UC-NRLF HT> I SB 3T 273 S9I Swift & Company's Analysis and Criticism of PART II of the Report of the Federal Trade Commission on the Meat Packing Industry of November 25, 1918 Issued April 5, 1919 FOREWORD The investigation of the packing industry by the Fed- eral Trade Commission was one-sided. The charge that the packers have a monopoly is not founded upon fact. In its report, the Federal Trade Commission has pre- sented only such information as could be used, by means of wrongful interpretation and insinuation, to make out a case against the packers. The Trade Commission had free access to Swift & Com- pany's files, and in publishing letters and telegrams taken therefrom, the Commission has actually failed to reproduce in its report letters and telegrams and even parts of. telegrams which controvert some of the very contentions that it tries to establish. In many cases, the Trade Commission has described perfectly proper practices and transactions in such a way as to make them appear illegitimate ; it has given undue importance to trivial matters, and has failed to even men- tion other matters of vital importance ; by a subtle method of insinuation and suggestion, the Trade Commission has in many instances given the effect of dogmatic assertion. Proof of the foregoing statements may be found in the following Analysis of Part II of the Federal Trade Com- mission's Report on the Meat Packing Industry. Aside from a Summary, this is the only part of the complete report that had appeared at the time this Analysis was prepared. This Part II of the Report is supposed to present suf- ficient evidence to warrant the conclusion of the Commis- sion that the five large packers have a combination in restraint of trade. Swift & Company denies that it has any agreements or understandings with other packers to affect prices of live stock or meats, and shows in this Analysis that the Trade Commission has failed to prove its case. CONTENTS Page FOREWORD 3 INTRODUCTION 5 One-sided Character of the Investigation 6 EARLY POOLS AND THE NATIONAL PACKING COMPANY.. 10 National Packing Company 12 THE ALLEGED COMBINATION OF TODAY 15 Summary of Trade Commission's Conclusions as to Monopoly 15 The Alleged "Live-stock Pool" 17 Centralized Buying System 23 Evidence from Packer Buyers 4 . 25 Packer Exchange of Information 25 Approximate Uniformity of Purchase Percentages The Real Explanation 27 The Situation at St. Joseph 31 The St. Paul Situation 33 The Situation at Omaha and Sioux City 36 The Situations at Oklahoma City, Fort Worth, and Denver 37 Conclusion on Alleged Live-stock Pool 39 Alleged Collusion in Live-stock Buying 42 "Part Purchases" 42 "Split Shipments" 48 "Wiring on" 52 Alleged "Making" the Daily Market 57 International Meat Pool 62 Alleged Collusion in Selling Meat Products in the United States 65 Alleged Collusive Action toward Small Competitors 69 The California Situation 71 ALLEGED AGREEMENTS IN OTHER LINES 81 The Real Facts about Alleged Lard Compound Agreement. ... 81 Alleged Collusion in Cheese Business 83 Alleged Agreements in Creamery and Butter Industry 84 Alleged Division of Territory in Poultry, Egg, and Butter Buy- ing 92 Alleged Combinations in the Rendering Business. 94 Formation of Wilson & Company and the Sulzberger Mem- oranda .. 97 AN AL YS IS . OF PART II OF THE Report of the Federal Trade Commis sion on the Meat- Packing Industry INTRODUCTION. Part II of the Federal Trade Commission's report on the meat industry deals with "evidence of combination among packers, " and is supposed to present sufficient evidence to warrant the conclusion of the Trade Commis- sion that the five large packing companies have a com- bination in restraint of trade. Aside from a "Summary" of the Federal Trade Com- mission's report, which was issued under date of July 3rd, this Part II is the first instalment of the complete report that has appeared ; but it is undoubtedly the most important, because the most fundamental question in con- nection with the whole packing industry is as to whether there is a monopoly, or whether there are any illegal agreements among the large packers. It is on the theory that the Federal Trade Commis- sion's conclusions are correct that legislation providing for the regulation of the packing industry has been de- I manded at Washington. It is therefore of extreme im- portance to analyze the so-called "evidence of combina- tion" in order to find out whether the Trade Commis- sion's conclusion is sound. This analysis will establish the fact that the evidence contained in Part II of the Federal Trade Commission's report is not sufficient to warrant the Trade Commission in its conclusion that a monopoly exists. It will also be shown that in trying to make out a case against the pack- ers the Federal Trade Commission omitted correspond- ence taken from Swift & Company's files, as well as easily ascertainable facts, which completely controvert conten- tions made by the Commission in its report. It will also be showr that the Federal Trade Commis- sion has described perf'^cMy sound business practices in such a way as to make them appear illegitimate; that the report is replete with insinuations and wrongful inter- pretation of facts ; and that it contains actual inaccuracies in its figures and statements. One-sided Character of tke Investigation. The Federal Trade Commission was supposed to make an impartial investigation of the packing industry, and at first it appeared that this was the intention of the Com- mission. It soon developed, however, that the Trade Commission was seeking only such information as it could use, by adroit and ingenious interpretation, in making out a case against the packing industry, and that it was not seeking facts and explanations from the packers which would place the information collected in its true light. This one-sided character of the investigation was evi- dent from the manner in which public hearings were held. In the first place, the Commission employed the services of an attorney who had gained his reputation as a pros- ecuting attorney, and who at once began to perform in practically that capacity for the Commission. At the hearings there were produced witnesses who had been sought out by the Federal Trade Commission, who tes- tified against the packers. The packers were not per- mitted, however, through legal counsel to cross-examine such prejudiced witnesses. They could not produce wit- nesses who, through cross-examination, would controvert evidence of prejudiced witnesses, and they could not cross-examine witnesses of their own to substantiate the facts which they might have produced. It is true that representatives of the packers might have appeared at these hearings, but since they would have been subject to cross-examination by a hostile attorney, and since they had no right of cross-examining witnesses themselves or through counsel, they naturally did not care to submit to any such unjust procedure. That this is a true description of the character of the hearings is substantiated bv the following statements by Mr. Francis J. Heney, attorney for the Trade Commis- sion, in public hearings at Boston, on December 28, 191 7 : "Commissioner Murdock: This meeting will come to order. This is a hearing held by the- Federal Trade Commission under the direction of the President of the United States, and the authority of Congress, in an inquiry into the food products of the country, and the high cost of living. 'Proceed. Mr. Heney. "Mr. Heney: Mr. Commissioner, I should like to ask for an order at this time excluding all witnesses from the room with the exception of the witness who is being examined, following the same policy we followed in Washington at the commencement of the hearings. "Commissioner Murdock: That order will be made. "Mr. Heney: I think it might be well for me to state for the benefit of the members of the press, that this investigation is not a trial in which any parties are defendants and thereby entitled to appear by attorney. It is an investigation into the economic conditions, as well as practices that may be prevailing, and it is ex-parte, and while the Commission will be glad to hear any wit- ness that presents himself here, no one comes here with the right to be represented by attorneys, with the Tight to -put orTwitnesses, because there is no investigation of that sort being conducted. " 8 In further support of our contention that we were not given a fair hearing, it is significant that Mr. Colver, himself, Chairman of the Federal Trade Commission, acknowledged to the House Committee on Interstate and Foreign Commerce, on December 19, 1918, that the hear- ings had been ex-parte in character. Another evidence of the unfair and one-sided methods of investigation used by the Federal Trade Commission is the manner in which agents of ~ the Commission went through the private files of Swift & Company and used in the report only such communications as would appear to make out a case against the packing industry. Public hearings were being held while the files were being ran- sacked, and scraps of correspondence were taken to the hearings and read into the public record, not only without adequate explanation, but with positively wrongful in- terpretations and misleading insinuations. This practice resulted in sensational items in the newspapers, and an inflaming of the prejudice that exists in the minds of many people against the packers. It hardly seems to Swift & Company that this is a dignified and scientific method for a department of the Government to use in making what. was supposed to be a fair and impartial investigation. Whatever may be thought of the fairness and impar- tiality of the methods of investigation, however, the im- portant point is that the report itself is one-sided. Even if the Commission felt justified in its conclusion that monopoly existed, its report should have contained the evidence on both sides of the question. But no! The report is practically the brief of a prosecuting attorney. It contains only such evidence as can, by wrongful inter- pretation, appear to indicate illegal collusion among the packers. It fails to produce scores of positive evidences of active competition. And, as mentioned above, the Commission has actually refrained from publishing let- ters that were taken from our files, and which controvert statements and insinuations made in the report. In some cases, it has actually used only such parts of telegrams, taken from our files, as appear to bear out its case, omit- ting items from the same telegrams which were not useful to the Commission. These are serious charges to make against a depart- ment of the Government. Their proof will be found in the analvsis that follows. 10 EARLY POOLS AND THE NATIONAL PACKING COMPANY. Pages Chapter I presents a history of the so-called beef pools, 1 1 to 25 w hich were in existence before 1902, and of the National Packing Co., which was in existence from 1902 to 1912. The object of the Commission in going into this past history is apparently to show that there was a disposition on the part of the packers to work together in the past, and to try to link these early events with the alleged present-day agreement to divide live-stock receipts. Th^ Commission says on page 11 of the Report : "These admitted agreements of the past are a key to the evi- dence of agreements and combinations of the present time." This evidence is only of historic interest, however, unless the Trade Commission can prove that the early day agree ments have been continuous. It is on this point that the Trade Commission has necessarily fallen down, in spite of bold and unwarranted interpretation of scattered data whi; h are supposed to indicate the existence of arrange- ments continuing through the days of the National Pack- ing Company and since the dissolution of that company. It is perfectly true that for several years previous to 190? the large packers had arrangements which have be?n referred to as "beef pools" or the "Veeder pools." Under these arrangements a central bureau decided from week to week how much fresh beef should be shipped to the several eastern markets. The object was to prevent recurrent gluts and scarcities therein. The economic effects of such an arrangement on the public as a whole were undoubtedly beneficial, as it probably had some effect in stabilizing prices through the regulation of sup- ply in accordance with demand. It might be added that 11 the experiences under the pooling arrangements showed the futility of attempting to fix the prices of such a per- ishable commodity as fresh beef. The beef pools were discontinued in 1902 but not because they -were declared illegal! The Federal Page is Government had filed a bill asking for an injunction to prevent the packers from having agreements in illegal restraint of trade. Swift & Company preferred to dis- continue the arrangement, because of public criticism, and did not contest the bill. The injunctional order was issued, and was afterwards affirmed by the Supreme Court of the United States, but the injunction itself con- tained the following clause: "Nothing herein shall be construed to prohibit the said defend- ants from curtailing the quantity of meats shipped to a given market where the purpose of such arrangement in good faith is to prevent the over-accumulation of meats as perishable articles in such markets." (1) In other words, the injunctional order expressly per- mitted the continuance of the very pools against which the agitation at that time had been waged. In spite of this fact, the packers preferred to discontinue the ar- rangement, because of popular misunderstanding and dis- approval. This explanation is of special significance be- cause the Federal Trade Commission has tried to make so much capital out of the fact that the packers had pooling arrangements prior to 1902. At the time the Veeder pool was abandoned, seventeen years ago, Swift Company definitely and absolutely ceased to have rela- tions with other packers leading to the allocation of beef shipments or to any other form of agreement which might be construed as in restraint of trade. As evidence of Swift & Company's earnest efforts to carry out this policy, there have been sent to the various department heads, at intervals of about six months, ever since that time, a copy (1) 196 U. S. 375. 12 of the injunction, with the following letter of instructions, and the receipt that must be signed : Instructions issued periodically by Mr. L. F. Swift to Department Managers of Swift & Company: September 5, 1918 Letter No. 1979. Dear Sir: Enclosed please find copy of decree of May 26th, 1903, as modified by the Supreme Court, in which the injunction issued in the suit of the United States v. Swift & Company and others, is made permanent. We again bring this to your attention and advise you that you are absolutely prohibited from entering into any agreement or combination, either personally or for Swift and Company, which will in any manner violate the injunction or the Sherman Anti- trust Law. This letter and copy of injunction bear serial numbers, and are to be retained for your files. Please acknowledge receipt of both documents on the blank enclosed for that purpose. Awaiting your reply. Yours truly, SWIFT & COMPANY, L. F. Swift, President. Place Date Swift & Company, . . Union Stock Yards, Chicago. Dear Sirs: I acknowledge receipt of your letter under date of Sept. 5, 1918, together with copy of injunction issued in suit of the United States v. Swift & Company and others, both bearing Serial Number 1979. I shall be governed by the instructions contained therein. Yours respectfully, (Signature) (Address) Must be signed personally by person to whom addressed. National Packing Company. Pages it is true that in 1902 the three largest packers planned 22 to 25 to merge their interests in a single large corporation, to- gether with a number of small packing companies. The proposed consolidation was similar to those taking place 13 at that time in other industries, such as the U. S. Steel Corporation; but the plan never went through, because of difficulties that arose in connection with the financing. The result was that no single predominating corporation has ever been formed in the packing industry such as are so common in other industries. While the negotiations for the proposed merger were under way several small packing companies were bought up by Mr. Swift, Mr. Armour, and Mr. Morris, with the intention of including them in the new company. On the failure to carry through the proposed plan these small companies were organized into the National Packing Company, the stock of which was taken by the three large packers interested, on the basis which had been agreed upon for the merger, i. e., the basis of the tangible assets of the three large packing companies. It is undoubtedly true that the directors of the National Packing Company discussed matters of general trade in- terest at their regular meetings, but there is absolutely no evidence or reason to suppose that such informal discus- sion as they may have had constituted an agreement of any form, or amounted to any illegal collusive action. This very question was before the courts in the case of the United States v. L. F. Swift et al., which was decided in 1912. and which acquitted the defendants of having any illegal combination in restraint of trade. In fact, it was even contended by the Government in trying that case that the fairly constant percentages of purchases, taken by the various packers, were evidence of agreements to divide live-stock receipts. And the packers were declared 1 'not guilty"! It is on this same charge that the Federal Trade Commission now bases its conclusion that the packers have an agreement in restraint of trade. The National Packing Company, although it was never 14 declared illegal, was dissolved in 1912, and the properties were sold to the Swift, Armour, and Morris companies. The National Packing Company had not been particularly successful financially, and strange as it may seem it had actually been a thorn in the side of the other large pack- ers from a competitive .standpoint. Even if there had been an illegal arrangement during the days of the National Packing Company, that would have little if any bearing on the situation today; but there were not agreements in restraint of trade at that time, as decided by the courts, and this is a significant fact inasmuch as the Federal Trade Commission at- tempts to show that there has been a continuing arrange- ment, though changing somewhat in form, from the earli- est days to the present time. 15 THE AIXEGED COMBINATION OF TODAY. Summary of Trade Commission's Conclusions as to Monopoly. pages Qn pages 26 and 27 of the Report, the Federal Trade 26 to 27 Commission summarizes the principal charges which are 'supposed to prove that the five large packers have a con- spiracy in restraint of trade. The Trade Commission in- forms us that "this evidence is convincing, consisting as it does largely of documents written by the packers/' etc. We admit that on its face the evidence might well appear convincing to the uninitiated and to the person who does not know that the evid?nce has been hand-picked for the purpose of bringing out only one side of the case. AVe submit, however, that a careful analysis even of this one-sided evidence reveals no proof of agreements in re- straint of trade. It is only through constant repetition, ingenious interpretation of the evidence, and bold as- sertion and assumption, that this evidence appears con- vincing even to the person who has not really studied the matter. The Federal Trade Commission bases its monopoly charge on the following conclusions: I. That th n five large packers "are in an agreement for the division of live stock purchases throughout the United States according to certain fixed percentages." 16 II. That the five large companies "exchange confidential inf ormation ' ' and "eniploy jointly paid agents to secure information which is used to control and manipulate live- stock markets." III. That the five companies "act collusively through their buyers by means of such practices as (a) 'Split-shipments' purchases; (b) 4 part purchases'; (c) l wiring on'; (d) ' Making' the daily market." (These practices will be described and discussed in detail below.) IV. That Swift, Armour, Morris, and Wilson have com- bined with certain other companies to restrict and control shipments from South America to the United States and other countries. V. That the large packers act collusively in the sale of fresh meat. VI. That there is a joint contribution to funds by the five large packers. VII. That there is joint ownership of various enterprises. These conclusions will be discussed in the order that they are taken up in the Commission's report. It will be shown that there is no evidence to support the charge of 17 collusion in an illegal or uncommercial way ; that many of the practices described are perfectly legitimate ; and that it is only by wrongful interpretation and insinuation that they are made to appear as illegitimate. The Alleged "Live-stock Pool." pages The Federal Trade Commission practically bases its 27 and28 monopoly charge on the fact that the percentage of live stock bought by each packer at the different markets, and for all markets together, remains fairly constant from year to year. It introduces the discussion of this subject by referring to 1 1 control of shipments and prices of fresh meats, " (page 28 of the Report), which the Commission claims existed during the days of the National Packing Co., and the Trade Commission refers to the National Packing Co. as a " subterfuge ' ' for covering up the pur- poses of the ' * pools " that existed before 1902. We are then informed that a device had been contrived for suppressing competition among the large companies whereby the receipts of live stock at the various markets were divided among the several packers. The Trade Commission tries to link up the 1 1 effected control of ship- .ments and prices of fresh meats ' ' with this new device in order to make out that collusive action was continuous through the days of the National Packing Company and since its dissolution. The transition from the one method to the other is indeed vague; it is only by unwarranted assumption and by positive statement not based on fact that the Trade Commission effects this link in its chain of reasoning. Pages Evidence is introduced to prove that there was an 29 and ao agreed division of live-stock receipts prior to 1912. This evidence consists of statements that a former head hog 18 buyer and a ' ' buyer employed at Kansas City ' ' had told the Commission that there had been agreements to divide receipts according to fixed percentages. This evidence can hardly be considered authoritative since the names of the informants are not given, since they may have had some special reason for wanting to testify against the large packers, and since, if they had been telling what they then thought was the truth, they might even have been mistaken in their conviction as to whether there really was an agreed division. The last explanation is probably the correct one, because a buyer, when he finds that his concern is buying a. fairly definite proportion of receipts, is likely to assume that this results from an agreement with other packers. That this is not the case will be pointed out below. The Trade Commission apparently considers that all references to percentages bought at different markets found in letters or memoranda in the packers files are proof of agreement. For this purpose a letter addressed to Mr. M. R. Murphy is quoted at the bottom of page 29. Among the numerous references to percentages in this letter one will look in vain for even a suggestion that there was an agreement among the packers. In fact, this letter indicates absence of agreement, as, for example, where the writer says "I wired you today that I thought you ought to buy 17 per cent, of the hogs at Kansas City, 30 per cent, at Omaha, and 50 per cent., or just as many hogs as Armour buys, at Sioux City." If there had been any agreed percentage, the writer would have naturally referred to the agreement, and spoken of the necessity of living up to it, instead of merely wiring "I thought you ought to buy ' '. It should be pointed out in this connection, as will be explained below, that each packer keeps a careful record of the percentage that he buys in each market, and that he aims to at least maintain this percentage. Such a per- centage becomes a usual or customary gauge of his suc- cess in developing his business, and he therefore fre- quently has occasion to refer to the percentage of animals that he buys, and to give instructions to buyers in ac- cordance with such customary percentages. The point is that references to percentages do not in themselves imply any agreement or collusion whatsoever with other pack- ers. Pages Another supposed evidence of agreement previous to 31,32, IQH was found in a letter to Mr. Veeder from Paul D. 33,34. Cravath (page 31 of Report). Attached to this was a memorandum, reproduced on pages 31, 32, 33, and 34 of the Report, showing the number and percentages of ani- mals bought by different packers in different markets. There is not a single word that indicates that these per- centages were the result of agreement ; the memorandum was made up by Mr. Cravath 's client, the Schwartzchild and Sulzberger Company, as explained in the letter itself, and covered past occurrences. The very fact that Mr. Cravath asked Mr. Veeder to check up the figures is pretty good evidence that they had not been the result of collusion among the packers. The truth of this matter is that Mr. Cravath was study- ing the situation at that time with a view to trying to get the other packers to agree to some legal arrangement that would lead to more satisfactory conditions. Competitive profits at that time were unreasonably low, and the Sulz- berger company was already suffering from the aggres- siveness of the other packers. Swift & Company, al- though believing that some such arrangement might be technically legal, especially as the "Veeder Pool" had been specifically permitted by the injunction issued in 20 1902, preferred not to run any risk of criticism, and definitely declined to enter into any such arrangement as was suggested. And yet the Trade Commission introduces this letter as evidence that there was an agreement in 1911 ! The Com- mission could have easily ascertained the facts if it had desired to go into both sides of this question. Pages rpftg federal Trade Commission tries to show that the 34 and 35 alleged division of live-stock receipts during the days of the National Packing Co. was continued after the dissolu- tion by introducing a table of percentages of purchases by the five large packers and the National Packing Co. (page 35 of the Report) from 1910 to 1913, found in the office of Swift & Company. There is absolutely no evidence that the percentages were the result of an agreement among the packers; such is merely assumed by the Trade Commission. The feature of this table to which the Trade Commission calls attention is the last column headed "1910 arbitrary." This column shows the percentage purchased by each of the five large packers, after making readjustments caused by the dis- solution of the National Packing Co. in 1912. The infer- ence is that new percentages were arranged by agreement, and that this table shows the continuance of an arrange- ment from 1910 to 1913. The fact is that Swift & Company has always been in the habit of compiling these percentages for its own use, so as to measure its success in holding its own and in gaining on competitors. During the year 1913, it was practically impossible to make comparisons with previous years because the National Packing Co., whose business was divided among Swift, Armour, and Morris, had been in existence and taking part of the receipts, previous to 21 and including part of 1912. It was therefore necessary to recompile the figures for such a year as 1910 by eliminat- ing the percentage bought by the National Packing Co., and spreading this percentage over the percentages taken by the other five companies. That is to say, the column headed "1910 arbitrary" was merely a device employed by Swift & Company to compare its percentage of 1913 with ifs percentage of 1910 ; such a percentage is of course no evidence of any continuing agreement, or of any col- lusive readjustment of percentages, even though the read- justed figures for 1910 were apparently obtained and used by other packers in making their comparisons. Pages ^ further attempt is made to show that there was an 36 and 37 agreement to adjust percentages after the dissolution of the National Packing Co. by introducing part of a memo- randum by Mr. G. F. Sulzberger, found in what the Fed- eral Trade Commission sensationally calls "The Black Book. " There is nothing in this letter except an indica- tion that Mr. Sulzberger and Mr. Armour had compared notes as to the percentages of live stock that they and other packers had been purchasing. The table of per- centages which accompanied this letter (page. 37 of the Report) is a memorandum of past purchases. There is nothing at all about this letter or the percent- ages to indicate that there was any agreement as to what the percentages should be in the future. It is difficult to see how such informal interchange of in- formation can be interpreted as evidence of a definite agreement among the large packers to divide receipts, especially when it is known that at that time the Sulz- berger Co. was beginning to have financial difficulties and that Mr. Sulzberger had had frequent informal confer- ences with Mr. Armour and representatives of other packers, complaining of their severe competition. 22 Pages Neither is there anything in the letters addressed to 38 and 39 M r . M. R. Murphy which indicates that there was any agreement. In 'fact, the first letter to Mr. "Murphy gives vary clear evidence of competition where it says "the trouble is that there ought to be 105 per cent, to satisfy everybody, " and again "I don't want to be too aggres- sive on the market, but at the same time we cannot afford to slide back." In concluding our discussion of the attempt of the Trade Commission to prove a continuing arrangement from the time of the old beef pools during the nineties, through the days of the National Packing Company, and up to the present time, it requires but little analysis to show that no continuing arrangement could have existed. The beef pools were arrangements to allocate shipments of dressed beef to the various eastern markets ; the Na- tional Packing Company was a corporation in which tne three largest packers owned stock in proportion to the tangible assets of tjie three large packing companies ; the alleged agreement of today is one of divided receipts of live stock ! Any one arrangement could not have been a continuation of the preceding one. And in addition to this, the Veeder pool of the early period was never declared illegal, and its principle was specifically permitted by the injunction of 1902 ; and the federal courts decided that the National Packing Com- pany was not in illegal restraint of trade, and the ques- tion of agreed division of receipts was involved in that case! So much for the Trade Commission's use of early history in its attempt to prove that there is an agreed division of live-stock receipts today. Pages j n bringing the discussion of the alleged agreement to 39 to 41 divide live-stock receipts up to the present time, the 23 Federal Trade Commission begins by pointing out the proportions of total receipts which the large packers are said to buy in this manner, and then goes on to explain the "centralized buying system," through which buying policies are carried out. Centralized Buying System. Pages ^h e Trade Commission describes the buying system 42 to 44 US ed by the large packers, whereby their purchases in various markets are governed by their respective head buying offices in Chicago. It is explained that these head buyers are in constant telegraphic communication with the buyers in the different markets, and that they issue specific instructions which have to be carried out by their sub-buyers. The description of this centralized buying system is a good example of the Trade Commission's practice in de- scribing a perfectly legitimate proceeding in such a way as to insinuate that there is something irregular about it. For example, the Trade Commission says: Page 42 "All (the buyers who were questioned) said that they were cora- ( Italics pelled to make their purchases in line with instructions from Chi- Inserted cago. * * * Buying instructions must be obeyed, all agreed, by S. & Co.) The head buyers at Chicago admitted this." Why should the Trade Commission say that the head buyers "admitted" this? There is no secret about it, and it is nothing to be ashamed of. This is merely an example of the insinuating methods used by the Com- mission. Page 44 rp^g Commission closes its discussion of this matter by saying that: "This constitutes a situation in which a control of the buying policies of all the large packers may be effectuated, and only a few men in each company need know that there is an agreement or understanding. ' ' 24 Although, the Commission refers to "an agreement " as though it had established its case, there is not even a charge of collusion between the different packers in connection with this description of. centralized buying. The Commission apparently introduces this discussion in order to show that it would be easier for the packers to get together because they have these centralized buy- ing systems than it would be if they did not have them. The impression is also created that the packers are able to exercise some control over prices in different markets through this centralized buying system. This same mat- ter is dealt with on pages 96 and 97 of the Report, where telegrams are reproduced to indicate that the large pack- ers "make" the market through their instructions to buyers. Even if Swift & Company's head buyer in Chi- cago wired to the buyer in Omaha to buy "ten lower than yesterday, " this means to buy lower if he can. It im- plies no control over prices whatsoever. A good exam- ple of the kind of instructions issued is found on page 97 of the Report, where Mr. G. F. Swift, Jr., wires to Kansas City, South Omaha, and St. Louis : "Try buy hogs lower and improve spread. We are trying buy 15/25 lower K. C. buy around 2000 So Om buy around 2000 St. Louis buy around 2000." This is, of course, a perfectly legitimate way of instruct- ing buyers, and is one that we shall undoubtedly continue. It is only through unfair insinuation that telegrams like the above can be construed as indicating questionable practices. There is, of course, absolutely no collusion with other packers in this matter of sending out instructions to buyers. The important point is that this whole subject of the centralized "buying system has been written up by the 25 Federal Trade Commission in such a way as to throw suspicion on a perfectly legitimate and praiseworthy method that each packer employs in centralizing and controlling his buying operations. Evidence from Packer Buyers. Page 44 j n connection with the alleged division of live-stock receipts, it is of extreme significance that in all its efforts to prove a case against the packers the Federal Trade Commission has been unable to unearth one single bit of positive proof that such an, agreement exists. No such agreement could be carried out without a great many people having to know about it. The Trade Com- mission makes the point that "one of the buyers at a western market" stated that he "couldn't prove it but it did look awfully much as though the packers got to- gether and divided up the total receipts for the day. 7 ' This is pretty slim sort of evidence for the Federal Trade Commission to even introduce into its report. . Packer Exchange of Information. page 45 ^he Federal Trade Commission says that the packers keep "a complete record of all one another's live-stock purchases and shipments" and insinuates that this prac- tice has ; ' a direct bearing on their combination in divid- ing live-stock receipts." As a matter of fact, each packer keeps a record of the purchases of other packers for competitive reasons; Swift & Company, for example, in order to measure its success in holding its own in the different markets, keeps these records for its own use ; it has done this for years and expects to continue to do so. There is nothing 26 in this fact to indicate that there is an agreement with the other packers. As for the collection of market information, the Fed- eral Trade Commission has put this matter in an entirely wrong light. The packers need the most detailed and accurate information possible concerning receipts of an- imals at the various markets^ the number shipped on to other markets, e,tc., in order to govern their buying as accurately as possible; and they need this information each day as early in the moniing as possible. In many markets the machinery for gathering such information is inadequate, and the packers themselves have co-op- erated in establishing methods to obtain -it. Page 46 This accounts for the situation at Kansas City, de- scribed at the top of page 46 of the Report, where it is said that the large packers "jointly employ two men to gather market information/' The information ob- tained in this way is not used by Swift & Company in any illegitimate way. It is not used as a basis for "wir- ing on," as alleged by the Trade Commission, although even this practice is not an illegitimate one, as will be shown on pages 52 to 57 below. It might be mentioned, in this connection, that the Fed- eral Government, through its Bureau of Markets, has been developing an organization for the collection and dissemination of market information; Swift & Company at least would be glad to see this work extended to such a point that the packers may be relieved of all expense and trouble in performing this function. 27 Approximate Uniformity of Purchase Percentages. The Real Explanation. Pages Although the Federal Trade Commission uses every 46 to 78 possible means to make it appear that there is a uni- formity of percentages in the purchase of live stock, due to agreements among the packers, the truth of the matter is that such uniformity as exists is an indication of active competition and of the close watch that each packer keeps on the others. As already explained, each packer keeps a record from week to week of the per- centages of total receipts at the various markets pur- chased by himself and by each of the other packers. Swift & Company is jealous of its position and does not intend to let the other packers gain in their propor- tion of the total by so much as a fraction of one per cent. It is true that the competition in purclrasing does not take the form of "cut-throat" competition, except per- haps to a slight extent at certain times. Any packer might be able to increase his proportion inordinately by going out and "bidding up" the market; or, in other words, by paying more than the animals are worth in the form of dressed meat. Any packer who tried this would of course lose money, and the chances are that even if this were tried the other packers would follow suit in order to maintain their positions in the market. Each packer not only has a fairly definite killing capacity in his plants, but he has a certain established trade which he must take care of, and if he falls off in his killing as compared with one or more of the other packers, he will lose customers for meat and perhaps suffer a permanent falling off in his total business. This would also result in running up his overhead expense, while his compet- 28 itors' expenses would be kept down by their greater vol- ume. It has been learned through experience by the large packers that it does not pay for any one of them to bid up the market by even a few cents a hundred pounds over what the animals are actually worth in the form of meat, and consequently price competition and buying competition are carried on within fairly narrow limits. The packers ' buyers are expert judges of weights, dressing percentages, and the qualities of meat derived from various animals, and their competitive bids in the live-stock markets ordinarily vary only from 10 to 15 cents, or perhaps 25 cents per hundred pounds, and each buyer naturally tries to buy at such a price as will yield a profit to the company on each purchase. If there is anything wrong in the lack of cut-throat or destructive competition that would result from a reckless attempt to increase purchase percentages by bidding up the market inordinately, the packers are guilty. We do not believe, however, that we can rightfully be criticised for not entering into such competition, which would not only be disastrous to ourselves or any other packer who attempted it, but which would be of no benefit to any one. It would only tend to make the market more erratic, and it would unsettle conditions generally. It is usually conceded that cut-throat competition is unhealthful and there have been developed in many industries forms of co-operative competition to regulate this very thing. The form that this has commonly taken in recent years is the open-price association, whereby a group of manu- facturers in a certain industry, or a group of jobbers in a certain trade, report individually to a central bureau their costs, sales, prices, etc., of the previous week or month. Statistics are then compiled and given to the various members; these are records of past transac- 29 tions and form the basis of future operations, without any agreement as to what prices shall be. There is not even this kind of an agreement in the packing industry; in fact, there is no agreement what- ever as to the division of receipts, and a careful reading of the Trade Commission's report shows that there is really no evidence of such an agreement. The fact is that each packer watches the others so closely that no one of them is able to gain appreciably on the others, and consequently the proportion of animals bought by each remains fairly constant from year to year. There is no occasion for surprise that this is true. If statistics were available to show the sales of the half dozen leading wholesale grocers or department stores in Chicago, we do not doubt but that the percentage of the total done by each would remain fairly constant from year to year. The more competitors come in direct contact with each other, and the more they are able to watch each other closely, the more nearly uniform will be the percentage of busi- ness done by each. And the purchase of live stock is carried on in open organized market places where each packer can watch the other with the closest scrutiny, and hence it is only natural that it would be even more diffi- cult for one packer to gain on the others in this trado than in almost any other trade. With these thoughts in mind, it is much easier to un- derstand and to appraise the allegations of the Commis- sion. Even a slight change in purchase percentages is really significant. The Trade Commission's own figures, on page 57 of the Report, show that Swift & Company's percentage of cattle purchases increased 1.17 per cent, from 1913 to 1917. This means that Swift & Company killed about 90,000 more cattle in 1917 than if it had not increased its percentage over 1913. This also means that 30 Swift & Company increased its proportion of total pur chases of cattle by nearly 3^ per cent, in four years. The figures for 1918 show a still further increase in their percentage of purchases for Swift & Company, and this is a highly satisfactory situation, because it shows that at least in the buying of cattle and in the selling of cattle products, we have made a gradual and substantial gain on our competitors in the past five years. Contrast this explanation with the statement of the Federal Trade Commission at the top of page 48 of the Report, where it is said that the weekly figures kept by each of the large packers for comparison of purchases made by other packers "does not supply useful business information, but shows how nearly the agreement is being adhered to." This is merely an attempt to give the impression that the fairly constant percentages result from a formal agreement, without giving any considera- tion to the actual economic facts underlying this phe- nomenon. What has been said of the reason why percentages of purchases remain fairly constant from year to year ap- plies only to markets that are fairly well developed and where conditions are fairly stable. The Trade Com- mission introduces a number of tables and diagrams, from pages 48 to 75 of the Report, which show how these percentages work out. It will be shown below, however, that for certain markets figures have been omitted which show that in important cases they have not been so uni- form after all. This point is especially important in connection with the situations at Denver and St. Paul, where the actual figures quite disprove statements made by the Federal Trade Commission. (See pages 38 and 35, respectively, below.) 31 Page 57 flie Sulzberger memoranda, quoted on pages 57, 58, and 59 of the Report, contain absolutely no evidence of agree- ments to divide live-stock purchases. They merely show an occasional interchange of information, concerning past transactions, between Mr. Sulzberger and other individ- ual packers. Some of these memoranda have to do with foreign shipments and have no bearing on the point at issue. The Trade Commission loses no opportunity to try to drive home the impression that the percentages quoted in these memoranda must have been the result of agreement, and that they serve as bases for agreements for future operations. The Situation at St. Joseph. Pages p rom pages gQ to 65 of the Report the Trade Corn- so to 65 mission introduces telegrams with regard to the situa- tion at St. Joseph, to indicate that representatives of Swift & Company were worried over the fact that Ar- mour and Morris were not buying their "share" of the cattle in that market, and that Swift & Company had tried to get these two competitors to buy more animals. These telegrams are introduced as evidence that they must have been in agreement as to the percentage that each should buy, and the Federal Trade Commission tries to give the impression that these agreed percentages were an obligation that each packer must buy his full share when the receipts are heavy. The truth of the matter is that occasionally the St. Joseph market tends to get "out of line" and slightly under the Kansas City market, near which St. Joseph is located. Competitive conditions, resulting from the efforts of each packer to buy in the lowest market, always cure such a situation and automatically distribute ship- 32 merits among the various markets so as to keep them in line with each other. But there have been occasions, when receipts were temporarily heavy, that prices in St. Joseph have been slightly below those in Kansas City. Swift & Company has a large interest in the stock yards in St. Joseph, and has a well equipped packing plant there, and naturally is anxious that shipments should continue to come to that market, and to that end that shippers shall be satisfied with the prices they obtain as compared with other markets ; otherwise they will stop shipping to St. Joseph. Although other packers have plants at St. Joseph, they sometimes rely too much on the "other fellow " to support a bad market. Swift & Company has always done its utmost, during periods of excessive receipts, to support the St. Joseph market, and has even urged its competitors to buy more heavily and to assume a greater proportion of the respon- sibility for keeping this market in line. Swift & Com- pany acknowledges that it has even done this during the past few months since the Trade Commission has alleged that this practice constitutes an evidence of collusion. Swift & Company can see no harm in making such efforts to support a market. The fact that we have urged other packers to buy more does not in any way indicate that there is an agreement. When we have used the word " share " (as in the letter at the bottom of page 60 of the Report), this does not mean an agreed upon per- centage, but merely the share or proportion that each packer has been accustomed to purchase or that we think such packer ought to purchase in order to do his part in supporting the market. Attention is called to the table on page 65 of the Re- port, which shows that the percentages of cattle and hogs bought by Swift, Armour, and Morris in St. Joseph have 33 varied appreciably from year to year. The Federal Trade Commission tries to make out that- this was a failure to live up to " percentages agreed upon"; the Commission's position is that uniformity in percentages shows agreement, and that a lack of uniformity shows a failure to live up to the agreement. In either case, the Commission assumes that an agreement exists, and then interprets the evidence to prove the assumption! The St. Paul Situation. Fage 65 ^ the bottom of page 65 of the Export the Trade Com- mission introduces a statement attributed to J. T. Mc- Millan, which appears on its face to contain pretty strong evidence that there must be an agreement between Swift and Armour in the division of live-stock receipts at South St. Paul. It is reported that Mr. Bangs, the manager of Swift's St. Paul plant, said to Mr. McMillan: "If you move to the yards, you couldn't do that; you would have to agree to buy not over a stipulated proportion of the hogs offered each day, the same sort of working agree- ment we have with Armour. ' ' It will be noted that no indication is given as to when or where this statement was made. One is inclined to believe that if it were authentic, authoritative, and con- clusive, the Federal Trade Commission would have made much more conspicuous use of it in trying to establish its thesis that percentages are fixed by agreement. The only basis we can find for this statement is in the evidence at the Trade Commission's hearings held in St. Paul in January, 1918. It appears that Mr. McMillan, who has a plant at St. Paul, was explaining negotiations which he had with Mr. Bangs relative to -the bringing of his (Mr. McMillan's) plant from St. Paul to the stock 34 yards at South St. Paul. It also appeared that Mr. Mc- Millan was concerned as to whether he would be able to buy enough hogs to operate his proposed plant, and that Mr. Bangs assured him that he would get an ample sup- ply. There is evidence that during the negotiations there was considered a stipulation that Mr. McMillan's pro- posed plant should be of a certain minimum capacity. There was to be absolutely no stipulation as to how much larger than this minimum the plant might be. That is to say, there is absolutely no evidence that Mr. McMil- lan's operations were to be limited or curtailed in any way, as would appear from the quotation at the bottom of page 65 of the Report. Evidence in volume 7 of the transcript of the hearings before the Federal Trade Com- mission, pages 1356 and 1359, bears this out. This part of the Trade Commission's presentation of the case must have been a pure figment of the imagination. It is true that in the public hearings Mr. McMillan said that Mr. Bangs told him, in assuring him that he would be able to buy enough hogs that ' ' that would be arranged on a percentage basis, the same agreement as Armour had" (page 1360 of the transcript). It is perfectly evi- dent, however, from other testimony that was introduced, and from the facts in the case, that Mr. McMillan could not possibly have quoted Mr. Bangs correctly, and that Mr. Bangs could have said nothing more than that Mr. McMillan would get "his share," or what he needed to satisfy his requirements, just the same as Armour had been able to buy all that he wanted. That this interpre- tation is not fanciful is corroborated by the testimony of Mr. Bangs himself on pages 1308 to 1310 of the tran- script, in which he denied having made such 'a statement to Mr. McMillan, and by the testimony of Mr. T. F. Wehner, a former hog buyer for Armour at South St. 35 Paul (pages 1331-1333 of the transcript),, in which he showed that there was no agreed division of receipts between Swift and Armour. Absolutely conclusive evidence that there has been no agreement among the several packers to divide receipts at South St. Paul is found in the following table of actual percentages of cattle and hog purchases taken by the five large packers at South St. Paul for each year from 1914 to 1918 : Percentage of Cattle and Hogs Purchased by Each of the Five Large Packers, South St. Paul, 1914 to 1918. CATTLE. Year Total Head Swift Armour Morris Cudahy Wilson 1914 168,487 97.4 1.0 0.2 0.2 1.2 1915 241,645 92.5 5.1 0.3 1.0 1.1 1916 286,017 85.6 9.1 1.0 0.4 3.9 1917 408,128 80.8 14.3 2.4 ... 2.5 1918 463,175 78.4 19.8 0.8 0.1 0.9 HOGS. 1914 1,380,679 75.7 23.6 0.6 1915 1,869.807 73.0 26.9 0.1 1916 2,327,000 65.0 34.6 0.4 1917 1,524,672 69.9 30.1 1918 1,766,218 67.1 32.9 This table shows that the percentages of cattle and hogs bought by the different packers vary substantially from year to year, and that as the live-stock receipts have been increasing Swift & Company's percentage has been de- creasing, while Armour's has been increasing. The per- centages taken by the other three packers are insignifi- cant but indicate that such purchases as they make vary appreciably from year to year. The reason why the percentages in this market have not reached a greater degree of uniformity is that the market is a new and growing one and that Swift & Com- 36 pany is the only large packer that has a plant in South St. Paul. The other packers have bought only in ac- cordance with the requirements of their plants at other points. When Armour's plant (now being built) gets to operating, the proportions taken by Swift and Armour will undoubtedly settle down to fairly constant per- centages, just as they have in other markets. At any rate the figures shown are positive evidence that receipts at South St. Paul have not been divided by agreement between Armour and Swift, although the Federal Trade Commission tries to give the impression that such a division of receipts obtains. This is a good example of the Trade Commission's method of pre- senting one little unsubstantiated statement in order to prove its case and at the same time leav- ing out a -wealth of evidence which clearly breaks down its own contention. The Situation at Omaha and Sioux City. Pages The correspondence introduced by the Federal Trade 66 to 72 Commission with regard to the situation at Omaha and Sioux City does not directly concern Swift & Company and therefore will not be discussed in detail. It is suffi- cient to point out one or two facts in connection with this correspondence. There are numerous phrases in these letters which show competition; the references to "our 30 per cent.'' and the instructions to buy certain percentages merely indicate what the Cudahy company was accustomed to purchase and was trying to maintain. There is abso- lutely no evidence of collusion with other packers, or that these percentages were the results of agreements. Attention is called to the list of percentages at the 37 end of the letter on page 68 of the Report, which were introduced as though they were a part of the letter. A footnote explains that these percentages were written on the letter by an examiner of the Trade Commission. When this letter was reproduced by the Trade Commis- sion in its Summary of the Report on the Meat Packing Industry, page 29, these percentages appeared to be a part of the original letter, and no explanation was offered that they had been added by an examiner of the Trade Commission. The explanation in the footnote on page 68 of Part II of the Report does not admit the unfair use made of them in the earlier report of the Commission. The Situations at Oklahoma City, Fort Worth, and Denver. Pages Only two large packers are represented in each of these 72 to 76 three markets, and therefore the tendency is for each to buy approximately the same number of animals as does the other. For this reason the Trade Commission refers to them as "50-50" markets. Swift & Company is not interested at Oklahoma City, and the situation in that market will not be discussed here. At Fort Worth, Swift and Armour each buys about 50 per cent, of the receipts purchased by these two pack- ers. Each plant is of about the same capacity, and so far as Swift & Company is concerned we do not intend to purchase less than 50 per cent, if we can possibly help it. Armour & Company undoubtedly feels the same way. For this reason, it works out that each gets approx- imately 50 per cent. ; and yet the percentage often varies substantially, as for example, the drop of Swift & Com- pany's proportion of cattle purchases from 52.06 per cent, in 1914 to 49.86 per cent, in 1915, according to the 38 table on page 75 of the Federal Trade Commission's report. The situation at Denver is considered of extreme im- portance by the Federal Trade Commission, and much is made of the fact that P. D. Armour wrote a letter to J. Ogden Armour, reproduced on page 76 of the Re- port, in which he says : "Of course, as you know, every- thing here is done on a 50-50 basis, and with the facilities we have it is almost impossible to keep up this ratio." The Trade Commission implies that the reference to a "50-50" basis means an agreed division; whereas, it merely means that each plant aims to buy at least 50 per cent, of the receipts at that market, and that neither wishes to see the other packer become the larger factor. In this connection, the Trade Commission reproduces on page 75 of the Report a table showing the percentages of hog purchases taken by Swift and Armour, and these figures indicate that each takes about 50 per cent., al- though they show that in 1915 Swift bought 12,000 more hogs than did Armour. It is very significant, however, that the Trade Commission reproduces only the percent- ages of hog purchases. It failed to reproduce figures of cattle purchases, which show marked variations from year to year. Swift's percentage of cattle purchases was 47.6 per cent, in 1914; it increased to 48.5 per cent, in 1915 ; to 50.7 per cent, in 1916 ; and to 54.7 per cent, in 1917. By increasing from 47.6 per cent, to 54.7 per cent, (or 7.1 per cent, in all), Swift & Company increased its pro- portion by 15 per cent, in three years! Armour's pro- portion had b?en suffering a corresponding decline, and this is undoubtedly what Mr. P. D. Armour referred to when he said, "With the facilities we have it is almost 39 impossible to keep up this ratio." Percentages of sheep purchases show an even greater variation from rear to year. The introduction of the percentages on cattle purchases would have destroyed the desired effect of the "50-5O" letter on page 76. This is another example of actual suppression of information on the part of the Federal Trade Commission. Conclusion on Alleged Live-Stock Pool. pages j n conclusion the Trade Commission says that the 77 and 78 alleged division of live-stock receipts gives the packers control over prices, and says that especially in " 50-50" markets the price offered by the lower bidder becomes the market price, and hence tends to reduce the market price in the long run to the lowest point that will keep producers raising live stock and sending them to market. It is also said that this gives a power over the prices of fresh meats, and that, hence, this alleged division of receipts accomplishes the same purpose as the Veeder pool prior to 1902. The truth is that even if there were an agreed division of receipts this would not give control over prices. If the price in Denver, for example, were artificially re- duced the least bit below prices based on country-wide, or even the world-wide, conditions, there would be ship- pers, speculators, and outside packers who are constantly seeking the lowest markets, and who would immediately jump in and make purchases of live stock, either to hold them until the price recovered, or to ship them to other markets or to their plants at other places. All stock yards are open to every one who wishes to purchase, but even if there were some way of keeping other buyers out, 40 the price could not be depressed in such a market as Denver, or any other market for that matter, because within a few days no more live stock would be shipped to that market. Again, even if there were an agreed division of live- stock receipts, this would give no control over meat prices and would in no way accomplish the purposes of the old Veeder pools. As explained above, the Veeder pools were arrangements by which the total amount of fresh beef to be shipped to the different Eastern markets was determined from week to week, and which was to be divided among the various packers. This was for the purpose of avoiding gluts and scarcities in the marketing of this highly perishable product. An agreed division of live-stock purchases, even if such an agreement existed, would in no way control the quantities of fresh beef shipped to the several markets. Such an agreement, even if faithfully lived up to, would not prevent gluts at individual markets, and therefore would be ineffective to control or regulate meat prices. There is absolutely no form of agreement that affects such shipment of fresh beef or of any other kind of meat. Page 78 A t the top of page 78 of the Report, the Trade Com- mission refers to "an exchange of information as to mar- gins," and to "a periodical inspection of the supplies in one another's coolers at the principal distributing points." There is no formal interchange of information as to margins. Occasionally the representative of one packer might tell the representative of another that "we made 'plus 30 ' last week in New York," as is shown in the Sulzberger memoranda. This is merely an occa- sional and informal interchange of information concern- ing past occurrences, and it falls far short of formal and organized methods of exchanging such information, as 41 used by open-price associations (see page 28 above), which apparently have the sanction of the law. Neither is there a "periodical inspection" of the sup- plies in one another's coolers. The branch house mar- kets of the packers are really open markets, which any person may visit, and it is true that the representative of one packer often visits the branch houses of other packers in order to get a line on the total stocks that are available for distribution. So far as Swift & Company is concerned, at least, this is not done " periodically " nor according to any definite plan. If it can be impar- tially and authoritatively determined that such occasional inspection of competitors ' stocks is in any way unfair or harmful, Swift & Company will be glad to discontinue the practice. Taken all in all, therefore^ it has been shown 1, that the Federal Trade Commission fails to prove that the fairly constant percentages of purchases are the result of agreements among the packers; 2, that there are enough instances of variation in purchase percentages, as in the cases of St. Paul, South Omaha, and Denver, to prove that there is no agreement to divide receipts; 3, that such approach to uniformity as exists is the result of competitive watchfulness that each packer keeps on the others ; 4, that even if there were an agreed division of live-stock receipts this would carry with it no power to control prices of live stock in the various markets and no power to control the prices of dressed meats. 42 Alleged Collusion in Live-Stock Buying. Pages The Federal Trade Commission claims that the large 78 to 99 packers control the live-stock markets and fix live-stock prices collusively by means of the practices known as : "Part purchases." ' ' Split-shipments. ' ' "Wiring on." " Making" the daily market. It will be shown below in the discussion of these prac- tices that : 1. The Trade Commission furnishes no evidence of collusion among the packers. 2. Perfectly legitimate business practices have been described in such a way as to give the impres- sion that they are illegitimate and unfair. 3. In attempting to establish its case, the Federal Trade Commission has used only such parts of in- formation collected from Swift & Company's files as appear to bear out its contentions, and it has ac- tually suppressed other information which controverts the contentions of the Commis- sion. Part Purchases. Pages The "part purchase" plan is described as the method 78 to 84 whereby "two or more packers join in purchasing the live stock of one shipper or producer, each taking a part of the shipment at the same price." Letters and tele- grams taken from Swift & Company's files are intro- duced to show that when a shipment is purchased partly by one packer and partly by another, the prices paid by the two packers are commonly identical. On page 82 of the Report, there are assembled in table form a number of such instances. The conclusion is (top of page 83 of the Report) that these results could be obtained "only by collusion." 43 The facts of the matter are as follows : A single shipper often sends a number of carloads of cattle to market at one time, and the animals in such a shipment are usually of practically the same type and weight, so that naturally they ought to bring the same price on any given day. Swift & Company's require- ments range all the way from the very finest cattle to the very poorest, and it is often impossible for us to use a large number of animals of one type and weight. The animals, when they are offered for sale, are placed in different pens, and our buyer often bids on a certain part of the total shipment, not feeling that he can use them all. In making his bid and purchase he deals only with the commission man and enters into no ar- rangement whatever with the buyer of any other packer to buy the animals in common, or to divide the total shipment. After the commission man has become satisfied that he is getting the highest price obtainable, and has sold a part of the shipment to one packer, he offers the re- mainder, or part of the remainder, as the case may be, to other packers. He naturally wishes to get at least as high a price for the remainder of the shipment as he obtained for the part already sold ; otherwise the shipper whom he represents would be dissatisfied, knowing that his cattle are of the same quality and weight and offered for sale on the same day. In the majority of cases, he is able to get the same price, and this accounts for the fact that the prices paid by different packers on part pur- chases are very often identical. Since no packer can be expected to buy more than he needs of any one type of cattle, and since the packer's buyer deals only with the commission man and does not connive with other packers' buyers, and since the whole 44 transaction is perfectly legitimate and above-board, it is perfectly obvious that the Trade Commission has wil- fully described this innocent practice in such a .way as to unfairly insinuate wrong-doing and collusion. The letters and telegrams that are introduced begin- ning with page 79 in the Report, are simply records of completed transactions reported by one representative of Swift & Company to another representative of the same company, and offer no indications whatever of col- lusion with other packers. They are all records of per- fectly legitimate transactions transactions that con- tinue today, and undoubtedly always will continue as long as we make the painstaking study of market conditions and prices that we find to be necessary in the efficient conduct of our business. As positive proof of the Trade Commission's desire to misrepresent the facts, we submit the following letter, a copy of which was taken from our files by the Federal Trade Commission, but which the Trade Commission failed to reproduce in its published report. This letter was written when the very subject of part purchases was under discussion in 1916, at a time prior to the dates of most of the instances cited by the Trade Commission from page 79 to page 82 of the Re- port. Chicago, April 20, 1916. Mr. Louis P. Swift, Fourth Floor. ?'&$ Part Purchases 4/19/1916. What they accuse us of, we understand we have never done, namely, the buyer for one packer has never bought a lot of cat- tle and then had the cattle divided and turned part of them over to another packer. This is what they accuse us of doing, and we should certainly see that it is never done. Their proof, however, of our doing this is the account sales that the shippers get from the commissionmen, showing for example that of eighty cattle, forty were sold to Swift and 40 to Armour. This merely means that the eighty cattle were put into two pens. Swift's buyer bought one pen and Armour's the other, and we should not give our buyers any instructions to discontinue this 45 practice. If there were three or four pens belonging to one ship- per and we wished to buy one, or two, or three, and leave the rest, we should be perfectly free to do so. Think we should, however, get this matter up squarely before the official body of the commission men, tell them what we are accused of doing, what we understand the facts to be, and ask them if there is anything wrong with the way we handle these cases, and what suggestions they have. Any agreement or instructions rela- tive to our not bidding under these circumstances might be in the nature of restraint of trade. JMC-IOB J. M. CHAPLIN. CC-ADW-RCM This letter puts the- matter in its true light, and would have completely offset the Trade Commission's conten- tion of collusion if it had been included in the report. It also appears that there are many other letters in our files bearing on this subject, especially during 1916 when the officials of Swift & Company were studying the mat- ter closely because of criticisms that had been made at some of the cattlemen 's conventions. The criticisms were leveled principally at Fort Worth, where there are only two large packers. The Trade Commisison had access to this correspondence but did not take any of it. We have found in our files, for example, the following letter which was written by Mr. Harold H. Swift to our Fort Worth manager in February of 1916, which also explains the situation : February 19, 1916. Personal Mr. J. B. Googins, Swift & Company, Ft. Worth, Texas. Dear Sir: There has been a good deal of talk around cattle conventions, especially at El Paso, but also at other points, in reference to lack of competition among buyers on the live stock markets. This, I suppose, was somewhat aimed at Ft. Worth because of there being only the two packing houses there, and along with this was coupled the criticism of dividing, on which they made the point that it is practically establishing one bid instead of healthy competition. I am pretty sure that the idea of buying only part of a string of cattle has been confounded with the idea of dividing, although, of course, I realize it is a different proposition, and, of course, our buyers have positive instructions not to divide. While they do sometimes buy only part of a string, on account of considerable agi- tation, and the fact that the cattle men are confounding the two subjects, would like you to review the general situation with our 46 live stock buyers and request that they consider the policy of buying all of a string when same is practical. Of course, realize that in large numbers it is not practical for us to take the whole string, but the other thing may be true, that is that in smaller numbers we might just as well take the whole string, and in such cases would like you to do so. Would like you to review the general proposition with all of your live stock buyers and advise me how you will handle the situation. Awaiting .your reply, I am Yours truly, HHS-EAP HAROLD H. SWIFT. It also appears that during the time we were paying special attention to this matter in 1916, Mr. L. F. Swift requested our Fort Worth manager to keep a complete record from week to week of all part purchases in the Fort Worth yards. We have this record from July, 1916, to the present. In its tabulation on page 82 of the Report, the Federal Trade Commission reports a large number of instances of part purchases made at Fort Worth, and the general impression is given that this is an extremely common practice. Reference to our weekly record, which was available to, but not used by, the Commission, shows that the practice of purchasing only part of a shipment is and was only occasionally resorted to. In fact during the 14-month period covered by the Trade Commission's instances on page 82 only about one per cent, of Swift & Company's total purchases at Fort Worth were made on the part-purchase plan. That is to say, the Federal Trade Commission has described a perfectly proper practice, (which, however, happens only occasionally), as an illegitimate practice carried out in collusion with other packers and as though it were a common occurrence ! Page so Qne or two other points in connection with the trans- actions reported by the Commission are worthy of note. On page 80 of the Report the Commission reports the sale of ten loads of steers shipped by A. Matthews, where it is shown that six loads went to Swift at $7.75, and three loads to Armour at $7.75. The original letter shows $9.75 47 as the price paid by Swift & Company, and although this figure in the original letter was undoubtedly incorrect, the Federal Trade Commission should at least have ex- plained that it changed the figure, inasmuch as the let- ter is reproduced in full in its original form. The figures shown in the tabulation on page 82 of the Report are said to have been taken from "Swift & Com- pany records," and there is a list of prices paid to Lan- dergin Bros, for a period of about a year and a half dur- ing 1916 and 1917. Swift & Company can find no trace of such records in its own files. Since the weights of these cattle are omitted, and since Swift & Company would have kept 110 such record of an individual shipper, we believe that the Trade Commission has carelessly stated that the information was obtained from Swift & Company, whereas it must have been obtained from some other source. Pages Tli;/ Trade Commission reproduces an exchange of let- 83&S4 ters an( j telegrams between L. F. Swift, President of the Company, and A. B. Swift, Manager of the St. Joseph plant, referring to part purchases in the St. Joseph mar- ket, and trying to make out that there was collusion with other packers in "dividing" receipts. All that these letters and telegrams mean is that it had been the custom for Swift & Company to purchase only a part of comparatively small shipments, such as those consisting of five or six cars. Mr. L. F. Swift de- cided that we should buy larger quantities at a time, and Page 83 issued instruct irrs that ''when cattle suit us in quality and price and we need the cattle, and they are not over five or six cars, he can buy them all any time but, of course, v. hen the quantity is larger or the quality unde- sirable, it is probably all right to only buy one-third or one-half." 48 / * Perhaps the reason that the Trade Commission used this correspondence in order to show collusion was that in one of his letters Mr. L. F. Swift used the word "di- viding" in referring to the purchasing of parts of single shipments. This was merely careless phraseology on the part of Mr. Swift. In one sense, the purchasing of part of a shipment does mean the dividing of that shipment with other packers, but not in the sense that our buyer would connive or agree with the buyer of another packer to purchase the cattle together or to divide them after they were purchased. Because of his interest in the St. Joseph yards, as explained above (page 32), Mr. Swift has always been anxious to have shippers satisfied, and he merely felt that in this case we could give the market better support by buying larger "strings" of cattle than had previously been our custom. Split Shipments. Pages The term "split shipments " refers to instances where 84 to 89 shippers divide their shipments between two markets. The point made by the Trade Commission is that split lots are sold at the same price on different markets, that the packers keep a check on all such shipments and see to it that the same prices are paid in the different mar- kets. We are told (page 85 of the Report) that "such sales represent collusion." In our constant study of the various markets we are naturally veiy much interested to know whether the prices paid for cattle of the same type and weight are in line with each other in different markets, and this matter can best be studied in connection with shipments split between Kansas City and St. Joseph, where freight rates are practically the same, and where the prices, therefore, 49 should be the same. All of the cases referred to in the Trade Commission's report cover splits between Kansas City and St. Joseph. Prior to the spring of 1916 it is true that Swift & Com- pany, when it learned of a split shipment between two markets, frequently wired from one market to the other, giving information of such split. This information was given by one Swift buyer to another Swift buyer, and there was no collusion with other packers. The letters and telegrams reproduced by the Federal Trade Commis- sion give absolutely no evidence of collusion. Although we have been unable to see anything wrong in wiring from one market to another in this way, we practically discon- tinued the practice in 1916, owing to criticisms that were being made. We prefer to lean backward in the matter rather than to furnish grounds for dissatisfaction and suspicion. During the period covered by the letters and telegrams reproduced by the Federal Trade Commission, therefore, Swift & Company has not been in the habit of wiring from one market to another when there have been split shipments. The judgment of cattle buyers is so nearly perfect that bids on cattle of the same weight and quality in St. Joseph and Kansas City on the same day would naturally be very nearly the same, if not exactly the same. But there is another and more potent reason for the exact identity in prices between these two markets, which occurs frequent- ly, even when the animals are bought by two or more dif- ferent packers. Many of the commission men have offices in both Kansas City and St. Joseph, and when the Kansas City office of a commission man learns of a split shipment between Kansas City and St. Joseph markets, this Kan- sas City office naturally gets in touch with the St. Joseph 50 office, undoubtedly with the view of getting the same price in both markets if possible. Otherwise, the shipper might think that the commission man had done better for him in one market than in the other, with resulting dissatis- faction over the price received in the lower market. Swift & Company understands that this is a common practice and believes that it accounts for the frequent identity in prices between these two markets. In its tabulation on page 89 of the Report, the Trade Commission presents data on a number of shipments split between St. Joseph and Kansas City. Even in this tabulation 23 per cent, of the cases show a slight differ- ence in price between St. Joseph and Kansas City, and to a man in the live-stock or packing business, it is not surprising that p'rices paid in these two markets at the same time should be identical in about three-quarters of the cases. If the variation were any greater it would be a matter of serious concern to the buying department of Swift & Company. At any rate, the frequent identity in prices is not evidence of collusion between the different packers as explained above. The most important feature of the Trade Commission's discussion of split shipments, however, is the fact that in compiling the figures for the table, which appears on page 89 of the Report, the Federal Trade Commis- sion used only such parts of telegrams taken from our files as seemed to bear out its contention that prices are identical on split shipments to St. Joseph and Kansas City, and purposely omitted other items in the same telegrams which showed differences im prices. To prove the truth of this statement, we submit the following telegrams, copies of which were taken from 51 Not used by F. T. C. our files by the Federal Trade Commission, but only parts of which were used in the, tabulation on page 89 of the Report. Portions which are shown in italics were not used by Trade Commission. In one case it will be no- ticed that the complete telegram is omitted. St. Joseph, Mo. 2/28/1916. . Leavitt 4 loads pulp fed steers account S. Karsh sold here today to Mor- ' ris 133 '4# 8.20 ( ? loads same cattle sold K C to SdS 1324 # S.35 2 loads pulp fed steers account Prey Bros, sold here today to Hammond 1276# 8.15 2 loads same cattle sold KG today S&S 1274 # 8.15 Copy to LFS EFS CHS Vance Not used by F. T. C. Not used by F. T. C. Not used Ingwersen St. Joseph 6/16/1915 We bought 2 loads Gebhardt & Son Colorado steers here today average 1311 # at 8.65 3 loads same sold KG today 1302 # 8.15 to Morris with 3 cattle out at 1.50 Morris bought here today 7 loads Oklahoma natives account Vancellous average 1191 # at 8.45 9 loads same cattle sold KG today 1249 # 8.35 with 2 out at 7.50. Copy to LFS EFS CHS Vance St. Joseph 2/21/1916 Leavitt 2 loads pulp cattle account Ludlow sold here today to Hammond 1398# 8.00 2 loads same cattle sold K C today to Armour 1404 # 8.00 We bought here today 3 loads pulp cattle account Prey Bros. 1294 # 8.00 3 loads same cattle sold K C today to Morris 130 /# I 7.95 ' Copy to LFS EFS CHS Vance St. Joseph 8/25/1915 Leavitt We bought 4 loads Russell & W cattle here Tuesday 875 # 6.90 4 loads same cattle sold Kansas City to Cudahy 885 # 6.90 f 1 load By water cattle here Tuesday sold Morris 1370 # 9.10 by F. T. C. \ 2 loads these cattle sold K C to S&S 1288# 8.90 Copy to LFS EFS CHS Tamblyn Not used by F. T. C. St. Joseph 1/18/1916 Tamblyn 3 loads pulp cattle here Monday account James Bros, sold Ham- mond 1087 # 7.75 3 loads same cattle sold K C to Cudahy as follows: 2 loads 1159# 7.50 1 load 1051 # 7.60 4 loads Miller Bros., Westerns sold here Monday as follows: 2 loads Swift 1030# 6.90 2 loads Morris 1046# 6.90 4 loads same cattle sold K C as follows: 3 loads Swift 1058# 6.90 1 load feeder buyers 945 # 7.00 Copy to LFS EFS CHS Ingwersen 52 In conclusion, with regard to split shipments, it has been shown that the Federal Trade Commission de- scribed a perfectly legitimate practice as though it were a means of collusion between the packers, and that in .trying to show that the prices are the same on split ship- ments, it actually omitted parts of telegrams, which show differences in price. Finally, in explaining the fact that prices are frequently identical, the Commission omitted the true explanation, which it could have known, and should have known, if it had really studied both sides of the question. Wiring On. Another form of alleged collusion between the packers i s fa e claim that when cattle are received in one market and the seller or commission man is not satisfied with the price, and consequently ships them to another market, the buyer in the first market wires the buyer in the second market, notifying him the price that he offered. The Trade Commission claims that this is done for the pur- pose of discouraging the forwarding of cattle from one market to another, and the Commission specifically says (bottom of page 89 of the Report) that "the packer buy- ers at the second market bid at prices no greater and often less than those offered the shipper at the first market, thus causing him to lose the freight and shrinkage in the weight of his stock. ' ' The discussion of this matter furnishes one of the most glaring instances of perversion of fact and actual sup- pression of data taken from packers ' files to be found in Part II of the Trade Commission's Report. The practice of wiring on is in itself perfectly legiti- mate. Suppose a buyer for Marshall Field & Company, located in New York, were offered a bill of goods at a price 53 which he was unwilling to pay. The seller of these goods decides to go to Chicago and approach a Marshall Field buyer there. The New York buyer naturally wires the Chicago buyer, stating the price that he has offered. Although Swift & Company has always realized that there is nothing wrong in this practice, it practically dis- continued it in the spring of 1916, due to criticisms and suspicions on the part of shippers. The Federal Trade Commission undoubtedly knew of this action, and at least could have known of it, but did not mention it in its re- port. It should be noted that all of the telegrams reproduced by the Trade Commission, from pages 90 to 93 of the Report, with the exception of the first one on page 90, are not examples of wiring on at all. They are merely records of completed transactions, letters sent out after the animals have been received and sold in the second market, merely to give market information that all our buyers are interested in. The apparent object of introducing these telegrams is to bear out the Trade Commission's statement that "the packer buyers at the second market bid at prices no greater and often less than those offered the shipper at the first market." In the main, the telegrams that are reproduced bear out this contention, but the important point is that the Trade Commission purposely omitted several letters which were taken from Swift & Company's files, but which show higher prices paid in the second market than were bid in the first market. The following are examples of such letters and telegrams, which were taken from our files by the Trade Commission but were not reproduced in the 54 report. They absolutely controvert the statement made by the Federal Trade Commission at the bot- tom of page 89: Chicago, Nov. 7, 1917. Mr. Charles H. Swift, General Office. Dear Sir: Barse forwarded from Ft. Worth Saturday, the 3rd, 15 loads grass steers, sold St. Louis as follows: Bid Ft. Worth Saturday, the 3rd. Sold St. Louis Nov. 7th. 15 loads grass steers 7.00 238 cattle 712# 7.65 Morris held at 7.50 120 " 721# 7.65 Armour 91 " 727# 7.65 Swift Yours respectfully WL*PS (Sgd) W. Leavitt Copy to LFS EFS November 16th, 1917. Mr. Charles H. Swift, General Office. Dear Sir: Referring to my letter of Nov. 14th reporting on 2 loads natives forwarded from St. Joseph Nov. 13th billed W. F. Clay, please cancel this letter and substitute the following: 2 loads W. F. Clay cattle arrived Thursday from St. Joseph and were sold at Chicago Nov. 16th as follows: Bid on St. Joseph market 11/13 Sold Chicago 11/16 2 loads natives avg. ard. 1350# 11.75 2 loads natives 1300# 13c With 2 out @ 12c Yours respectfully, ES (Sgd) W. Leavitt LFS EFS Chicago, Dec. 31, 1917 Mr. Charles H. Swift, General Office. Dear Sir: S. Nelson, speculator, shipped from St. Paul Thursday, the 27th, one car cattle; sold Chicago Monday, the 31st, as follows: Bought St. Paul Thursday 12/27 Sold Chicago Monday 12/31 23 cattle 8.75 15 steers 918# 9.25 Daniels 4 cows 897# 7.50 Armour 3 cows 883 # 6.00 1 bull 600# 7.00 Libby Yours respectfully, WL*PS (Sgd) W. Leavitt Copy to LFS EFS Chicago, Oct. 25, 1917 Mr. Charles H. Swift, General Office. Dear Sir: Place & Geritts forwarded from Milwaukee Wednesday, the 24th. 3 loads steers sold Chicago today as follows: Bid Milwaukee 10/24 Sold Chicago 10/25: f> i steers 10 steers WL*PS Copy to LFS EFS 9L25 7.50 1 load 1 " 1 " 9.85 Kellar 9.75 10.00 Swift Yours respectfully, (SgdJ W. Leavitt Chicago, June 23, 1916 Mr. Charles H. Swift, General Office. Dear Sir: Landers & Hess forwarded from St. Louis Wednesday, the 21st, one car native steers sold Chicago as follows: Bid St. Louis June 21st Sold Chicago June 23rd one load native steers bid 9.40 1 load native steers 9.75 S&S Afterwards could not get price. Prey Bros, forwarded from St. Joseph Tuesday, the 20th, 3 loads pulp cattle sold St. Louis as follows: Bid St. Joseph Monday 6/19 Sold St. Louis Wednesday 6/21 3 loads pulp cattle 9.25 Held at 9.50 S*PS Copy to LFS EFS 3 loads pulp cattle 1158# 9.00 Morris Yours respectfully, (Signed) W. Leavitt Chicago, June 26, 1916 Mr. Charles H. Swift, General Office. Dear Sir: Clay Robinson forwarded from Omaha Thursday, the 22nd, 4 loads cattle sold here today: Bid Omaha Thursday, the 22nd 4 loads good heavy dehorned Sold Chicago Monday, the 26th white faced steers 10.50 S*PS Copy to LFS EFS 4 loads good heavy dehorned white faced steers 10.65 S&S with one steer out at 9.50 Yours respectfully, (Signed) W. Leavitt 56 Chicago, Sept. 27th, 1916 Mr. Charles H. Swift, General Office. Dear Sir: National forwarded from St. Louis Tuesday, Sept. 26th, 2 loads native steers sold Chicago today as follows: Bid St. Louis Sept. 26th Sold Chicago Sept. 27th 3 cars 50 native steers 9.25 50 1162 # 9.50 Armour Afterwards could not get price Yours respectfully, (Signed) W. Leavitt LFS EFS Chicago, Nov. 24, 1916 Mr. Charles H. Swift, General Office. Dear Sir: Moody Com. Co. forwarded from St. Louis Thursday, Nov. 23rd, to Chicago the following cattle: Bid St. Louis Nov. 23rd Sold Chicago Nov. 24th 34 native ylg. cattle 6.25 13 steers 1045# 7.10 Wilson 15 ylg. cattle 754# 6.35 Swift 6 " " 754# 6.00 " Yours respectfully, LFS EFS f Signed) W. Leavitt Chicago, May 11, 1917 Mr. Charles H. Swift, General Office. Dear Sir: Johnson Bruber forwarded from St. Paul May 9th 26 steers as follows: Bid St. Paul May 9th Sold Chicago May llth 26 steers speculators 10.50 with 5 out 26 steers 11.10 Morris which did not bid Thursday's market Gall Bros, forwarded from St. Paul May 10th 1 car 22 steers as follows: Bid St. Paul May 10th Sold Chicago May llth 22 steers 10.75 22 steers 11.50 Morris Yours respectfully, LFS EFS (Signed) W. Leavitt Chicago, June 27, 1917 Mr. Charles H. Swift, General Office. Dear Sir: Austin, Hamil. and Dickson forwarded from St. Joe Monday, June 25th, 3 cars natives as follows: Bid St. Joe 6/25 Sold Chicago 6/27 2 loads weigh 1600# 13.45 3 loads 1480 # 13.65 1 " 13.55 Armour Yours respectfully, LFS EFS (Signed) W. Leavitt 57 Chicago, August 8, 1917 Mr. Charles H. Swift, General Office. Dear Sir: Milton Marshall forwarded August 7th from St. Louis 2 cars native steers as follows: Bid St. Louis 8/7 Sold Chicago 8/8 2 cars native steers 12.60 2 cars native steers 13.00 Swift Yours respectfully, LFS EFS (Signed) W. Leavitt By introducing these communications Swift & Company does not mean to give the impression that prices paid in the second market on forwarded shipments are ordinarily higher than the prices paid in the first market. As a mat- ter of fact, if the cattle are judged correctly, and if the market does not change in the meantime, the forwarding of shipments from one market to another would ordi- narily result in loss to the shipper. The Chicago price, for example, is higher than the Omaha price, but the difference between the two is not equal to the full cost of freight plus sufficient allowance for shrinkage of animals in transit. Other items, such as the cost of hauling dressed meat, are factors in the competitive determina- tion of market differentials. In conclusion, with regard to wiring on, it has again been shown that the Trade Commission has resorted to the suppression of data taken from our files, which con- trovert its own contention; that it has described a per- fectly legitimate practice as though it were illegitimate; and that it has charged the packers with collusion, with- out introducing a single bit of evidence that such col- lusion exists. Alleged "Making" the Daily Market. The charge is that "the big packers act in concert to make and control the market." The evidence given in support of this charge is principally that the market on 58 any given clay does not settle down to a definite, price until the large packers send their buyers out into the yards, and that these buyers of the large packers fre- quently stay off the market until 10 or 11 o'clock, or until even after the noon hour. It is also alleged that when the packers enter the market late in the day the buyers of all the different companies go out into the yards at the same time. As for staying off the market until late in the fore- noon, we admit that this has occasionally been done, and that naturally we have sometimes held off in this way with the hope of buying live stock at a, lower price. There are some days when we are loaded up with all the live stock we want, or when the markets for dressed meats are in bad condition, so that we know that we have got to buy stuff cheaper if we possibly can, in order to make our normal profit of a fraction of a cent a pound in dis- posing of our product. Under such conditions, there' are many times when we should prefer not to buy live stock at all. and it is only the need of taking care of our es- tablished trade, and our assuming of a moral responsi- bility to do our share in clearing the market of live stock from day to day that makes us willing to purchase at all. We are really under no legal or moral obligation to begin buying at 8 o'clock in the morning; there is no rea- son why we should not enter the market until 2 o'clock in the afternoon if the prevailing prices appear unwar- ranted, or if we do not need material to keep our plants operating. We naturally buy animals at as low a price as possible; otherwise we should not make our fraction of a cent per pound profit and we should have to go out of the packing business. There is one other important reason for late buying, however, that the Federal Trade Comniission does not 59 mention, and one that has been particularly important within the past two years when live-stock receipts have been extremely heavy, and transportation conditions have been more or less chaotic. The reason is that frequently a substantial portion of the receipts, especially at Chi- cago, is not unloaded by the railroads until well into the forenoon, and that therefore it is rather late in the day before the commission men have the animals watered and fed and ready for sale. Under such conditions, Swift & Company generally prefers to wait until all or nearly all of the live-stock is ready for sale, because in buying for our day's requirements, we want to have a chance to in- spect all of the offerings. A situation of this sort is illus- trated by the telegram reproduced on the middle of page 98 of the Report, signed "Garry," where it says "50 cars back will go slow on balance." This shows that there were still 50 cars of hogs to be unloaded, and that the buyer would therefore postpone his buying. It is perfectly natural that the commission men should sometimes be dissatisfied to have the large packers enter the market late, and it was their feeling on this score that prompted their protest back in 1916, reproduced on pages 94 and 95 of the Report. As a result of that protest, and informal protests of a similar nature, Swift & Company has tried to make it a point within the past few years to have its buyers go out into the yards at an earlier hour than formerly, even when there was little for them to do, and when a large portion of the day's receipts was not ready for inspection. Swift & Company is will- ing, and has always stood ready, to do whatever is reason- able in order to satisfy the demands of commission men and shippers in a case of this sort. As for the charge that the buyers of the different pack- ers appear on the market at the same, or approximately 60 the same time, whenever this happens it is not the re- sult of collusion. Each packer keeps a close watch on the day's receipts and knows when a sufficient number has been unloaded from the cars and is ready to be bid on, and each packer also keeps a close watch on the buying activities of the other packers. Where packers have been holding off the market until 10 or 11 o'clock in the morning, the appearance of the buyers of one packer is usually the signal for the buyers of the other packers to go out through the pens in order to make their bids on the offerings of the day. Otherwise, the buyers of the first packer who enter the market are likely to pick up some of the choicest offerings of the day. Page 96 The telegrams, reproduced on pages 96 to 99 of the Report, show nothing that is illegitimate and contain absolutely no evidence of collusion between the different packers. The first telegram, on page 96 of the Report, is particularly worthy of mention as it indicates how care- lessly the Trade Commission went into this matter, and how carefully it avoided the obtaining of true explana- tions of the material presented in the Report. This telegram reads as follows: Feb. 22nd 18 17 JC Hogs opened 40/50 higher trying buy steady yesterday average. Swift. It is explained tha't "17 J C M is "apparently a code address," and that "It amounts to an instruction to 17 J C to buy steady." The interesting features of this telegram and explanation are that "J C" stands for Jersey City; that the telegram was ordinary market in- formation that we send to our Jersey City plant regu- larly; that Jersey City buys no hogs, and that the hogs killed there are bought in the West and shipped to that point, (except occasionally a few that are bought direct 61 in Buffalo) ; and that, therefore, the telegram "instruction" at all. Furthermore, if it had been struction to "try to buy steady," there would have been nothing illegitimate even then ! We might go on and analyze each of the telegrams ap- pearing on pages 96-99 of the Report, and show that these represent nothing but perfectly legitimate practices which go on from day to day, and which will necessarily con- tinue in the future. The Trade Commission apparently bases its charge of collusion largely on the fact that one telegram, signed "Olson," (middle of page 96 of the Re- port), contains the phrase "packers trying for steady." This does not mean that there is any collusion among the packers. It merely means that the sender of this telegram knew, from his observation of the activities on the market on that particular day, that not only his com- pany, but also the other companies, were trying to buy at prices that had prevailed on the previous day, rather than to buy at the higher price at which the market had opened. Although it is of course true that since the large pack- ers are the principal buyers, their bids have the greatest influence in establishing the price from day to day, it is not mentioned by the Trade Commission that the price goes up as frequently as it goes down. In fact, during the past few years the general tendency has been decid- edly and conspicuously upward. There is absolutely noth- ing wrong in having our head buyins* office at Chicago instruct our buying offices in other markets as to how many animals they shall buy, or at what price they shall "try" to buy them. The only possibility of harm is through agreement or collusion among the different pack- ers, and although the Trade Commission says that there 62 is such collusion it offers absolutely no evidence that such is the case, and it is unable to cite a single instance where the price has been collusively manipulated either up or down. To a person in the packing business it seems absurd to have to explain at all the Trade Commission's dis- cussion of " making " the daily market. It has been shown, however, that the Commission has described per- fectly legitimate practices in such a way as to make it appear that the packers have some arbitrary power to fix the market price, and that they have acted in col- lusion in making their purchases, without giving a sin- gle bit of evidence to corroborate this contention. International Meat Pool. Pages ^his matter can be disposed of with a few words : first, 99 to 107 because it is not particularly germane to the question of combination among the packers in the United States, and second, because there are no arrangements concern- ing shipments from South America which are not clearly . legal, and open and above-board. The charge is that the large packers have a "com- bin^tion" with certain British and South American com- panies to regulate and divide shipments of beef and mut- ton to the United States, and certain foreign countries, particularly England. The charge that there is such an agreement to regulate shipments to the United States is untrue. The charge that there is such ah agreement to regulate shipments from South America to England has a certain basis of truth. The truth of this matter is that for several years the large American packers have had arrangements with each 63 other and with certain foreign companies providing for the proportion of total shipments that each should carry between South America and England. Such a division of business was not only justifiable because it helped to make more regular the receipts of perishable meats in England, but the arrangement itself, made necessary largely by the lack of adequate boat space, was not secret, and was countenanced by British law. Furthermore, this arrangement is similar to the form of co-operation specifi- cally permitted by the recent Webb Bill, which is intended to encourage co-operation in exportation on the part of competing firms in the United States. As for the alleged control of shipments from South America to the United States, the following are the facts : Before the European war began and after the United States import duty on fresh meat had been removed, Swift & Company (through the Swift Beef Company of London) made a contract with the Lamport & Holt Steam- ship Company (a British company) providing for a cer- tain amount of space to be used by Swift & Company in shipments from South America to the United States. Such a contract was made necessary by the fact that there had been practically no refrigerated shipping space in the South America-New York trade, and that iJfm- port & Holt was the only line to equip itself with the necessary refrigerated vessels to give regular service. This contract was made independently by Swift & Com- pany, and does not represent in any way an agreed di- vision of shipments with the other packers. Shipments to the United Stat- s have been limited only by amount of steamship space offered, and Swift & Company has continuously been in the market for all space obtainable. Our London representatives have always been under instructions not to enter into agreements with other pack- 64 ers involving division of shipments to the United States. During the war, because of insufficiency of refrigerated vessels, there have been no shipments of refrigerated meat from South America to the United States, and ship- ments to England have been controlled by the British Government. With this explanation in mind, the extracts taken from the Sulzberger memoranda, reproduced on pages 100 to 106 of the Report, appear more or less absurd when of- fered by the Trade Commission as evidence of combina- tion. In fact, there are parts of these extracts which clearly show that the contracts made by the different packers for shipping space to the United States were made independently. For example: at the top of page 103 of the Report, Mr. Sulzberger notes that the Swift & Company contract with the steamship line gave Swift "one-third of total space/' and that he "thought this a little excessive for Swift." In other words, Swift had gone ahead and made a contract with the steamship com- pany without reference to Mr. Sulzberger 's wishes in the matter. Again, at the bottom of page 103 of the Re- port, Mr. Sulzberger introduces a table showing the per- centage of shipments to the United States made by each packer, and he- introduces the table with the statement "I stated that the United States shipments as arranged figured about as follows, which figures ; ^ere made note of." This shows that the other packers had not figured out what the percentages were, and that therefore the latter could not have been based on an agreement. Another evidence of competition in foreign business is found at the bottom of page 1 05 of the Report, where Mr. Sulzberger infers, from remarks mada by a representa- tive of Armour & Company, that that company had a "Special contract" with the British Government, and 65 that Armour asked him not to mention the special con- tracts, as they were unknown to all ; and that Swift es- pecially "does not know of them." This indicates that each packer was making the best arrangements that he could irrespective of the desires of the other packers. Although the Trade Commission introduced this evi- dence as though it were complete and final with regard to the arrangements on foreign business, the Commission itself is apparently a little skeptical about the conclu- siveness of the data reproduced in the report. This is evident from the manner in which it closes its discussion on page 107 of the Report, where it says that ' * The Black Book memoranda * * * are not a complete account of negotiations." As a matter of fact, these extracts from the Sulzberger memoranda refer to occasional and informal exchanges of information between Mr. Sulz- berger and other individual packers. It has been ex- plained that there has been no agreement affecting ship- ments to the United States, and that such other arrange- ment as there has been, allocating boat space for ship- ments from South America to England, was not only justified from an economic point of view, but also per- fectly right from a legal standpoint. Alleged Collusion in Selling Meat Products in the United States. Page 107 j n trying to make out a caso that the large packers act in collusion in selling dressed meat, the Trade Com- mission falls back on its old explanation that the alleged division of live-stock purchases covers the amount of dressed meats that each packer will have for sale ; it says that inspection of one another's branch-house stocks en- ables the packers "to prevent an over-supply of fresh meat in any market"; that prices are kept uniform by 66 th3 exchange of information as to "margins" on the sale of meats; and that retail butchers find "no perceptible difference in the prices charged by the different big pack- ers/' It also explains that there is "rotation in price cutting/' in order to drive small packers out of business. It has been explained that there is no agreed division of live-stock purchases, and that even if there were this would not involve the allocation of shipments of dressed meat to the different markets, and would therefore have no effect on meat prices. It has also been explained that Swift & Company does not make periodical inspection of stocks in competitors' branch houses, but that occa- sionally visits are made in order to obtain a better idea of meat stocks available for sale. As for the interchange of margins, correspondence is introduced on pages 110 to 114, which shows that occa- sionally one packer has received, directly or indirectly, results achieved by other packers on past transactions in various markets. We can see no harm in such oc- casional and informal interchange of information. There is certainly no harm done if a representative of Swift & Company tells a representative of Armour & Company that we made a certain margin on our sales in Boston the previous week. Such occasional exchange of information is nothing as compared with the organized method of col- lecting and exchanging such information's practiced in many trades under the form of open-price associations. (See page 28 above.) The Trade Commission introduces the statement that retail butchers found "no perceptible difference in the prices charged by the different big packers," (bottom of page 107 of the Report), as though this were proof that the packers sold at agreed prices. This statement 67 illustrates both a lack of grasp of economic phenomena, and an omission of pertinent and salient facts which really destroy the contention that the Trade Commission tries to establish. In the first place, the fact that prices become approx- imately identical in any one market is the result of com- petition. Every person who has studied economics knows that in a well-organized market-place competitive buy- ing and selling and competitive watchfulness bring about practically a single price at any one time for products of the same kind and quality. On the other hand, com- petition does not work out perfectly in this way in the meat markets, and although prices charged by the differ- ent packers in the same market are approximately the same, there are sufficient variations to cause retail butch- ers to shop around from the branch house of one packer to the branch houses of the others, so that they can buy their meat to the best advantage. If they did not find differences in price for the same qualities of meat, it would not be worth their while to spend as much time as they do in shopping around. This fact was not men- tioned by the Federal Trade Commission. Page 108 The Trade Commission tries to give the impression that the large packers exert a control over prices through the use of their " general men." It is true that the dis- trict managers of large sales organizations have to keep a close watch on prices, shipments, and profits, but they in no way have agreements with other packers, and their principal duty is to see that our own selling houses get the best price they can for their products. The fact that we take losses so frequently on fresh meats is in itself sufficient evidence that our sales representatives do not collusively control the price of meat. The diagram on pages 30 and 31 of the 1919 Swift & Company Year 68 Book, for example, shows that during the year ended June 30, 1918, we either made no money, or actually lost money on our sales of beef and beef by-products in 19 out of the 52 weeks. A letter from R. C. McManus to H. B. Collins, repro- duced at the bottom of page 108 of the Report, gives an entirely wrong idea of the motives involved in writing the letters. It will be explained below (pages 84 to 91), that we have been doing our utmost to prevent agreements among our local agents in buying cream. This letter is merely an evidence of one attempt that we made back in 1915 to prevent such agreements. It was entirely unfair for the Trade Commission to reproduce this letter by itself detached from other correspondence on the same subject, such as that appearing on pages 147 to 154 of the Report. On page 110 of the Report it is said that the " large packers buy a great deal of fresh meat from each other, " and that the object is "to even up the supply between themselves or to keep prices at a high uniform level. ' ' It is perfectly true that the packers often buy fresh meat from each other, but the Trade Commission gives no evidence that the object of this practice is to keep prices at a "high uniform level"; and the Trade Commission fails to present the true explanation of this perfectly legitimate practice. As a matter of fact, each packer has a certain established trade which he wants to take care of, and if he is short of a certain quality or weight of goods, he naturally buys them of another packer who has nn ample supply. This is commonly done in all trades, and in no way represents a form of collusion, or an at- tempt to regulate supply so as to affect prices. 69 Alleged Collusive Action Toward Small Com- petitors. Pages 114 ^he Trade Commission charges that the large packers to118 act collusively with or against small packers, either by having agreements with them as to prices, or by taking turns in reducing prices in order to drive them out of business. The alleged price agreement at Los Angeles, described at the bottom of page 114 of the Report, does not involve Swift & Company, as we have no packing plant in that city. As for the charge that there is an agreement at Tacoma, Washington, where the Union Meat Company is concerned, it will be noticed that the Trade Commission offers no real evidence of the existence of any such agree- ment, and Swift & Company can only deny that to the best of its knowledge any agreement exists. The extent to which the Trade Commission goes in trying to estab- lish its case is illustrated by the statement that small packers at Philadelphia regularly telephoned to the branch houses of the large packers to secure their price quotations, "which they closely followed." This is, of course, a very common practice, and in no way shows collusion. The Trade Commission makes a positive statement that the large packers take turns in cutting prices in or- der to drive small competitors out of business, and on page 116 of the Report, introduces testimony of one Charles H. May,, Manager of the Farmers' Co-operative Packing Co., of Madison, Wisconsin. A careful analysis of this testimony shows that it is utterly inadequate as a proof of rotation in price cutting. It will be seen that Mr. May testified that during a single week the Plankinton Co. (a Swift concern) was selling beef at a low price, and 70 that Armour & Company was underselling the other packers on pork. During the following week, Mr. May said that "I haven't the exhibit of it, * * * but 'Cudahy did all the beef business in Madison." We fail to see how this can be considered as -evidence of rotation in price cutting. It is the commonest thing in the world for one packer to undersell the others on some particular product with which he may be loaded up and which he has to move. To single out two weeks, and to show that during the first, two packers had the low prices on two different products, and that during the second a third packer had the low price on beef, without even introducing any evidence that this was true, does not seem to us to constitute . sufficient evidence to make such a serious charge, especially as Swift & Company does not and would not resort to this practice, if for no other reason than that we know the practice to be illegal. The charge that there is rotation in price cutting in Salt Lake City (page 117 of the Report) is entirely un- supported by evidence, and we are tempted to suggest that if such evidence as the Trade Commission may have in its possession were introduced, it would furnish no better evidence of price cutting by agreement than is introduced in connection with its charge that there is " rotation in local price cutting * * * at San Antonio, Texas." This evidence, beginning at the middle of page 117 of the Report, contains a statement by one local packer that " These big fellows seem to be taking turn- about at selling very cheap," and we are further in- formed that the local managers of Armour & Company and -Swift & Company have complained that the plants often shipped them a great deal more meat than they ordered, with the result that thev have had to reduce 71 the prices in order to move their stocks. In the first place, it will be seen that not even the small packer at San Antonio has evidence that there is rotation in price cutting, and in the second place it should be explained that the shipment of larger supplies than are ordered by local managers is a very common oc- currence with Swift & Company all over the coun- try, and in no way indicates or results in illegitimate price cutting. The sum total of estimated requirements as reported to our plants by our branch-house managers may provide an outlet for only two-thirds of our total supplies of meat, and we naturally have to give them more than they want in order to move these supplies, even if the local managers have to reduce prices in order to induce greater consumption. We repeat that this is pretty slim evidence for the Trade Commission to use as a basis' for such a serious charge that we take turns with other packers in re- ducing meat prices so as to drive out small competitors. On careful analysis, the Trade Commission's case falls to the ground through lack of evidence. In addition to this, Swift & Company absolutely denies that it ever makes any arrangements with other packers to take turns in cutting prices. The California Situation. + Pages 118 The Federal Trade Commission claims that in Cali- to 131 fornia there is collusion among the packers in the pur- chase of live stock, and that there are "understandings with reference to the prices to be paid" (page 119 of the Report) ; and also that there is collusion in the sale of meat products, particularly through the device of division of territory. Although much correspondence is intro- duced in support of these charges, it will be shown below that a careful analysis discloses no evidence of agree- ments to control prices, and that there are portions of this correspondence which clearly indicate the existence of active competition. It should be understood that in California the method of purchasing live stock is different from that used east of the Rockies. The packers purchase most of their animals by sending buyers out to the ranches, and by negotiating direct with the owners ; there are no public stock yards to which animals are consigned in the care of commission men. There is, therefore, no open market place where live-stock values can be reported from day to day, with the result that there is no such authentic and wide-spread market information available as there is in the organized live-stock markets of the Middle West. This lack of authentic market information has to be overcome to a certain extent by exchange of information among the packers by means of private correspondence. This system of keeping posted on the market has its dis- advantages and is far inferior to the system of price reporting in eastern markets, where outside market re- porters can observe the prices that are being paid, as well as the receipts of live stock ; and yet, in the absence of any such open price-reporting system, the interchange of information among the packers in the West yields some benefit in steadying prices, in stabilizing the re- ceipts at the different markets, and in making it possible for the buyers of the different packers to estimate future needs and future supplies. On pages 119 and 120 of the Report the Trade Com- mission introduces letters which show that the various packers exchange information as to the receipts of live stock, and that the Union Meat Company of Portland, 73 and the Western Meat Company of San Francisco, ex- change weekly data on live-stock purchases and prices. An analysis of these letters shows that the informa- tion given is merely a record of past occurrences and transactions, and that there is nothing in them which even suggests an agreement as to prices to be paid or as to division of receipts in the future. Such interchange of information is analogous to the methods employed by open-price associations, as described on page 28 of this document. We believe that it is beneficial to both the packing and live-stock industries in California for the packers to have such information, and we can see no reason why this practice should be discontinued. In the exchange of letters between the Western Meat Co. and the Cudahy Packing Co. in June, 1915 (pages 120 and 121 of the Report), the phrase, "so we can work in harmony with you with a view of getting prices down to where they really belong"- (top of page 121 of the Re- port) seems at first blush to contain a suggestion of col- lusion in fixing prices. A careful reading of the other parts of the letter, together with the reply from the Western Meat Co., shows that the suggested harmony was with regard to the question as to whether heavy hogs should be purchased in Idaho at $1.00 or at 50 cents under "the regular weights." That is to say, the ques- tion concerned the differential between the price paid in Idaho and the basic San Francisco price. The Western Meat Co. replied that it "could not very well buy the heavy weights less than |c lower," and said that it was buying hogs in Idaho, not from the raisers themselves, but from shippers who did not tell the Western Meat Co. what the hogs were costing them. The Western Meat Co. did not agree to work in harmony even with respect to what the Idaho differential on heavy hogs 74 should be, and there is absolutely no evidence in these letters that there was any agreement with respect to the prices themselves. Again, at the top of page 122 of the Report, it appears as though there may be collusion in the division of cattle between the Western Meat Co. and the Cudahy Packing Co. The Western Meat Co. refers to the cattle owned by "Mr. Fuller," discusses the probable value of these cat- tle, and suggests that if Cudahy does not need them, the Western Meat Co. " could probably use some of them very nicely. " The explanation of this matter is that it has been gen- erally understood for a number of years that Mr. Fuller has been working closely with Mr. Cudahy, and that, in fact, Cudahy has helped to finance the operations of Mr. Fuller, and that Cudahy, therefore, had the preference on all his cattle. The Western Meat Co. knew that there would be no chance to purchase the Fuller cattle unless the Cudahy Packing Co. did not want them. We can see no harm in such a suggestion on the part of the Western Meat Co., under these circumstances. In the same letter, the Western Meat Co. asked if the "Oxnard cattle " had been sold. The Western Meat Co. merely asked for this information because it could not have buyers everywhere, in order to keep posted on the situation. The references to prices in these letters are merely exchanges of opinions, and in no way constitute an agree- ment as to what prices shall be. It should be especially noted that at the top of page 122 of the Report the West- ern Meat 'Co. says that " whether they (prices) go lower or not will depend entirely on how many are offered, as the demand for beef is less than last year regardless of 75 the Exposition." This clearly indicates that the price is a competitive one, based on conditions of supply and demand. In the three letters on pages 123 and 124 of the Report there is nothing but an interchange of information as to transactions that had been carried out and of opinion as to future prices. Attention is called to the statement of the Western Meat Co. near the top of page 124 of the Report, that u we are able for the first time in several months to show a small favorable margin on beef." This statement shows that there could have been no control of prices, and that the packers had paid for cattle all that they were worth, and even a little more than they were w,orth in the form of dressed meat and by-products. If the Trade Commission could offer one single instance where the prices had been manipulated, either up or down, or where prices were controlled so as to yield the packers inordinate profits, there would be more founda- tion for its accusations. The letter on page 125 of the Report was written by a representative of one of the small packing concerns, in which none of the five large packers is interested. This letter asks if it would not be possible to agree to buy hogs "on a delivered basis." This is merely a suggestion that the packers adopt a uniform method of quoting prices, and does not suggest the fixing of the prices themselves. Xear the end of this letter, however, there is a sugges- tion that a definite price be arranged, but we call atten- tion to the Western Meat Co.'s letter, signed F. L. W., at the top of page 126 of the Report, in which it is de- clared : "As far as having any understanding on the price that is to be paid for hogs, we would not care to be restricted in this manner, as besides being contrary to the spirit of the time, there is always the possibility that it might make bad friends." 76 In other words, the only suggestion contained in all this correspondence of anything like an agreement affect- ing prices was promptly turned down by the Company in which members of the Swift family own stock. Further- more, there is no evidence that this suggestion was ever carried out among the other packers involved. The let- ter quoted above was written before the Federal Trade Commission had begun its investigation of the affairs of the Western Meat Co. In commenting on the correspondence presented on pages 127, 128, and 129 of the Eeport, the Trade Commis- sion alleges that there is evidence of an understanding that there shall be no price cutting, and that each packer shall respect the sales territory of the other. The letter at the top of page 127 of the Report contains a complaint from the representative of the Western Meat Co. that another packer is selling at extremely low prices, but he specifically says : * 1 I, of course, have no suggestions to make as to what prices your people should get." The reply at the bottom of page 127 of the Report indicates a willingness to refrain from cutting prices, and asks for the Western Meat Co. 's price list. Nothing in this letter can be construed to mean that there was agreement to secure the same prices that were being charged by the' Western Meat Co. Anybody is welcome to the Western Meat Co.'s price list, and it is sent freely to competitors as well as to dealers. The Western Meat Co. has apparently felt that it is overstepping neither the spirit nor the letter of the law when it has complained that a competitor is unnecessarily cutting prices, especially when such price cutting is sub- versive of sound business conditions in a territory where over-competition has been" more or less disastrous to all concerned. At any rate, such complaints as are found in 77 these letters are accompanied by no evidence that any agreements resulted, and as a matter of fact the West- ern Meat Co. has carefully refrained from having such agreements, either as to prices or as to division of ter- ritory. In the letter at the bottom of page 127 of the Report, the Pacific Coast Beef and Provision Co. complains of a report that the Western Meat Co. of San Francisco is going to ship beef to Los Angeles, and in the reply on page 128 of the Report, the Western Meat Co. replies that it is looking for no " extra places to lose money on fresh meats," and explains that practically nothing has been sold in Los Angeles. This letter also asks whether Cudahy is go ing to "put in fresh meats at their new branch house (at Fresno), as this might make considera- ble difference in regard to our policy of keeping out of Los Angeles." This might appear as though the West- ern Meat Co. had some agreement to keep out of Los Angeles. The fact is that the Western Meat Co. has always shipped intermittently to Los Angeles when there was any money in this business, and that it never agreed not to do so. The quotation given above shows that the Western Meat Co. did not know of Cudahy 's plans and that information was merely being sought. This in itself indicates lack of agreement to divide territory. The reference to "keeping out of Los Angeles" implies no agreement to do so, and in fact indicates the Western Meat Go's, intention to sell goods in Los Angeles when- ever it so desires. The letter from the Cudahy Packing Co. to the Western Meat Co., reproduced on page 130 of the Report, is sup- posed to contain evidence that there must be a division of territory, because Cudahy, located in Los Angeles, had declined an order for ribs and loins in San Francisco. 78 not caring to go "beyond the limits of our own terri- tory." As a matter of fact, it rarely pays a Los Angeles packer to ship fresh meat to San Francisco, because of the freight rate that has to be paid, and Cudahy volun- tarily gave information to the effect that he did not care to ship goods to San Francisco, even though he had just received "an inquiry "; the reference to "our own ter- ritory " means merely the usual or customary territory, as limited by freight rates, that is served from Los Angeles, and does not refer to any agreed division of territory. In the letter at the top of page 131 of the Report the representative of the Western Meat Co. at Fresno, Cal- ifornia, complains to the San Francisco office of that company that the Los Angeles branch of Swift & Com- pany has been selling to the Terra Bella Mercantile Co., of Terra Bella, and asks when Swift & Company was ac- corded permission to do so. This can refer to nothing but the division of territory that is made between the branch houses of Swift & Company in San Francisco and Los Angeles. These two selling houses representing the same company must necessarily have an agreement as to just which territory each shall cover. The Western Meat Company's agent apparently had his hands full because of competition from the San Francisco branch house of Swift & Company, and naturally felt incensed when he found he had the Swift & Company Los Angeles house also to contend with in this particular locality. It was perhaps his idea that the Western Meat Co. might have influence with Swift & Company to prevent competition from the Los Angeles branch. The West- ern Meat Co. did not feel that it had such influence, as is evidenced by the following reply to the letter under 79 discussion, copy of which was taken by the Federal Trade Commission, but which was not reproduced in its report : Jan. 22, 1915. Mr. G. A. Karr, Fresno, Cal. Dear Sir: Replying to yours of the 20th inst., with reference to Swift & Company, Los Angeles, selling Terra Bella Merc. Co., at Terra Bella. It would not be expedient for us to engage in a controversy with them over selling in this town and consequently will not take up with them about it. We are sure that our prices compare favorably with those quoted by Swift & Company and you need have no fear of their prices being lower than your own. Yours respectfully, WESTERN MEAT COMPANY. Provision Dept. Per WH-SS In concluding our discussion of the California situa- tion, we also wish to reproduce another letter written by the President of the Western Meat Company to sub- managers on September 4th, 1917, copy of which, in sub- stantially the same language, was sent to all the branch- house managers of that company. Although this let- ter was written shortly after the Food Control law was passed, and while the Federal Trade Commission inves- tigation was in progress, it is worthy of note that sim- ilar letters of instructions have always been sent out at irregular intervals in order to show the policy of the company, and in order to keep all managers from de- parting from this policy. Copy of this was taken from the files of the Western Meat Co. by the Fed- eral Trade Commission, but it -was not reproduced in the Report: Sept. 4. 1917. Mr. M. D. Gallagher, Mr. E. R. Patterson. Mr. W. Haaker, Mr. E. G. Evens, Gentlemen: I write to caution you against having any understanding as regards buying or selling with any of our competitors, either in the fresh meat, produce, provision or inedible lines. It has always been our policy to work on these lines, and I am merely calling your 80 attention to this fact, so that the policy of the company will be' fully confirmed in your minds. A new food production bill provides for prison sentences of from two to five years for offenses of this nature, which are particularly aggravating in war times, and furthermore, heavy fines can be levied in addition to the prison sentences. Kindly acknowledge receipt. Yours respectfully, F. L. WASHBURN. Swift & Company fails to find evidence in this Califor- nia correspondence of any illegal or uncommercial collu- sion among the packers in California with regard to the fixing of prices or the division of territory. On the other hand, we have shown that even in the correspond- ence reproduced by the Trade Commission there are pos- itive evidences of the real competition that exists; and we have also shown that interchange of opinion as to prices and receipts is necessary because of the absence of open public market places and the current market in- formation that is available when there are such market places. 81 ALLEGED AGREEMENTS IN OTHER LINES. Pages 132 ^he Trade Commission claims that it has evidence to 158 O f an agreement among the large packers to fix the price of lard substitute, that there is division of territory and joint manipulation of prices in the purchase of cheese, that there are similar agreements in the purchase of but- ter, cream, poultry, and eggs, and that there are also "collusive and unfair practices" in the rendering busi- ness. There is perhaps no part of the Trade Commission's report which is so replete with misconstruction of facts or where there are such glaring instances of suppression of correspondence taken from our files and of other data which show the baselessness of the Commission's conten- tions. The Real Facts About Alleged Lard Compound Agreement. Pages 132 ^\ s evidence of an agreement to fix the price of lard to 134 compound the Federal Trade Commission introduces letters passed between representatives of Armour & Com- pany relative to the situation at Pittsburgh, Pennsylva- nia. These letters refer to the fact that the price charged by all competitors on this product has been the same "since Jan. 14th" (top of page 133 of the Report), and that in another place it is said ' i Everybody 's price must be the same as your's" (page 133). The last letter on this subject (top of page 134), after referring to "com- petitors ' prices being identical, ' ' ends with the remark : "Also, you might destroy this letter on the subject." On their face these letters look rather damaging, and 82 without any further explanation, which the Trade Com- mission does not give, they certainly seem to indicate that there had been an agreement to fix prices. Whether the Trade Commission had the facts or not we do not know; at any rate, the Commission could have had the proper explanation if it had not been so intent on mak- ing out a case against the packers by presenting only one side. The truth about this matter is as follows : These letters were written beginning with January 24th, 1918. The United States Food Administration had begun to exercise its control over food matters during the previous fall, and one of the first commodities over which it exercised its authority was cotton-seed oil, out of which lard compound is made. The manufacturers of these commodities were brought together at the request of the Food Administration in order to stabilize the price of cotton-seed oil; a definite price was agreed on as well as a differential over the price of oil which should apply to lard compound. In other words, the fixed price of lard compound, of -which the Trade Commission complains, was determined at the request of, and in co-operation with, the Government itself. This fact is not mentioned by the Federal Trade Com- mission in its report. The Trade Commission places considerable importance on the fact that one of these letters contains the phrase "You might destroy this letter on the subject." Al- though Swift & Company, of course, does not know just why an Armour official should have issued such instruc- tions, we should naturally guess that it was because the Armour man was afraid that the letter might be seized by the examiners of the Federal Trade Commission and 83 used in an unfair and misleading way. If this was the motive of the Armour official, subsequent events certainly proved that his fear was not without foundation. Further details about the negotiations between the Food Administration and the manufacturers of lard com- pound and cotton-seed oil, together with the resulting in- structions as issued by the Food Administration, may be found in the testimony of Mr. J. Ogden Armour before the House Committee on Interstate and Foreign Com- merce, Jan. 21, 1919.- Alleged Collusion in Cheese Business. Pages 134 Xone of the correspondence introduced by the Fed- to 144 era } Trade Commission on this subject was taken from the files of Swift & Company, and this Company is not concerned to any great extent. It is true that the large packers together handle a considerable proportion of the cheese business of the United States, but the figures presented by the Federal Trade Commission on page 134 of the Report exaggerate their "dominant position" in the cheese market of the nation. The total production of Cheese in 1918 appears to have been about 420,000,000 pounds (Standard Farm Paper Year Book 1918-1919), and according to estimates furnished us by the Bureau of Markets, United States Department of Agriculture, about 92 per cent, of this entered trade channels. This means that about 385,000,000 pounds of cheese were traded in during 1918. Swift & Company handled less than one-sixth of this total. At the top of page 135 of the Report, the firm of Pauly & Pauly is listed as a " packer-controlled" firm, because this firm sells 80 per cent, of its output to Swift & Com- pany. It is true that we buy very heavily of this concern, 84 with whom we have had very satisfactory relations ; but it is not true in any sense that this firm is controlled by Swift & Company. The alleged control of this firm is made use of by the Federal Trade Commission in an attempt to show collusion between Armour & Company and Swift & Company, by introducing into the reproduction of a letter from Armour & Company's files (bottom of page 135 of the Report), a parenthetical remark which was not in the original letter. This point is mentioned merely as an illustration of the methods used by the Trade Com- mission to imply collusion. Such implications have the force and effect of absolute assertions in the minds of many readers of Government documents. In connection with this cKeese business, Swift & Com- pany also wishes to state that we buy over 90 per cent, of our Wisconsin cheese purchases from wholesale deal- ers, in whom we have no financial interest, and that we buy the remainder direct from cheese factories, none of which we own. We buy no cheese on the cheese boards in that state. We have never tried to affect the quotations on the cheese boards, and we have no agreements or con- spiracies with other packers or dealers to affect cheese quotations or to divide territory in any way whatsoever. Alleged Agreements in Creamery and Butter In- dustry. Pages 144 The Federal Trade Commission claims that there is a to 154 division of territory among the big packers in the buy- ing of cream, which is used for making butter, and that there are price agreements among the local buyers and agents of the packers who gather cream at country points for shipment to our butter factories. In support of the first claim, the Trade Commission 85 says that out of 1,561 creameries, condensaries, and cream stations, reported to the Commission, 1,262 belong to Page 145 Swift and 293 to Armour, and that "there are only 29 towns where cream buying stations of two or more packer groups are located." This is supposed to imply a division of territory. In the first place it should be noted that the number of Armour cream-buying stations is very small as com- pared with the number of Swift stations. These cream- buying stations are located principally at small country points, and there are tens of thousands of such points where the packers might have representatives to buy cream. It is only natural that in developing a system of cream-buying stations, one packer should prefer not to establish a buying agency at the same shipping point where another packer has already become established, especially when there are so many thousands of places that may be selected. That Swift and Armour are both represented in only 29 towns, especially when Armour is located at only 293 places in all, cannot possibly be con- sidered evidence that there is an agreement to divide territory. Furthermore, Swift and Company's method of as- ' sembling produce is substantially different from that em- ployed by the other packers. We rely largely on our own country plants, which collect, prepare, and ship these products ; the other packers buy more heavily from other dealers. This in itself indicates that it would be prac- tically impossible to divide territory; and as a matter of fact, Swift and Company has no agreement with other packers for this purpose. As for the question of agreement among local cream buyers, this matter requires preliminary explanation 86 before the correspondence introduced by the Trade Com mission can be properly understood. In obtaining cream at country points, Swift & Company employs agents who assemble the cream brought in by surrounding farmers and ship it to Swift & Company, receiving a commission for their services. These agents are men who are gen- erally in other lines of business. They are often pro prietors of local stores, or they may be cash buyers of poultry and eggs on their own account, who are acting as agents for Swift & Company only in the purchase of cream on a commission basis. In many cases there are two or more such cream buyers in a single town, and there are also cream buyers at ship- ping points within a radius of ten or fifteen miles, to any of which the farmers may haul their cream, depending on the prices offered by these different cream buyers. It is perfectly obvious that the prices paid by compet- ing cream buyers in the same town or in the same general locality must be substantially, if not exactly, the same; otherwise, the buyer who offers, say 1 cent less per pound for butter fat, will get no business, and he has to fall in line with his competitors in order to hold his' trade. On the other hand, if his price is too high, he gets the business, but loses money on it. Because of this situa- tion, it has always been very common for competing cream buyers to keep themselves informed as to the prices their competitors are paying. This was the situation which confronted Swift & Com pany when it entered the business, and is the situation it has had to contend with in the development of local cream- buying stations. We have employed agents who are rep- resentatives of Swift & Company only in the sense that they receive a commission for such cream as they gather 87 and ship to us; they have always been in the habit of keeping themselves posted. as to prices paid for cream by other buyers in the same town or nearby towns; and in the very nature of the case, the prices offer- ed by these local cream buyers must be, and neces- sarily will be, substantially identical, even though the buyers are severe and jealous competitors of each other. One other complicated feature of the situation is that some states have "anti-discrimination laws/' which pro- hibit one company from paying different prices for cream or other products at different points within the state, except as differences are justified or made necessary by differences in transportation rates. The object of such legislation is to prevent price cutting in single localities for the purpose of driving competitors out of business. We have therefore been up against the problem of preventing price agreements in localities where prices are bound to be practically the same, even if there is no agreement, and at the same time of preventing differ- ences in prices in different localities, as required by State laws, except as such differences are justified by trans- portation rates or are necessary to meet competition. A careful analysis of the correspondence introduced (pages 147 to 154 of the Report) show^s the difficulties we have met in dealing with this situation, and shows at the same time the positive efforts we have made to prevent local price agreements among our country cream buyers. The matter is written up in such a way by the Fed- eral Trade Commission as to imply that we are con- sciously having our agents enter into agreements with competitors, and that we are trying to cover up the mat- ter by admonishing and instructing our agents to be care- ful in the phraseology of their correspondence. In this connection, the Trade Commission has failed to 88 reproduce certain letters that it took from our files which more clearly define our real attitude and policy than any of those which are actually reproduced in the report. As an example of the Trade Commission's unfairness in this respect, it failed to reproduce the following pos- itive instructions that were issued to our representatives on Feb. 15, 1915, copy of which was available to the Commission, and which shows our definite attempts to prevent price agreements. Similar instructions were is- sued from time to time. No. 331 Legal Buying February 15, 1915. Produce Instructions. 1. Managers should keep in mind the fact that buying prices and selling prices should be based on value, taking into consid- eration quality, freight rates and competitive conditions. Attention is directed to the so-called Anti-discrimination laws under which uniform prices must be paid. While these are construed to permit variations to meet legitimate competi- tion, the conditions must be extreme to induce Managers to make such variations. 2. Managers must not, under any circumstances, enter into any agreements, verbal or written, restricting competition in any manner, or dividing territory with competitors or in any man- ner threatening or seeming to threaten shippers. Any acts that might be so construed should be avoided. 3. Anything that might tend to affect the Company from a legal standpoint, should be called to the attention of the Produce and Legal Departments, with all the facts that can be gath- ered concerning them. Another evidence of the unfairness with which the Trade Commission handled this matter is shown by the method in which general instructions issued by Mr. L. F. Swift, ordering compliance with the old Supreme Court injunc- tion of 1903, are introduced at the bottom of page 149 of the Report. This incident is explained as though it were a special precaution taken by Mr. Swift at the time of the introduction of resolutions in Congress calling for an investigation of the packing industry. As a matter of fact, these instructions, based on the 1903 injunction, 89 have been issued periodically by Mr. Swift to all heads of departments at intervals of about six months for many years. This matter was explained, and the instructions reproduced, on pages 11 and 12 above. An attempt is also made, as on page 150 of the Report, to intimate that auditors have been employed merely for the purpose of going about among our agents in order to destroy incriminating evidence. The truth is that one of the duties of our traveling auditors has been to check up the operations and correspondence of our repre- sentatives in order to. prevent the actual occurrence of collusive practices. This is clearly shown by the letters reproduced at the bottoms of pages 148 and 151 of the Report. It is also significant that in reproducing the letter of March 9th, 1916, on page 151 of the Report, the Federal Trade Commission failed to reproduce the following let- ter of April 3rd, which was written by the head of our Produce Department to two sub-managers in the depart- ment, which again explains our attitude and efforts, and copy of which was actually taken from our files by the Federal Trade Commission. April 3, 1916. Messrs. J. Y. Marshall L. E. Dunker Question of Making Agreements Other Produce Dealers. Want you to take up especially with each Manager, assistant manager, you visit, the question of making agreement of any character. You fully understand our requirements in this matter. The Managers are all under instructions from Mr. L. F. Swift, covering the matter. We desire you to further handle as follows: Explain to them clearly that they have been thoroughly in- structed in this matter and any deviation from these instructions will revert against them in person. You are to thoroughly and clearly explain to them that if for any reason they have a conversation with other dealers, they are not to make any statements of any character that could be construed as an agreement and unless this is fully understood by them and unless this is followed to the letter, we shall find it necessary to instruct them that no conversations of any character are to be had 90 r with any other dealers that touch any feature of the produce busi- ness. You are to make a definite memorandum of this conversation with each of these managers, showing the date thereon and hold same in your files as permanent record and responsibility is placed with you to see that interview of this character is had with every manager of the produce plants under your direction, within reasonable time. HBC*R It will be seen that in this letter the manager of our Produce Department said that it might be necessary to instruct our agents not to hold "conversations of any character * * * with any other dealers that touch any feature of the produce business. " That is to say, we were trying so definitely to prevent our agents from entering into price agreements that we were thinking of instructing them to not even talk with other dealers about the produce business. Again, on page 147 of the Re- port, the Trade Commission introduces a letter written to Mr. H. B. Collins on September 10, 1915, but fails to reproduce the reply written by Mr. Collins on September 20, copy of which was taken from our files by the Federal Trade Commission and which clearly explains our atti- tude: Sept. 20, 1915. Mr. R. C. McManus, Legal Dept. Answering your letter of Sept. 10th: I may be mistaken, but I do not believe there is anything about these letters that proves clearly illegal. Considering the number of agents we have, unless we say to them they are not under any circumstances to have conversation of any character with their competitors, there will be more or less com- munications reaching our creameries from these agents. What do you think of instructing managers, as well as our trav- eling representatives, that where they receive a communication, either by telephone or by letter, from an agent, which shows any . trace of getting together, or making agreement with, a competitor, that they are to be written a clear letter, specifically mentioning the communication, stating to them that under no circumstances are they to make an agreement, and that they are making them- selves criminally liable by so doing. Believe this would have the effect 1st Of stopping possibility of their making agreement. 2nd It would make our records clear. Awaiting your reply. Produce Dept. HBC EJH Desk A. 91 Finally attention is called to the letter of September 1, ]916, page 153 of the Report, which shows that because of the difficulties we were having in preventing our cream agents from entering into local agreements, in spite of positive efforts we had been making in that direction, we thought of actually doing away with cream agents in Missouri, where we were having the most trouble, and also of carrying out a similar policy in other states if it worked out satisfactorily in Missouri. In conclusion, it is obvious from the foregoing dis- cussion that the Federal Trade Commission not only misrepresented the facts w r ith regard to the cream- buying situation at country points, but that it also actually suppressed pertinent and relevant corre- spondence which it took from our files. The insinuation, which carries the weight of positive assertion in the minds of those who do not understand the matter, is that Swift & Company was sanctioning local price agreements, whereas a true interpretation of the correspondence re- produce'd in the Commission's report, and especially of the correspondence which the Trade Commission failed to reproduce, shows that Swift & Company was doing its best to prevent illegal price agreements. Swift & Com- pany doubts if any other concern has made such definite effort* to cope with this difficult situation. 92 Alleged Division of Territory in Poultry, Egg, and Butter Buying. Pages 154 j n introducing its discussion of this subject, the Fed- to 156 era } Trade Commission says that in 1917 the five large packers "had a control estimated in the trade to be over 65 per cent, of the dressed poultry and eggs shipped in the United States and are also large shippers of butter." If the Trade Commission wished to show what per- centage of the trade in these products is handled by the five large packers, it should have been more accurate in the presentation of figures. In the first place, it should not have gone to "the trade " for an estimate, because substantially accurate data were available. Estimates in the trade are particularly unreliable, especially as many dealers are prejudiced against the large packers who are their principal competitors, and who naturally have an exaggerated notion of the part played by the large packers. To give the impression that the packers con- trol over 65 per cent, of the trade in poultry and eggs is absolutely misleading. In the first place, they do not together u control" any part of the trade, because they are in keen competition with each other; and second, be- cause even if they did work together, they would handle nothing like 65 per cent, of the total. The following table shows the total production of poultry, eggs, and butter in the United States in 1918, according to the latest reports of the United States De- partment of Agriculture; the proportion entering trade channels, as estimated by the Bureau of Markets of the same government department ; the volume handled by Swift & Company, the largest dealer in these products; and tjie proportions of total production and of total amount entering trade channels handled by Swift Com- pany: 93 PROPORTION OF POULTRY, EGGS, AND BUTTER HANDLED BY SWIFT & COMPANY, 1918. (000 omitted.) Com- modity Total Production U. S. Amount Entering Trade Channels Handled b> Swift & Company Quantity Per Cent Total Pro- duction Per Cent Total Entering Trade Channels Per Cent (a) Quantity Poultry 589,000 head (b) 1,767,000 Ibs. (c) 75.0% 1,325,250 Ibs. 79,000 Ibs. 4.5% 6.0% Egg* 1,921,000 doz. (b) 2,881,500 Ibs. (d) 75.0% 1,440,750 doz. 2,161,125 Ibs. 91,620 doz. 137,000 Ibs. 4-8% 6.3% Butter (el 1,475,000 Ibs. (f) 71.3% (ft) 1,051,250 Ibs. 61,600 Ibs. 4.2% 5.9% (a) Percentages estimated by Bureau of Markets, U. S. Dept. of Agriculture letter dated 1-21-19. b Report of Secretary of Agriculture, 1918 page 8. (c) Average weight estimated at 3 Ibs. each. d 1 Yi Ibs. per doz. (30 doz. to case, 45 Ibs. to case). (e) Creamery and Dairy. (f) Figures furnished by Bureau of Markets, United States Dept. of Agriculture letters dated 1-21-19, 2-18-19. (g) Based on estimates of Bureau of Markets (Note a), 95 per cent for creamery and 45 per cent for dairy butter It will be seen from this table that Swift & Company handles only about 6 per cent, of the total poultry, eggs, and creamery butter sold in the United States. The Trade Commission could undoubtedly have obtained the figures from other packers, and could have arrived at an accurate estimate of the proportion handled by the five large companies. Since Swift & Company is the largest dealer in these commodities, and since two or three of the large packers handle relatively small quantities, it would be impossible to show more than 15 or 20 per cent, at the outside, as the proportion handled by the five large packers. Contrast this with the 65 per cent, mentioned by the Federal Trade Com- mission, which is given the semblance of authori- tativeness by its issuance by a Government depart- ment. Such disregard for accuracy is indeed sig- nificant. 94 As for the alleged division of territory in buying of these products, the fact that the large packers do not have buying stations to any extent at the same shipping points is not in any way evidence of collusion. The ex- planation for this situation is the same as that given for the location of cream-buying stations, on pages 85 and 86, above. The only evidence that the Trade Commission offers that there must be a division of territory is a let- ter reproduced on page 156 of the Report, in which an official of Swift & Company refers to "each town in our territory. " This phrase means absolutely nothing so far as division of territory is concerned; it is merely a common method of referring to the parts of the coun- try where we habitually buy produce. Although the existence of other firms in the poultry, butter, and egg business is recognized on page 156 of the Report, the Federal Trade Commission gives an entirely wrong impression as to the importance of these other con- cerns. As a matter of fact, there are hundreds of large dealers in these products, located both in producing sec- tions, and in large consuming centers, and in a great many sections of the country the part played by the large packers is insignificant as compared with the total busi- ness. Alleged Combinations in the Rendering Business. Pages 156 ^ Q Federal Trade .Commission attaches considerable to 158 significance to the fact that companies organized for the ;. rendering of fats from dead animals, or from the waste collected from retail stores, are owned by the packing interests, that these concerns have exclusive rights in the markets where they are located, and that they have made extortionate profits. 95 So far as rendering companies located at stock yards are concerned, it is practically necessary for there to be only one company at each yards in order to properly dis- pose of the dead animals that arrive. This is due to the fact that the business is really sufficient to support only one company, and also to the fact that it is practically impossible to get prompt and efficient service in the col- lection and removal of dead animals if there are two or more companies. For this reason a rendering company located at stock yards is usually given the exclusive right to buy all dead animals in the yards. The rendering business is not a particularly attractive enterprise, and one naturally wishes to obtain if pos- sible a little larger return on his money than he would expect from other investments. The larger than normal profits that have accrued during the past two or three years, however, have been due prin- cipally to unforeseen rapid advances in the prices received for rendered fats between the times that the dead animals have been bought and the times that the product has been put on the market. It was impossible to predict at the time dead animals were being bought that there would be any such increase in prices of result- ing products. Nevertheless the prices paid by rendering companies for dead animals have substantially increased during the war period, and we do not believe that impar- tial investigation would find any company in w T hich Swift & Company is interested guilty of buying at unreasonably low prices. The Federal Trade Commission gives undue prom- inence to this matter ; the rendering companies are on the whole very small, and their business is insignificant. For example, in the Congressional hearings at Washington it was said that one company, which is connected with 96 the Swift interests, made a profit of 60 per cent, on its capital. As a matter of fact, the capital of this company was $25,000, and the profit was $15,000; and this busi- ness took care of all the dead animals that there were, in connection with the marketing of over 2,000,000 head, worth $100,000,000! It would appear in this instance that the Commission has given undue prominence to a trivial matter. At any rate, Swift & Company recognizes the fact that ownership of rendering companies, and the exclusive manner in which they must necessarily be allowed to operate, involves a certain measure of power to arbitra- rily control prices of dead animals in individual markets, and if it could be claimed that we have used this power unfairly in the past, we wish to state that we have already taken definite steps to see that no legitimate complaint can be made against our activities in this direction in the future. We thoroughly believe that through our interest in these companies we have improved the methods of taking care of this disagreeable feature of the live-stock indus- try, and that we have thereby improved conditions in the stock yards ; it is our sincere desire to operate such facil- ities to the best interest of all concerned, and we are only too glad to make any changes necessary with this end in view. All that we want in a matter of this sort is impar- tial suggestion and co-operation, rather than misrepre- sentation of our motives and of the facts. 97 Formation of Wilson & Co. and the Sulzberger Memoranda. The remainder of the Trade Commission's report con- sists almost entirely of an account of the negotiations which led to the reorganization of Sulzberger & Sons Co. under the name of Wilson & Co., Inc., and of the repro- duction of the so-called " Black Book" of Mr. Germon F. Sulzberger. Swift & Company does not feel called upon to go into an exhaustive explanation of these matters. We can find no evidence of illegal or illegitimate practices in con- nection with the reorganization of the Sulzberger com- pany; and in the " Black Book" memoranda we can find nothing but an occasional and informal exchange of views and information between Mr. Sulzberger and other indi- vidual packers at a time when the Sulzberger company was having financial difficulties, and when Mr. Sulzberger was complaining of the aggressive competition of the other packers. UNIVERSITY OF CALIFORNIA LIBRARY BERKELEY Return to desk from which borrowed. This book is DUE on the last date stamped below. Mar9'49Cf 2HVlay54Vl| Mow JUN 1? 1954 \ 41954' n REC'D APR17195/ WAY 1 6 IV FE3 2 ml CIRCULATION DEPT. LD 21-100m-9,'48(B399sl6)476 YC 25783 HO THE UNIVERSITY OF CALIFORNIA UBRARY