAN Is there anyone else that has to go away?
Mr. MILLER. Mr. Hall and Mr. Lyman both have to go away. STATEMENT OF MR. CHARLES A. LYMAN, SECRETARY OF THE
NATIONAL BOARD OF FARM ORGANIZATIONS. Mr. LYMAN. Mr. Chairman, in appearing in support of the Capper-Hersman bill before this committee, I wish to say that I have owned and operated a farm in Wisconsin for the last fifteen years, and during most of that time I have been a member of farmers' cooperative self-help organizations, including the American Society of
Equity and the Grange. At the present time I am secretary of the National Board of Farm Organizations.
Mr. Miller, who has appeared here, has told you about this organization. I have given Mr. Morgan a copy of our constitution and by-laws and a list of member organizations and board members, as requested by you yesterday.
Thé CHAIRMAN. If you have no objection, I would like to have that put into the record.
Mr. Lyman. I want to point out what Mr. Miller has emphasized already that the bill which we have been discussing has been drawn up very carefully after repeated conferences with leaders of agricultural thought and the representatives of farm organizations throughout the country.
There has been a slowing up of the development of agricultural cooperation in this country as a result of the passage of section 6 of the Clayton Act, the reason being that many of the States had cooperative laws providing for capital stock, and requiring the building up of a surplus. In this connection, I would point out that an unfortunate interpretation has been placed on the word “profits." My own belief is that in a purely cooperative association of farmers there are no profits. The word "savings" should be used rather than “ profits.” A cooperative association works on a margin of safety and at the end of six months or a year returns a patronage dividend based on the amount of business that has been contributed to the association by the individual members.
The CHAIRMAN. Don't some of these take in products from others than members?
Mr. LYMAN. Strictly speaking, they are not purely cooperative. There are some of these organizations in the grain belt, and there is an attempt by the leaders of these organizations to bring them in under the cooperative basis, so that any farmer in the community can share in the savings or benefits.
The CHAIRMAN. Wherever they took in the product of others than members and made a profit on their products it would be, I presume, a profit-making organization, would it not?
Mr. LYMAN. State laws would not interpret it so, as I see it, in that the profit that nonmembers may receive, this so-called profit, may be paid in the form of one or more shares of stock. The Wisconsin law enacted in 1911, with the helpful assistance of Sir Horace Plunkett, of Ireland, who was in the State at that time, provides for the nonmembers in this way, and the Wisconsin law has been followed closely by a number of States.
The CHAIRMAN. We have a very large number of farm organizations in my State. They are small, ordinary corporations. They are cooperative in a fashion, but still they always take in more or less of the products of persons who are not members.
Mr. LYMAN. After the passage of the Clayton amendment, the Bureau of Markets of the Department of Agriculture sent out model nonstock nonprofit laws to the various States and a few States have adopted this plan. There are perhaps 8 or 10 States which now have the nonstock, nonprofit laws, some in addition to the regular cooperative laws; but nine-tenths, I would say, of the farmers' cooperative associations throughout the country have capital stock and believe that this plan is best suited to the business in which they are engaged. The representative of the California association who
appeared before you to-day stated that the banks were consulted to see whether the particular farm product in question could be handled under the nonstock, nonprofit plan. In some cases this plan has worked successfully, but, generally speaking, it is not so well suited to the average farming community and requires trained advisers and sympathetic treatment on the part of the bankers. I think we should recognize that farmers require capital stock to conduct their business operations just as much as do other business groups.
Mr. Chairman, I am convinced that agriculture as compared to other basic industries is in a declining condition. For this reason I feel that agricultural cooperation through collective purchase and sale is absolutely necessary to maintain the business of farming in a flourishing condition. It is because there has been a slowing up in the cooperative program and fear and apprehension on the part of farmers in the marketing of their products that we are asking for this amendment. This matter has been discussed by farm leaders for several years. The bill in question was drawn up a good deal in its present form after conferences with Dr. T. C. Atkeson and other representatives of the National Grange.
To show you that this matter has been placed before the farmers throughout the country, I will read a few statements from farm papers, taking only a few out of a great many that we have in our office.
The Capper-Hersman bill is making friends every day because of the enemies it has. (Pennsylvania Farmer, Oct. 28.)
The Pennsylvania Farmer on June 7, showing you how far back this matter was before the public, said:
A bill is now before Congress amending the Clayton Act to make clear its. meaning. Every farmer should support the bill.
Successful Farming, of Iowa, August 19, said: The remedy lies in an amendment to the antitrust laws. If farmers demand it, the law is assured.
New England Homestead, August 9:
We approve of the bill in Congress and hope it will have the warm support of farmers generally.
Farm Stock and Home, of Minnesota, in July, said:
This bill is intended to establish the fact by law that farmers combining for mutual protection are not criminals.
Kansas Farmer, June 7, said:
It has been drawn up only after consultation with official representatives of the National Grange, who have pledged their earnest support in securing its enactment. Its enactment is vital to all farming organizations.
Orange Judd Farmer, in June, said:
The Farmer, published in St. Paul, July 5, said:
An amendment to the Sherman Act giving all farm organizations the right to organize and engage in collective bargaining through their officials has been introduced in the United States Senate by Arthur Capper. Every farmer interested in collective bargaining will be helping their cause by informing their Representative in Congress of the farmers' need of this measure,
I have read but a few extracts to show the committee that this matter has been thoroughly advertised and has been laid before the farmers of this country, and that they feel a great need for clarifying the present antitrust act, as is intended by the bill under discussion.
STATEMENT OF MR. JOSEPH E. HALL, OF CARIBOU, ME., REPRE
SENTING THE AROOSTOOK FEDERATION OF FARMERS.
Mr. HALL. I am from Aroostook County, Me., the top of the United States. Our chief, and perhaps only, industry up there is the production of potatoes, and this law cost the farmers of our county about $30,000, when they were simply trying to protect themselves.
The CHAIRMAN. You mean the Clayton law?
Mr. HALL. Yes; the Sherman-Clayton law—this antitrust lawand it arose in this way: When the potato industry first started up in our county the buyers came up there and bought potatoes and shipped them to Boston. There they would mix them with cheaper grades of potatoes and put them on the market as Aroostook potatoes.
Later, when we commenced to ship with draft on bill of lading, with privilege of examination, if the market happened to be declining, dishonest middle men would make complaints about the physical condition of the potatoes and refuse to pay the draft and offer a settlement far below contract price. I think from the smile on the chairman's face that he is more or less familiar with how those things have been handled by the middle men.
The CHAIRMAN. I have had some experience with them.
Mr. Hall. The farmers met with great losses by that means until they commenced to go individually to Boston and, incognito, inquire of some of these dealers if they had some potatoes to sell, whereupon they would often be taken to the very cars they had shipped and be told what fine stock they were. That condition gave rise, a number of years ago, to the organization of the potato shippers' association. I am not familiar with the form of that organization. I was neither a member of it nor of its counsel, but my general understanding of the circumstances that arose is as follows: The lack of protection in the big markets of the East led local shippers to organize in self-defense. They employed two inspectors, one in New York and one in Boston, and whenever complaints came they were referred to these inspectors, who would go and make such settlement as they could. They found, among the middlemen, a certain class who persistently and continuously adopted these fraudulent means of making money at the expense of the farmer, and so they adopted a system of notifying their members of such men and warning them from dealing with them. One of these notifications fell into the hands of one of the parties affected by it, and he entered civil suit and also brought the matter to the attention of the authorities as a
violation of the Sherman law, and the result was that it cost these farmers about $30,000 to settle the two cases. No one who is familiar with the circumstances under which the Sherman-Clayton laws were enacted would for a moment contend that they were ever intended to place a reward upon stealing and prevent honest men from protecting themselves against dishonest practices, and yet this is exactly the way the so-called antitrust operated with us.
Some 8 or 10 years ago there was an organization of potato growers started, and by some manipulation on the part of the manager who come up to. Aroostook to handle its business it was plunged into an indebtedness of about $10,000. Under a local manager the association had worked out of that up to within a couple of thousand dollars, when the Aroostook Federation of Farmers, which I represent, was organized. It took over the assets and paid the debts of the old organization. It is a stock corporation, but with the qualification that no person other than an actual farmer can be a stockholder and no stock can be transferred—and notice of this was printed on the backs of the certificates of stock—without first submitting that stock to the board of directors of the corporation. Then they organized, as subsidiaries, what they called locals, to transact the business in the various localities where potatoes were handled. In our State we could not efficiently accomplish our objects in any form except as a corporation, and this fact, in the minds of many lawyers, carries us outside the exemption as to farmers obviously intended in the Clayton Act. But, inasmuch as our contracts with members do not obligate them to market their entire crop through the organization, there is no element of monopoly or restraint of trade involved.
The CHAIRMAN. What number of farmers have you got in your organization ?
Mr. HALL. When I left home there were about 4,000 actual members, or members of farmers' unions who were affiliating with our organization by contract.
Mr. YATES. Did it work? Did it protect them?
Mr. HALL. It has protected them from some things, but it can not give them full protection until the law permits them to exercise some control over their own products without the danger of being sued civilly and prosecuted criminally. And in this connection, permit me to say that if farm food products now costs the consumers too much money the fault lies with the system of distribution. The . farmers can do much to correct these evils if you will give them the unhampered right to bargain and sell collectively, as the pending bill proposes.
I was sent down here Mr. Chairman, on another errand. At the present time, under the operation of the existing tariff laws, Canadian potatoes are coming into our markets free of duty, and as their cost of production is less than half the production cost in Aroostook county the result is unfair to our farmers, and they sent me down here to see if we couldn't have some relief.
The CHAIRMAN. You mean so far as the tariff on goods is concerned?
Mr. Hall. That is what I referred to.