this resolution a committee of five Senators was appointed by the President of the Senate

to examine fully all questions touching the meat product of the United States; and especially as to transportation of beef and beef cattle; and the sale of the same in the cattle markets, stockyards, and cities; and whether there exists or has existed any combination of any kind, either on the part of the Trunk Line Association or the Central Trade Association, or other agencies of transportation or on the part of those engaged in buying and shipping meat products, by reason of which prices of beef and beef cattle have been so controlled or affected as to diminish the price paid the producer without lessening the cost of meat to the consumer.1

This committee headed by Senator Vest, of Missouri, held its initial meeting at St. Louis on November 20, 1888, and proceeded to take testimony from representatives of the International Cattle Range Association and the Butchers National Protective Association. Despite internal conflicts as to policy among the membership of these two groups there was unanimity of thought on the fundamental fact that while there was a very decided depression in the prices paid to the producers of cattle that the price of meat to the consumer remained as high as before. It was brought out that market prices for cattle commenced declining in 1885, the selling price of the best grade of beef dropping from $7.15 per hundred pounds at Chicago in 1884 to $5.40 in 1889.2

Another fact gleaned by the committee and upon which there was agreement was that during the 10-year period beginning about 1878 the method of selling beef cattle had been entirely revolutionized resulting in a concentration of the market at a few large centers, namely Chicago (the principal point) Kansas City, Omaha, St. Louis, Cincinnati, and Pittsburgh. In other words, the whole system in vogue prior to 1878 under which the shipper and the butcher went from one cattle raiser to another, competing in the purchase of cattle, had been almost entirely eliminated by the year 1888. This revolution, it was developed, was largely the result of the construction of railroads and the subsequent combination between these corporations and the stockyard people, as well as by the ability of a few men, chiefly of Chicago, to control enormous capital resources. For instance, the committee developed the fact that by the so-called Evener combination, which began in 1873, three great trunk line railroads, the Pennsylvania, the New York Central, and Erie, agreed to charge $115 for each carload of cattle shipped from Chicago to New York and to allow certain shippers in Chicago designated "Eveners" a rebate of $15 per car. This resulted in the destruction of the St. Louis cattle market and the great development of the Chicago market as revealed in the number of cattle received at the Union Stockyards in Chicago393,007 in 1866 as compared with 1,096,745 in 1876.3 The three great railroads monopolized the entire cattle transportation from Chicago to New York, amounting to 4,000,000 cattle, between 1871 and 1879.

The Senate committee developed the further fact that the dressedbeef business, which became important in 1878 with the advent of the refrigerator car, as early as 1888 was practically controlled by four great Chicago concerns, namely, Armour & Co., Swift & Co., S. W.

1 U. S. Senate, Report on Transportation and Sale of Meat Products, No. 829, 51st Cong., 1st sess., p. 1 U. S. Senate, op. cit., p. 1. U. S. Senate, op. cit., p. 3.

Allerton, and Hammond & Co., Armour and Swift being by far the largest.

These "charter members" formed the "Allerton pool," so named because the business of the pool was held in the office of Packer Allerton. This pool decided upon the quantity of meat to be shipped by each member. It was a rather crude set-up and was not particularly effective since the territory at that time was not extensively elaborated. The control of the cattle market was absolutely within the grasp of these four companies if they chose to assume such control, and there was much evasion on the part of witnesses, many of whom, being cattle men dependent for a livelihood upon maintaining the good will of the packers, were reluctant to give the facts, it was charged as result of the committee probe. The four great packing concerns, it was brought out, had an agreement not to compete with each other in the purchase of cattle.

It was significant according to the committee report that the principal owners and agents of the dressed-beef establishments refused to obey the summons of the Senate committee to appear and testify, although subsequently Mr. P. D. Armour of Armour & Co., obeyed a subpoena to appear before the committee in Washington. Mr. Armour testified that there was no agreement between the packers relating to the purchase of cattle, but in rebuttal the committee secured an admission from the witness that he was not entirely familiar with all of the vast activities of his army of agents. Mr. Armour ascribed overproduction and overmarketing of cattle, especially range or southwestern cattle, as the chief cause of the decline in the price of cattle to the producers."

As a result of its investigation the Senate committee reached the conclusion that the four big packers:

(1) Combined to fix the price of beef to purchasers and consumers by artificial and abnormal centralization of markets.

(2) Refused to interfere with each other in certain markets and localities in the sale of meat.

(3) Acted together in supplying meat to certain public institutions. (4) Combined in opening shops and underselling the butchers at Detroit and other places in Michigan and at Pittsburgh in order to force them to purchase dressed beef.

(5) Combined in refusing to sell any meat to butchers in Washington, D. C., because the butchers had bid against them for contracts to supply the Government institutions with meats.

(6) Acted jointly in Chicago in conspiring to refuse to give testimony to Senate committee.

(7) Received the bulk of the profit accruing from the depressed prices paid to the producers of cattle.

The committee declared as fallacious Armour's arguments as to overproduction in view of the large annual increase of population, and they also discounted his further argument of over marketing on the basis of statistics of cattle compiled at the great stockyards."

Summarizing, the committee declared that there was convincing proof of collusion with regard to (a) fixing of beef prices (b) division of

Federal Trade Commission, op. cit., Pt. II, p. 13.

U. S. Senate op. cit., pp. 431-434.

U. S. Senate, op. cit., pp. 6-11.

territory in business; (c) division of certain public contracts; (d) compulsion of retailers to buy their beef from the packers.7

The Senate committee cited as a remedy for the alleged beef industry combination the application of the law which had passed the Senate and was then pending in the House of Representatives, later known as the Sherman antitrust law, and admonished the State governments to enact laws to punish these combines operating within the State lines.

While describing a situation held to be menacing to the cattle producers as a result of the alleged greedy combinations of dressed packers and the rebating railroad companies, the Senate committee paused to strike a note of optimism, as indicated by the following statement which was placed in the Senate records along with the detailed summary of the testimony of witnesses:

*

A little reflection will satisfy every intelligent man that no combination can keep the prices of beef cattle at present quotations. The population of the country is increasing in a wonderful ratio, and of course the increase is greater each year. The foreign demand for American beef is annually growing and it can be only a short time until our store cattle will be admitted into the United Kingdom Besides the cattle-growing region in the West is rapidly becoming limited. The admission of new States, and the settlement of agricultural lands, the quantity of which is enlarged by systematic irrigation, must necessarily decrease the grazing area. While this is so, there will be an increased demand for beef with increased population * * * It is impossible that the Chicago market should continue to control the cattle interest of the whole country as it does now, or that a few large operators shall retain their hold upon that market.

.

In other words the venerable Senators comprising the special investigation committee, fell back upon the doctrine of Laissez Faire which had its origin during the early part of the nineteenth century. A dangerous combination existed, the Senators admitted, but nevertheless everything would work out all right for the cattle men and the consumers in the end through natural economic forces.

This picture drawn in conclusion by the Senators must have been comforting to Messrs. Armour, Swift, et al. The solution offered-a trust bill not yet enacted into law, and reliance upon future State legislation certainly should not have been disturbing to individual or group bent upon extension of their business through control and power.

The Sherman anti-trust act was placed upon the statute books on July 2, 1890. The Senate investigation of the dressed-beef business may be said to be partly responsible for this law. It is appropriate therefore to sketch here very briefly the scope of this famous act about which so much has been said and written. In general this law

prohibited every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, and every monopoly or attempt to monopolize.10

Specifically, according to later decision, the Sherman law was (1) adopted to prevent all kinds of contracts or combinations which directly or hurtfully restrain trade or commerce subject to Federal control, or monopolize or attempt to monopolize, and (2) no twilight zone was left which could not be reached either by Federal or State

law as result of established interstate commerce jurisdiction, and (3) combination of persons in whatever walks of life insofar as they are engaged in such commerce are within the scope of its provisions and in particular combination of manufacturers engaged in such commerce are comprehended by the law." How was this law going to affect the so-called Beef Trust?

Notwithstanding the results of the Senate investigation and the apparent comprehensiveness of the Sherman law as it would seem to relate to the meat-packing business, it appears from subsequent official investigations by the court and by the Federal Trade Commission that the "dressed meat pools" combinations were continued and increased in scope. Testimony under oath of Henry Veeder, son of the attorney for Swift & Co. and secretary for a group of beef packers comprising Armour & Co., Armour Packing Co., Cudahy, Hammond, East St. Louis Dressed Beef & Provision Co., Morris & Co., and Swift & Co. show that representatives of these companies during the period 1893-1896 met every week in a suite leased by Veeder. At these meetings the territory was divided, volume of business was apportioned upon statistics compiled by Veeder, clearinghouse agent for the packers, and penalties were assessed for violations of the allotment agreement. Should this be construed as in restraint of trade? The packers admitted such a combination under the so-called "Veeder pool." 12

Under this plan Armour & Co. was known as "A," Armour Packing Co. as "B," Cudahy Packing Co. as "C," Hammond Packing Co. as "D," St. Louis Dressed Beef & Provision Co. as "E," Morris & Co. as "F," Swift & Co. as "G." Subsequently Schwarzschild & Sulzberger were designated as "G," and Swift as "H." The country was divided into sales territory, known as "A," "B," "C," etc. The system also called for two statements from each packer each week. One statement, the "shipment statement," showing the total amount of shipments by the packer into certain territory, "A," for instance; and, the second, a "margin statement" giving the closed selling prices received by the party in this territory during the same week. These statements served as a basis for adjusting the proportion of shipments and expenses as well as for assessment of fines for overshipment. There was also a "percentage" statement which was sent to the head of the beef department of each company each week. This referred to the total percentage of beef to be shipped into a given territory by a packer.is

While regular meetings of the packers' representatives were dispensed with from May, 1896, to January, 1897, Secretary Veeder continued in the employ of the packing interests and conducted a beef-statistical bureau. In the early part of 1898 a new pool was organized, the firm of Schwarzschild & Sulzberger being admitted to membership in place of the East St. Louis Dressed Beef Co., which Morris & Co. had absorbed. The outstanding feature of this pool was the increase of penalities for overshipment and the employment of auditors to check on the statements submitted to Veeder by the individual packer. Apparently the members of the combination

14

11 U. S. Department of Commerce, Trust Laws and Unfair Competition, by Davies, Joseph E., 1916, p. 52. 12 Virtue, op. cit., p. 657.

18 Federal Trade Commission, op. cit., Pt. II, pp. 14-15.

14 Ibid., p. 47.

were distrustful of each other and acted on the theory that it "takes a thief to catch a thief."

The Veeder pool system made it possible for the packer members to extend their control over the fresh-meat business in the principal markets of the United States, it is claimed. The munipulation, according to the Federal investigators, was brought about by a uniform method of figuring cost, which was given out by their salesmen as the cost of meat. If a change in some item of cost was made one day by one company, on that same day or soon thereafter the same change, or another of corresponding amount, was made by the other parties to the agreement. At first the quotas of shipments for each member were made upon the basis of the business of the preceding week, but later a certain figure, termed "fully capacity" was established with reference to the different markets and territories.

This Veeder pool continued until May, 1902, when the Department of Justice, following agitation in the newspapers and in the Congress, filed charges of conspiracy and asked the court for an injunction. It is significant that the agitation came at a time of declining prices of cattle and high prices to the consumer.15 It is pointed out as significant also that Veeder as alleged destroyed all letters and memoranda which had been kept by the pool since 1902.

In their statement in reply to the findings of the Federal Trade Commission, Swift & Co. admitted the existence of the "beef pool" and defended the system in the following language:

The arrangement whereby the quantity of beef could be shipped by each packer to various large eastern markets was discontinued in 1902. Although public opinion would probably not countenance such arrangements at present, they (the "beef pool") were undoubtedly of benefit to the public at large in that they helped to avoid recurrent gluts and scarcities in eastern markets, and tended to steady prices.16

The packers claimed they resorted to these methods in a spirit of keen competition.

B. MERGER PERIOD (1902-1912)

The petition of the Attorney General for an injunction alleged: (1) Restraint of competition in purchase of livestock and the sale of meat, and (2) the monopolization of this commerce, including the securing of railroad rebates for monopoly purposes. Temporary injunction was granted on May 21, 1902; subsequently, on May 26, 1903, the injunction was made perpetual; and on April 11, 1905, it was affirmed with slight modification on appeal by the United States Supreme Court in Swift & Co. v. U. S., the court unanimously holding that an illegal combination had been shown; and that the effect of the combination on interstate commerce was direct and not accidental, secondary and not remote." Mr. Justice Holmes delivered the opinion of the court, which directed the five large packing companies, several smaller ones, and a number of individuals not to refrain from bidding against each other in the purchase of livestock, not to conspire to fix uniform prices for the sale of meats and quantities shipped, but to

15 Walker, Francis, The Beef Trust and the United States Government, in the Economic Journal, No. 16, p. 495. 16 Swift & Co., Statement on Summary of the Report of the Federal Trade Commission on Meat Packing Industry.

17 Swift & Co. . U. S, 196. U. S., 375.

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